Precious Metals News & Analysis - Gold News, Silver News from Money Metals Exchange

Goldwin Smith’s Dire Warnings About Paper Money Matter More Than Ever

Wed, 16 Sep 2026 00:00:00 EST

In 1883, https://share.google/jlhEcVAx5gYoOBhiX"; target="_blank" rel="noopener">Goldwin Smith gave an address, later published as https://books.googleusercontent.com/books/content?req=AKW5Qad_Jq-SZnA2c9GD8Gs4r9djsPgq1QQ7PShbLyYmSdT-aulMPIWbR86O3mDjvCzQChW6Djnc0DOvjxDJgQ-E7rGiO6GjtOdPhNkXirMn0T7FwPFuwrHbmLwmNoYeOb8sXRbJRT9gWKlPL3bm2Y-j-Y8rorl9KGwcHBmObyL1iAtQ8KU07sCyW38j-WtN0X35t8aySUNYXBeqSLw8wa86sfz7yA0e3Xxa3FlOEIKcjASRRMzcq89kIBz00C9CNTgZpsNqwlcD"; target="_blank" rel="noopener">False Hopes: Or, Fallacies Socialistic and Semi-Socialistic, Briefly Answered, taking on a number of the political and economic fallacies of his time. His remarks on inconvertible paper money are still worth considering today.

The names have changed, but the impulse behind Greenback advocates has carried right through to modern government deficits and attempts to manipulate the currency.

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Smith had some good observations about inflationary policies, not least that “Among the champions of paper currency there are no doubt, knaves, many a one, who know very well what they are about, and whose aim is to defraud the creditor, public and private, by paying off the debt with depreciated paper.”

Most notably, he recognized that inflation tends to favor debtors at the expense of creditors.

That’s why debt-financed deficit spending tends to be popular with the government.

Meanwhile, when it comes to claims of “honest” inflation advocates, Smith noted that there were plenty of “honest enthusiasts” who believed “that a commercial millenium could be opened by merely issuing a flood of promissory notes and refusing payment.”

This reflects one of the central delusions of advocates of fiat money, that increasing the money supply actually increases wealth.

Of course, the mere printing of money does not create goods, services, gold, silver, land, or anything else that people might want to buy.

All it does is devalue the quantity of money and claims on the quantity of money in circulation.

Smith put it this way…

“The bill is a promissory note, and the bank in increasing the number of its bills, like a trader who increases the number of his promissory notes, adds, not to its assets, but to its liabilities.”

That’s a crucial distinction that has been largely lost in the modern world.

Your banknote used to be a promissory note, a promise to pay the bearer in gold or silver. Now all the Federal Reserve note promises is another claim on the Federal Reserve.

That’s a subtle but substantial difference.

What Does a Fiat Dollar Mean?

So what would it actually mean if someone took the inconvertible idea to its logical conclusion?

“Suppose the promissory form to be discarded, and the bill to be simply inscribed ‘one dollar,’ as the Fiat-money men propose, what would ‘dollar’ mean?”

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Smith answered that question himself. Advocates of fiat “money” would claim it meant “a certain proportion of the wealth of the country, upon which, as an aggregate, the currency would be based.”

But this raises an obvious question. What proportion?

Smith continued, “The most serious difficulty is that while the coin, which a convertible bank bill represents, is the property of the bank of issue, the aggregate wealth of the country is not the property of the Government, but of a multitude of private owners.”

This is an important insight that goes to the very heart of the proper role of government in the economy and society. The government cannot just print money and spend it on whatever it wants, as if that wealth actually belonged to the State.

Smith explained the problem in direct terms.

“In issuing an order for a loaf of bread, a coat, or a leg of mutton, to be taken from the possessions of the community at large, it would be simply signing a ticket of spoliation.”

So what did he mean by “ticket of spoliation”?

He meant that the devaluation of currency through monetary inflation tends to decrease the amount of goods one can purchase with a given sum of money.

Just like the Cantillon Effect, such fiat-printing inflation favors whoever gets to spend the new money first and makes life harder for those who have to spend it later.

Legal Tender Is Not Consent

Legal-tender laws, meanwhile, tend to undermine private contracts.

“In one sense, of course, government can, by its fiat, put value into paper. It can make the paper Legal Tender for debts, in other words, it can issue licenses of repudiation.”

This means that a government can unilaterally change the terms of a financial contract after the fact. By declaring certain paper money legal tender, it essentially allows itself to evade existing debts by paying them off in currency the government knows will be devalued.

That’s not exactly a ringing endorsement of legal-tender laws.

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Smith wrote that “Legal Tender confuses the ideas of the people, shakes commercial morality, and prepares the way for the attempts of the Fiat-money men, and for all the mischief which they breed.”

A free society should not be tied to any particular currency.

If people want to make contracts in gold, silver, dollars, or any other medium of exchange, that should be their business.

Competition between currencies can serve as a useful check on inflation because people can move to alternatives if the issuer of one currency becomes irresponsible.

Legal-tender laws and central banks instead prevent that competition and force everyone to accept a single, depreciating currency.

However, one important note is that gold and silver are still Constitutional money and are still considered “legal tender.” For further details, please see the U.S. Constitution, https://constitution.congress.gov/browse/article-1/section-10/clause-1/"; target="_blank" rel="noopener">Article 1, Section 10, Clause 1; and https://constitution.congress.gov/browse/article-1/section-8/clause-5/"; target="_blank" rel="noopener">Article 1, Section 8, Clause 5.

It is perfectly legal to buy things with gold or silver sound money as the tender of the transaction; therefore, gold and silver are legal tender by definition.

This is something that Money Metals and the https://www.soundmoneydefense.org/about-us"; target="_blank" rel="noopener">Sound Money Defense League have been actively advocating for well over a decade.

Gold and Silver Were Chosen by the Market

https://www.moneymetals.com/uploads/content/SoundMoneyReview-2026.pdf";>Gold and silver deserve their place as money because of the unique qualities found in the precious metals themselves, rather than any government decree.

“The value is in the gold. It is in exchange for the gold that, whenever a sale takes place, the commodity is given.”

That seems simple enough, but it has huge implications.

It means that gold and silver function as money because people value them as commodities. They are useful as media of exchange precisely because their value can be measured and divided.

Personally, I will simply overlook Smith’s use of “intrinsic value,” while accepting his core argument that gold and silver are implicitly, tacitly, and explicitly more valuable than paper fiat currencies.

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Smith observed that precious metals “were felt to have special advantages as mediums of exchange and universal standards of value, on account of their durability, their uniformity, their portability, their capability of receiving a stamp, of being divided with exactness, and of being fused again with ease.”

Gold and silver are valuable materials with convenient properties that allow them to serve as useful media of exchange.

They can be used as money, either as bullion or coins, aka “specie,” if people choose them.

A free market does not need a currency issued and mandated by the government to function. It can operate with a wide variety of media of exchange and standards of value, limited only by people’s capacity to measure and carry them.

The Limits of Monetary Management

When it comes to managing the currency, Smith had one particularly memorable analogy.

“Setting government to settle the circulation of paper, is having the barometer regulated by superior wisdom without reference to atmospheric pressure.”

In other words, governments cannot effectively control the broader economy or set interest rates because they lack the information and flexibility of the marketplace.

Inflation and monetary policy involve a huge number of variables that cannot possibly be understood by any central authority.

Markets are messy, but they have advantages when it comes to incorporating the diverse and often contradictory inputs of millions of individuals.

As for governments that believe they can control the currency to advantage, Smith warned, “Even the least dishonest of such governments, when in want of money, thinks nothing of issuing a flood of legal tender currency, without reference to the state of the money market, a proceeding which is in the nature of a forced loan.”

That’s another way of saying inflation benefits the government by allowing it to spend more than it otherwise could.

The people end up paying the piper, in one fashion or another.

Bimetallism and Currency Competition

When it comes to bimetallism, Smith was entirely correct that “How is it possible for any convention of nations to fix, and to keep fixed, the relation of any two commodities, when, among other determining circumstances, the rate of production varies from year to year?”

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He was right to oppose any government-imposed fixed relationship between gold and silver.

Bimetallism is a monetary system in which both gold and silver are officially recognized as money at a government-set exchange rate. For example, the government might declare that 15 ounces of silver equal 1 ounce of gold, as they did in https://www.moneymetals.com/news/2025/04/01/the-coinage-act-of-1792-then-and-now-003952";>the Coinage Act of 1792. The difficulty is that international and national market values change, so a rigidly fixed legal ratio can cause one metal to be undervalued and disappear from circulation.

The broader lesson is an argument for https://www.moneymetals.com/uploads/content/SoundMoneyReview-2026.pdf";>free markets and limited government.

The best way to counter government interference in currency and markets is to allow competition among currencies. Let people use whatever money they choose, so everyone remains free to make their own decisions about contracts and commerce.

Gold Is Sound Money

Gold has served as money across civilizations because it was not created by government decree. This sound money was https://www.academia.edu/145853249/On_The_Origins_of_Sound_Money"; target="_blank" rel="noopener">chosen in the marketplace.

Smith understood this. The precious metals became preferred media of exchange because of their rarity, durability, uniformity, portability, and divisibility. Those qualities have not disappeared. A gold coin remains gold regardless of the government in power, the central banker at the podium, or the number of new Federal Reserve Notes issued into circulation.

Federal Reserve Notes are fiat currency. Their purchasing power depends on political management, central-bank policy, and public confidence. Gold is a tangible asset with a long monetary history, no counterparty risk, and value recognized around the world.

De-dollarizing does not mean abandoning the dollar for everyday transactions. It means reducing dependence on a currency that can be expanded at will by institutions that have repeatedly shown a willingness to dilute it.

https://www.moneymetals.com/buy/gold";>Buying physical gold is one practical way to do that.

Gold offers an opportunity to preserve wealth outside the banking system, outside the Federal Reserve’s printing press, and outside the reach of monetary policy experiments. It is not a promise to pay. It is payment itself.

For those who believe in sound money, free markets, and https://www.linkedin.com/posts/joshua-d-glawson_goldwinsmith-socialism-politics-activity-7503803482357886977-Bfij"; target="_blank" rel="noopener">individual liberty, owning gold is more than an investment decision. It is a declaration of monetary independence.

Gold ETF vs Physical Gold - What GLD Shareholders Own vs Metal in Hand - Annual Fee Drag, Counterparty Risk, Collectibles Tax, and IRA Rules - Money Metals

Tue, 15 Sep 2026 00:00:00 EST

A gold ETF trades like a stock, but is designed to track the price of gold. Physical gold is the metal itself. Both rise and fall with https://www.moneymetals.com/gold-price";>the gold price. However, only one of these assets is still yours if the financial systems collapse.

That is a small yet incredibly important difference. It changes what you pay each year, what you owe the IRS, and whether you can put your hands on the metal.

This guide compares the two on the points that settle the gold ETF vs physical gold question. What do you actually own? What does each one cost over the years? How are the two assets taxed, how fast can you sell, and how does each one work inside a retirement account?

What a Gold ETF Actually Is

A gold ETF is a trust that holds bullion and sells shares in it. You buy those shares in a brokerage account, the same way you buy a stock in the stock market. The share price will move with the gold spot price.

The two biggest funds are SPDR Gold Shares (GLD) and iShares Gold Trust (IAU). Similar but smaller funds include GLDM and SGOL.

Here is the part that gold investors have to note about gold ETFs. While they do provide exposure to the gold price, they do not give you real ownership of gold. You own a piece of a trust that owns gold. The trust holds the title to the bars. You simply hold a share of the trust.

Some gold ETFs do not even hold metal. Some simply track gold futures. Others hold shares of mining companies, which move with mining profits and not just with gold.

To be clear, that does not mean the gold is not there. GLD publishes a list of the gold bars held by the trust, including identifying details for individual bars, and makes independent inspection reports available. The important distinction is ownership and access. The trust owns the bullion, while ordinary investors own shares and generally cannot redeem those shares for the underlying gold.

Nevertheless, if you want a fund backed by real bullion, check the fund documents before you buy. Ensure that what you buy will actually fit your strategy.

Can You Trade ETF Shares for Real Gold?

For almost everyone, no.

GLD shares can only be turned in for metal in blocks called Baskets. One Basket is 100,000 shares. Only Authorized Participants can redeem them, and those are large broker-dealers under contract with the fund. https://files.spdrgoldshares.com/spdr-cms/2025-10/GLD_Prospectus_10042022_as_filed.pdf";>The GLD prospectus puts it plainly: shareholders who are not Authorized Participants “will only be able to redeem their Shares through an Authorized Participant.”

https://www.ishares.com/us/products/239561/ishares-gold-trust-fund";>IAU works the same way. Its shares “are not redeemable from the Trust except in large aggregated units called Baskets,” and only authorized participants may redeem them.

So when someone asks which gold ETF is backed 100% by physical gold, the answer misses the point. Several funds are fully backed by bullion. That still does not mean you can go get any of it.

What Owning Physical Gold Actually Means

Physical gold is a coin or a bar that belongs to you. It does not have a fund sponsor, trustee, or custodian that stands between you and the metal.

You can buy it in a few forms:

https://www.moneymetals.com/buy/gold/coins";>Gold coins struck by government mints, such as American Gold Eagles or Canadian Gold Maple Leafs
https://www.moneymetals.com/buy/gold/bars";>Gold bars in sizes from one gram to a full kilo
Gold rounds made by private mints, which usually carry lower premiums

You also have to decide where to keep it.

Home storage is private and free, but it comes with a lot of risk and usually some costs. Home safes come with the risk of theft, house fires, or other natural disasters. There is also the cost of buying a secure home safe, which can become very expensive.

A bank safe deposit box can be cheaper for small metal holdings. However, the box is not insured by the bank and you can only access it during bank hours. A https://www.moneymetals.com/silver-gold-storage";>private depository charges a yearly fee, insures the metal in full, and keeps it out of the banking system.

None of those options is free of tradeoffs. An ETF hides this decision from you. Physical gold makes you face it.

Gold ETF vs physical gold at a glance

	Gold ETF	Physical gold
What you own	A share of a trust	The metal itself
Yearly cost	Sponsor fee, charged every year	None, unless you pay for storage
Upfront cost	Broker commission, if any	Premium over spot
Counterparty risk	Sponsor, trustee, custodian	None, unless you store with a third-party
Speed of sale	Seconds, during market hours	One to three business days
Can you take delivery	No, for retail investors	It is already in your hands
Long-term tax rate	Up to 28%	Up to 28%
Retirement account	Any brokerage IRA	Self-directed precious metals IRA
Privacy	Held in your brokerage record	Higher
Best suited for	Short-term trades and rebalancing	Long-term wealth insurance

The real cost comparison: yearly fees vs one-time premiums

Most comparisons stop at one line: the ETF is cheaper. That might be true for the first year, but it can often change after that.

What a gold ETF costs you every year

GLD charges a sponsor fee of 0.40% of net asset value per year. IAU charges 0.25%.

The fee is not billed to you. The trust pays it by selling gold. Your share count stays the same, but the gold behind each share slowly shrinks. You lose ounces every year without making a single trade.

Here is what that drag adds up to, assuming the fee stays flat:

Holding period	GLD at 0.40%	IAU at 0.25%
1 year	0.4%	0.2%
5 years	2.0%	1.2%
10 years	3.9%	2.5%
20 years	7.7%	4.9%
30 years	11.3%	7.2%

These figures are for illustration. They show the cost of the fee alone and ignore the gold price, which affects both options the same way.

What physical gold costs you once

Physical gold has one main cost: the premium over spot. You pay it at purchase, and you pay it once.

Let’s look at an example. Imagine you buy a one-ounce gold coin at a 4% premium. That 4% is your cost of entry.

Ten years later, you still own that same full ounce. Even thirty years later, you will still own that ounce, unless you sell it. Nothing falls off along the way. All that changes is what the coin is worth given the current gold spot price.

You do give back part of the spread when you sell. That is because dealers buy below spot. If you use a depository or a bank safety box, you will pay a fee each year. Home storage costs you the price of a safe, and potentially insurance, but you have much more control over what you spend.

Where the lines cross

Run those two cost curves side by side and the usual advice flips.

A one-time 4% premium beats a 0.40% yearly fee at about year eleven. After that the gap keeps widening. Hold for thirty years and the ETF fee costs you nearly three times what the premium did.

Short holds favor the ETF. Long holds favor the metal. Anyone who tells you one is simply cheaper has not asked how long you plan to hold it.

Counterparty risk: the chain between you and the gold

Every gold ETF share sits at the end of a chain. Walk it in order:

You own a share.
The share is a claim on a trust.
The trust is run by a sponsor.
A trustee handles the paperwork.
A custodian holds the bars in a vault.
In some cases, sub-custodians hold part of the metal in vaults the trust does not control directly.

Each link is a firm that has to do its job. Most of the time that works. However, people are often drawn to gold because it’s something they can hold onto that does not depend on any third party.

A gold ETF lives inside the financial system. It settles through brokers, clears through exchanges, and depends on custodians. That’s not a problem when markets move normally. However, when markets suffer severe setbacks, it often falls apart. In contrast, gold often thrives in those times precisely because of its self-sufficiency.

Physical gold in your possession has no chain at all. It is the only form of gold ownership with zero counterparty risk. That is the whole argument, and it is a narrow one, but it is the argument that matters most to long-term holders.

Liquidity: how fast can you actually get your money?

Gold ETFs win on speed. You can sell in seconds while markets are open, and the cash lands in your account on the normal settlement schedule. That is a real advantage, and no honest comparison should dodge it.

However, there is a common claim that physical gold is hard to sell. That is not necessarily true, even though it is often repeated in forum threads and gets repeated as fact.

Here is how selling actually works. You can call a dealer and sell over the phone. You can start an order online through an online exchange.

The dealer then locks in your price at that moment. You ship the metal, insured.

Payment goes out once the metal arrives and is verified. Start to finish, that is usually a few business days.

Common coins and standard bars are the easiest to sell. Odd sizes and obscure products take longer and fetch wider spreads. As you get into the market, it is often best to stick to well-known products and you will not have a liquidity problem.

There is one more wrinkle. ETFs only trade when the exchange is open. If a crisis breaks out on a Saturday, it will result in your shares being frozen until Monday. Money in your safe is not subject to this.

So, here is the honest summary. The ETF is faster, and physical gold is not illiquid. Those are two different claims, and most comparisons blur them together.

Taxes: both get hit as collectibles

This is where a lot of ETF investors get an unpleasant surprise.

The IRS treats gold as a collectible. According to https://www.irs.gov/taxtopics/tc409";>IRS Topic 409, “net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate.” That is well above the 15% or 20% rate most long-term stock gains receive.

The surprise is that this applies to bullion-backed gold ETFs too. These funds are set up as grantor trusts, so the IRS looks through the share to the gold behind it. Sell GLD at a profit after holding it for years and you can face the same 28% ceiling you would face on a gold coin.

So one of the assumed advantages of the ETF is not an advantage at all. On taxes, the two are close to a wash.

The paperwork also looks a bit different. When you sell ETF shares, the sales are reported by your broker via a 1099-B form. Dealers report a physical sale only when it crosses a specific IRS threshold. Those thresholds depend on the product and the quantity.

This is general information, not tax advice. Rates and rules change, and your own situation may differ from typical situations often addressed online. Talk to a tax professional before you sell.

Holding gold in an IRA: ETF shares vs physical bullion

Both belong in a retirement account. They just get there by different roads.

Gold ETF shares go in any ordinary brokerage IRA. You buy them like any other holding. There is no special custodian and no extra paperwork.

Physical gold needs a https://www.moneymetals.com/programs/iras";>self-directed precious metals IRA. A qualified custodian administers the account, and the metal is held at an approved depository. The bullion also has to meet IRS purity rules. https://www.moneymetals.com/guides/ira-accepted-precious-metals";>Gold must be at least .995 fine, which rules out some popular coins, including South African Krugerrands and pre-1965 U.S. silver.

The tradeoff is simple. The ETF route is easier to set up. The physical route gives you metal you can take delivery of as an in-kind distribution when you retire. If the point of holding gold is to end up with gold, that matters.

Do gold ETFs track the gold price exactly?

They follow the gold price closely. However, it is not a one-to-one following.

A gold ETF’s share price follows its net asset value, and that value is the fund’s gold minus the yearly fee. Because the fee comes out every year, the fund’s return trails gold itself by a small amount. Over one year, that gap is barely visible. Over twenty years, it becomes a very noticeable difference.

Share prices can also drift above or below net asset value when markets are stressed. It is usually small and short-lived, but it means the price you get is set by the market for the shares, not purely by the gold.

Physical gold tracks spot in its own way. You pay a premium going in and give up a spread coming out. In between those moments, though, you continue holding the same amount of gold value.

Here’s an easy way to sum it up: the ETF tracks the price of gold; the metal is the thing that is being priced.

So which one should you own?

The answer depends on your financial goals.

Buy the ETF if you are trading or rebalancing. Maybe you move in and out of positions. Maybe you reset your allocation every quarter, or you just want gold exposure inside a brokerage account you already have. In those cases the ETF’s speed is worth the yearly fee.

Buy physical gold if you are holding for years or decades. The math on fees favors the metal over long periods. So does the absence of counterparty risk. If gold is the part of your portfolio meant to survive a crisis, it should not be a share in a trust.

In a retirement account, pick based on what you want at the end. Shares are simpler to hold. Physical bullion can be distributed to you as metal.

Many investors hold both, and that is a reasonable answer. Use the ETF for the part of the position you may trade. Use physical gold for the part you never plan to sell. The two jobs are different, and one product does not have to do both.

If you decide the metal is what you are after, you can compare current products and premiums on our https://www.moneymetals.com/buy/gold";>gold bullion page.

Frequently asked questions

Neither is better across the board. A gold ETF is cheaper and faster for short holds and active trading. Physical gold can become more cost-effective over long holding periods, depending on premiums and storage costs. Your holding period and your reason for buying decide it.

You do not own metal, you own a share of a trust. You cannot take delivery. The sponsor fee eats into your position every year. And the fund depends on a sponsor, a trustee, and a custodian all doing their jobs.

Several funds, including GLD, IAU, GLDM and SGOL, are backed by allocated bullion held in vaults. Full backing is not the same as access. Retail shareholders in these funds still cannot redeem their shares for metal.

Not as an ordinary investor. GLD redemptions happen only in Baskets of 100,000 shares, and only Authorized Participants can process them. The practical path is to sell your shares and buy bullion with the proceeds.

It is slower, not harder. A dealer locks your price when you call or place the order online, and payment usually clears within a few business days. Widely traded coins and standard bars sell the fastest.

In most cases, yes. The IRS treats both as collectibles, with long-term gains taxed at a maximum rate of 28%. Bullion-backed ETFs are structured as grantor trusts, so the collectibles rate reaches through to the shareholder. Ask a tax professional about your own situation.

While Everybody Obsesses About Rate Hikes, Federal Spending Marches Along Unabated

Tue, 15 Sep 2026 00:00:00 EST

While everyone obsesses over the possibility of a quarter-point interest rate hike, the U.S. government keeps adding to its https://www.moneymetals.com/news/2026/08/20/the-40-trillion-national-debt-in-perspective-005151";>massive $40 trillion debt.

The Trump administration ran a $166.8 billion deficit in August, according to https://fiscaldata.treasury.gov/datasets/monthly-treasury-statement/"; target="_blank" rel="noopener">the Monthly Treasury Statement. That drove the fiscal 2026 budget shortfall to $1.97 trillion, virtually the same as through the same period last year.

To put the numbers into perspective, for every dollar the federal government has received in revenue this year, it spent $1.41, meaning 28.9 percent of fiscal ’26 federal outlays have been paid for with borrowed money.

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The August deficit was significantly (52 percent) lower than the August 2025 deficit, and many mainstream media outlets breathlessly reported it as a “shrinking” deficit. But calendar shifts skew the numbers.

When accounting for August spending pushed back into July, driving the biggest monthly budget shortfall since the COVID era, the August deficit rises to $248 billion, $7 billion higher than August 2025.

Uncle Sam also enjoyed the benefits of lower tariff refunds, boosting August revenue.

Total government receipts came in at $360.03 billion. That included a net $12.84 billion in tariff receipts. It was the first month of positive tariff revenue since April.

Tariff refunds totaled $10.54 billion, down from $33.38 billion in July.

With one month remaining in fiscal 2026, total government receipts stood at $4.85 trillion. That’s 3.3 percent higher than through the same period in 2025.

The real problem continues on the spending side of the ledger.

The Trump administration blew through $526.83 billion last month, even with some August Social Security and Medicare payments going out in July. Factoring in the calendar effects, the federal government spent around $608 billion last month, slightly lower than the $689 billion spent in August 2025 (another month impacted by calendar effects).

https://www.moneymetals.com/uploads/content/fyaug26spending.png"; width="700" height="486" class="mx-auto p-3" alt="" />

With one month remaining, the Trump administration has spent $6.81 trillion, a 2.2 percent increase over the same period in 2025.

A 2.2 percent increase in spending might not sound significant. But weren't we told there would be spending cuts?

In fact, there were some cuts in the Big Beautiful Bill (along with spending increases).

The increased spending comes despite cuts to the EPA and the Department of Education, along with staffing reductions that are now showing up in the data. Lower disaster spending also helped moderate spending levels through the first two months of fiscal ’26.

Looking at the big picture, the spending trajectory is up. Even with all the hype about DOGE and some lip service to cutting spending during the early days of the Trump administration, the U.S. government spent just over $7 trillion last year. That’s an average of $583.3 billion per month or $19.2 billion per day.

And now there's a war.

According to the latest CBO forecasts (which tend to assume best-case scenarios), net outlays will run at $7.449 trillion in FY2026, $7.772 trillion in FY2027, and $8.151 trillion in FY2028.

Despite some non-specific talk about “spending cuts,” there seems to be little to no commitment to tackle runaway spending. In fact, the powers-that-be constantly find new reasons to spend money, whether it is a crisis at home or a war overseas.

The Cost of the Debt

The federal government got a little relief in the form of lower interest expense in August.

In August, the Treasury forked out $97.7 billion in gross interest on Treasury debt securities. That was down from $117.57 billion in July.

According to a Treasury Department official, the drop in interest expense reflected changes in inflation accruals.

August interest payments pushed total interest expense to $1.27 trillion with one month remaining in fiscal ‘26. That’s up about 13 percent compared to the same period in fiscal ’25.

Interest on the national debt cost $1.2 trillion in fiscal 2025. That was up 7.3 percent over 2024.

Net interest outlays (interest expense – interest receipts) were $86 billion in August.

Through the first 11 months of the fiscal year, the federal government spent more on interest on the debt than it did on national defense ($876 billion) or Medicare ($979 billion). The only higher spending category is Social Security ($1.5 trillion).

Much of the debt currently on the books was financed at very low rates before the Federal Reserve started its hiking cycle. Every month, some of that super-low-yielding paper matures and must be replaced by bonds yielding much higher rates.

This brings us back to all the hoopla over a possible Federal Reserve rate hike. Everybody is obsessing about what Warsh & Co. may or may not do and ignoring the $40 trillion elephant in the room. Quite frankly, the next $1 trillion in debt is almost certainly more significant than a quarter-point hike in rates.

And when you combine an ever-growing Debt Black Hole with rising rates, you have a recipe for real trouble – which is precisely https://www.moneymetals.com/news/2026/09/11/the-fed-will-hike-or-it-wont-it-really-doesnt-matter-005195";>why I think even if the Fed does hike, it will be one-and-done.

If only people worried as much about the debt as they do the mechanizations of the central bank, maybe we could make some headway.

But that doesn’t seem to be in the cards.

When people say the spending is unsustainable, it feels like an understatement. In fact, it’s fair to call https://www.moneymetals.com/news/2026/03/26/the-us-government-is-insolvent-yes-that-matters-004791";>the federal government insolvent.

However, very few people in the political class seem the least bit interested in tackling the problem. The bad news is that at some point, the problem is going to tackle them.

Namibia in the Process of Building Its Initial Gold Reserves

Tue, 15 Sep 2026 00:00:00 EST

Namibia wants gold, and it’s launched a program to get it.

While https://www.moneymetals.com/news/2026/09/03/central-banks-piled-in-more-gold-in-july-005182";>many countries are expanding their gold reserves, the South West African nation is in the process of building its own gold holdings for the first time.

Last March (March 24, 2026), the Bank of Namibia launched a program to build gold reserves through a domestic purchase program, inking a deal with QKR Namibia Navachab.

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The central bank will reportedly accumulate gold on a “phased basis” from local production using Namibian dollars.

According to a statement released at the time, the agreement creates a process for the “structured purchase” of domestically produced gold, “in line with international reserve management standards and the Bank’s long-term strategic objectives.”

Bank of Namibia Governor Ebson Uanguta said establishing a gold reserve aligns with several central bank objectives of safeguarding macroeconomic stability and promoting national economic interests.

“This agreement represents an important step in advancing the Bank’s reserve diversification strategy. Gold continues to play a critical role as a store of value and a hedge against global uncertainty. By partnering with domestic producers, we are not only strengthening our reserves but also supporting local value creation and economic development.”

According to a report by Namibian Mining News, the gold accumulation plan is “currently in full swing” and represents “a strategic hedge for long-term national stability.”

The goal in phase one is to establish gold holdings making up 3 percent of the country’s international reserves, roughly N$1.74 billion. As of July, the country had accumulated 8,574 troy ounces of gold valued at N$573.4 million.

To reach the 3 percent goal, the Namibian central bank will need to purchase another 17,147 ounces of gold, assuming no significant price change. That’s just over one-half of a tonne. Completing phase 1 will create a gold reserve of around 25,721 ounces (0.8 tonnes).

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Bank of Namibia Deputy Governor Nicholas Mukasa said that once the central bank completes phase 1, the central bank will reevaluate and determine the next steps forward.

“We want to, first of all, focus on phase one and then, in the first quarter of next year, we can sit as an institution and decide and say, look, fine, we are now at the 3 percent target that we wanted for phase one. What do we do now in phase two?”

While we’re not talking about large amounts of gold, the move is another sign pointing toward gold’s growing importance in global finance.

Year to date, central banks have accumulated an additional 130 tonnes of gold, about 30 tonnes less than through the same period last year. The primary difference between 2025 and 2026 is that there has been more selling this year.

Last year was the fourth-largest expansion of central bank gold reserves on record. The all-time high was set in 2022 with 1,136 tonnes. It was the highest level of net purchases on record, dating back to 1950, including since the suspension of dollar convertibility into gold in 1971.

The fact that small countries that have not historically held gold are now systematically building reserves reveals that gold fever is spreading.

Bond Vigilantes Smell Blood in the Water...

Mon, 14 Sep 2026 00:00:00 EST

Treasury Secretary Bessent insists on challenging the bond vigilantes, and neither side is backing down. The underlying trends are pointing toward volatility ahead… and potentially much more.

What an interesting macroeconomic picture is being painted at the moment.

I’m afraid it will be “interesting” not in a “well, that’s fascinating” way, but something closer to the old Chinese curse, “May you live in interesting times.”

There’s a lot I could cover in this regard, but much of it can be summarized by the observation that Treasury Secretary Scott Bessent is busily talking https://www.moneymetals.com/news/2026/09/10/treasury-department-announces-even-bigger-bond-buyback-market-shrugs-005192";>Treasury bond yields down… while Fed Chairman Kevin Warsh is just as busily talking Treasury bill yields up.

And it increasingly looks like both are going to be disappointed in the results.

For his part, Bessent has been challenging the market to a duel on bond yields, and the market is taking up the challenge. As I https://x.com/Brien_Lundin/status/2098039733142147379?s=20"; target="_blank" rel="noopener">posted on X last week:

https://x.com/Brien_Lundin/status/2098039733142147379?s=20"; target="_blank" rel="noopener">https://www.moneymetals.com/uploads/content/Blood-in-the-water-X-Brien-Lundin.png"; width="800" height="629" class="mx-auto p-3" alt="" />

As that blood drips into the water, the sharks are getting more numerous and excited. Consider the trajectory of the 10-year Treasury yield:

https://www.moneymetals.com/uploads/content/10-Year-Yield-Futures--1-.jpg"; width="800" height="739" class="mx-auto p-3" alt="" />

There’s a bullseye on 5%, and the market usually gets what it wants.

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Moving to the other end of the curve, Warsh might get his higher rates even without resorting to the rate hike that everyone now expects. Given President Trump’s promise last week of a cool $5,000 payment to every adult citizen (at an estimated $1.2 trillion cost), it’s likely that vigilantes demanding higher returns won’t be limited to bonds but bills as well.

Regardless, with diesel prices soaring to record highs and other inflationary flashpoints becoming evident in last week’s CPI report, even I have to acknowledge that Warsh will likely post a quarter-point rate hike next week to rebuild some credibility for the central bank.

But the math still doesn’t work for any kind of an extended rate-hike campaign.

And in fact, outside of the most recent spate of price weakness in gold, https://www.moneymetals.com/news/2026/09/10/debasement-trade-gains-ground-as-nations-reassess-dollars-bonds-and-gold-005191";>bond yields and the gold price have been rising hand-in-hand. I featured a chart of this in last week’s Golden Opportunities, showing how the two have been largely positively correlated since late June.

This correlation isn’t a good sign for either Bessent or Warsh, because it evidences the market’s doubt regarding the future value of the dollar.

In addition, as I’ve been writing and saying recently, I think gold and bonds are sniffing out some trouble ahead. A 5% 10-year Treasury yield looms directly ahead, and that could be a trigger point for a very significant equities sell-off. That bubble has been searching for a pin for some time, and this just might be it.

As I https://x.com/Brien_Lundin/status/2098926416188297461"; target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://enews.jeffersoncompanies.com/q/usgI2Ldtu_a7YHJj0X1NPnLzM4EUVU5uULAZcOJU1RFRkFOLkdMRUFTT05AaW5kZXBLlbmRlbnRsaXZpbmdidWxsaW9uLmNvbcOIviO67SgwcLIMWVqmZWEZ0bohuQ&;amp;source=gmail&ust=1789499188073000&usg=AOvVaw1Ze5VbGETzoTqvCN8_ptaM" rel="noopener">posted recently on X:

https://x.com/Brien_Lundin/status/2098926416188297461"; target="_blank" rel="noopener">https://www.moneymetals.com/uploads/content/10-year-yields-Brien-Lundin.png"; width="800" height="414" class="mx-auto p-3" alt="" />

In the meantime, the metals have been victimized by the emotional swings of the Western traders, and with the odds of a Fed rate hike this week rising toward 100%, gold is trading down again today.

However, that’s to be expected as a rate hike looms. And, importantly, these instances have typically marked take-off points for gold.

As long-time readers will remember, I called the gold bottom in December 2015 as the Fed’s first rate hike was days away. From that point on, gold and silver soared, and many of our junior stock picks multiplied four to five times in value over the next six months.

In this case, I predict we’ll soon have a resumption of the https://www.moneymetals.com/news/2026/09/05/brien-lundin-debt-debasement-and-why-golds-bull-market-has-support-005186";>long-term gold bull market.

To get Brien Lundin’s ongoing commentary on the markets at no charge, https://goldnewsletter.com/golden-opportunities-sign-up/?tblci=GiBdY-MYH1-nD-WW6UXCXAtHBPIEdPpDc50r48qPeOICrCDKuWUow8jry8SFw-EvMLzYPQ"; target="_blank" rel="noopener">click here to subscribe to his free Golden Opportunities newsletter.

The Strange Selloff in Gold

Mon, 14 Sep 2026 00:00:00 EST

Gold and silver are starting the new week under pressure, extending a correction that has now been running for several weeks.

Gold finished last week around https://www.moneymetals.com/gold-price";>$4,360 an ounce, down roughly 1.6%, while silver fell almost 1.5% to https://www.moneymetals.com/silver-price";>around $65.18. That marked gold’s third consecutive weekly decline.

And selling picked up again Monday morning. Gold slipped below $4,350 in early trading, while silver fell back toward the $63 area as traders braced for what could be another Federal Reserve interest-rate hike this week.

But the strange part is what’s driving the selloff.

The Middle East situation continues to deteriorate, oil has surged above $100 per barrel, inflation remains stubbornly high, and investors are becoming increasingly nervous about both stocks and bonds.

Those would normally sound like pretty good reasons to own gold.

Instead, metals traders are currently focused on the Fed.

Higher oil prices threaten to push inflation higher, dramatically increasing expectations that the Fed will raise rates again at its meeting Wednesday. Higher rates, mainly in the short run, tend to make life more difficult for gold and silver.

So we have the somewhat perverse situation where escalating war, soaring energy prices, and renewed inflation fears are hurting gold because Wall Street believes those problems will force the Fed to tighten monetary policy.

Oil remains at the center of the story. Brent crude traded above $107 Monday morning while U.S. crude hovered above $102 following further disruption to Saudi energy infrastructure and escalating fighting around key Middle Eastern shipping routes.

That is bad news for consumers. Energy ultimately works its way into the cost of transportation, food, manufacturing, and just about everything else.

But beneath the recent weakness in gold, there are some remarkably strong signs of investment demand.

Global gold ETFs attracted roughly $18 billion in August, the second-largest monthly inflow ever recorded. Holdings rose by 121 metric tons to an all-time high.

China’s central bank also added about 650,000 ounces of gold during August, its biggest monthly purchase in nearly three years and its 22nd consecutive month of reported buying.

In other words, while short-term traders are selling gold because they're worried about what Kevin Warsh might say Wednesday, some of the world's largest investors and central banks continue accumulating the metal.

That distinction matters.

Gold and silver can certainly fall further if the Fed delivers another rate hike and signals that still more tightening is coming. Silver, as usual, may be even more volatile.

But rising oil prices, persistent inflation, geopolitical instability, enormous government debt, and continuing central-bank gold purchases haven't gone away.

The Fed can move interest rates around. It can't make those problems disappear.

Kalshi Launches Paper Gold Trading

Mon, 14 Sep 2026 00:00:00 EST

Kalshi is getting into the gold business.

Kind of.

The catch is it doesn’t involve any actual gold.

The prediction market exchange recently announced the launch of a gold perpetual futures contract, colloquially referred to as a “perp contract.”

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Unlike traditional futures contracts, perps never expire and don’t require anybody to hold the underlying asset.

The Kalshi calls its gold contract GOLDPERP. According to the company’s Commodity Futures Trading Commission (CFTC) filing, one contract provides price exposure to the equivalent of one troy ounce of gold. Kalshi allows trading in increments as small as 0.001 contract, effectively giving exposure to the price of 0.001 ounce of gold.

It breaks down like this:

1 contract = 1 oz of exposure
0.1 contract = 0.1 oz
0.01 contract = 0.01 oz
0.001 contract = 0.001 oz

In effect, if gold is $4,000 per ounce, a 0.001-contract position represents $4 of gold exposure.

Contract prices move in minimum increments of 10 cents per ounce. Investors can trade fractions of a contract as small as 0.001, providing exposure equivalent to one-thousandth of an ounce of gold.

This is the most important part. The contract is entirely cash-settled, and there is no mechanism to deliver or receive physical gold as there is in a traditional futures contract.

Kalshi isn’t required to hold any gold either. It determines funding Monday through Friday at 10 a.m., using a complex formula involving the spot price of gold

If GOLDPERP has averaged below spot, the rate is negative, and shorts pay longs and vice versa.

For instance, if gold is trading at $4,000 and the funding rate at 10 a.m. came in at +0.01%, you would owe roughly 40 cents for one full contract. ($4,000 × 0.0001)

The short on the other side of the contract would receive the money.

Kalshi earns money on both sides of the transaction, charging a fee whenever you open or close a position.

Traditional futures exchanges are not pleased with the move, worried it could disrupt their model. The CME Group filed a lawsuit against the CFTC to block approval of Kalshi’s perp contracts, arguing they qualify as swaps, not futures.

A Kalshi spokesperson said the company introduced the gold futures contract due to the growing interest in commodities, and he seems to understand the appeal in this day and age.

“Metals, especially gold and silver, have a story to tell because of inflation.”

But have I mentioned that there is no metal involved in any step of this transaction? Not one ounce!

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It is purely a cash contract with the price of gold as a reference.

The Kalshi contract creates an avenue for synthetic exposure to the gold price without purchasing gold at all. Leverage magnifies this effect. For example, an investor can obtain, $15,000 of gold exposure while posting only a fraction of that amount as collateral.

This could potentially disrupt the market because GOLDPERP creates another avenue for speculative gold exposure without the need for corresponding physical bullion demand. This could channel more money into the paper market and away from physical bullion. As a GATA email put it, it could “divert more gold investment money from metal to the imaginary.”

However, some analysts believe sophisticated investors on the short side of a perp contract may hedge their exposure by buying COMEX futures, ETFs, or physical gold.

If you want to gamble on the gold price, a Kalshi perp contract may be a good go-to, but don’t imagine you are investing in gold. You own nothing more than a bet.

Money Metals, Sound Money Groups Release 2027 Sound Money Review

Mon, 14 Sep 2026 00:00:00 EST

Three pro-gold and silver groups have teamed up to present the second edition of the https://www.soundmoneydefense.org/review/2027-sound-money-review"; target="_blank" rel="noopener">Sound Money Review, a scholarly journal dedicated to advancing principles of sound money.

The Sound Money Review, presented by https://www.youtube.com/Moneymetals"; target="_blank" rel="noopener">Money Metals, https://x.com/SoundMoneyDef"; target="_blank" rel="noopener">Sound Money Defense League, and https://soundmoneyfoundation.org/contact/"; target="_blank" rel="noopener">Sound Money Foundation, showcases compelling and relevant research, past and present, pertaining to sound money. These groups are the nation's leaders in sound money policy advocacy as well as publishers of the https://www.moneymetals.com/resources/sound-money-index"; rel="noopener">Sound Money Index, the nation's leading resource ranking all 50 states by their state laws pertaining to precious metals.

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This year's journal features writings from economists, legal scholars, philosophers, and historians, including Sound Money Fellows Antón Chamberlin, Ph.D. and Joseph Solis-Mullen. These scholars presented shorter articles on topics such as interest rate manipulation, the limitations of central planning, and https://www.soundmoneydefense.org/sound-money-explained"; target="_blank" rel="noopener">sound money and the myth of militarism.

Chamberlin's research explores the impact monetary policy has on housing and family formation. Solis-Mullen revisits the Hunt Brothers' infamous silver market episode from an Austrian perspective.

The second edition of the Sound Money Review also includes the monetary treatise originally written 500 years ago by Polish scientist Nicolaus Copernicus, https://www.amazon.com/-/he/Minting-Money-Nicolaus-Copernicus/dp/0982075626"; target="_blank" rel="noopener">On the Minting of Money. This new publication, translated from its original Latin and re-released with an introduction by Ralph Benko, explores the polymath's understanding of inflation and currency debasement as a pestilence for nation-states across the globe.

Stefan Gleason, president and CEO of Money Metals, said, "At Money Metals, we believe precious metals serve as an effective check against inflation and runaway government. By supporting advanced research on these topics, we can provide yet another resource for individuals and investors who wish to further their understanding of sound money."

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The Sound Money Defense League is responsible for more than 35 sound money legislative victories across the nation since 2014. The League has also warned dealers and investors about https://mises.org/power-market/gov-desantis-signs-big-government-bill-attacking-floridas-gold-industry"; target="_blank" rel="noopener">overreaching bills that impose new regulation and surveillance on the precious metals industry and its customers.

The League also honored Alaska state Rep. Kevin McCabe and Maryland state lawmakers Del. Wayne Hartman and Sen. J.B. Jennings with the https://finance.yahoo.com/economy/policy/articles/money-metals-sound-money-defense-190000593.html"; target="_blank" rel="noopener">Sound Money Legislators of the Year award for their work in enacting sound money legislation in their states in 2026.

Jp Cortez, executive director of the League and Editor-in-Chief of the Sound Money Review, said, "Our work does not end with enacting meaningful policy changes across the nation. We are thrilled to publish the second edition of our collection, adding yet another resource that inspires further research, debate, and actionable solutions in search of a better monetary system."

The Sound Money Review is one of the many resources on topics pertaining to gold and silver produced by these groups. These groups also offer scholarships, paid fellowships, and publish the Sound Money Index each year.

Please click the https://www.moneymetals.com/scholarships-fellowships"; rel="noopener">link for more information about the Sound Money Scholarship or the Sound Money Fellowship.

Download the full 2027 Sound Money Review (PDF) https://www.soundmoneydefense.org/uploads/content/2027-Sound-Money-Review.pdf"; target="_blank" rel="noopener">here.

Beyond the CPI: The Complete Inflation Story -- August 2026

Mon, 14 Sep 2026 00:00:00 EST

The Consumer Price Index (CPI) data for August was generally in line with expectations. However, a slightly hotter-than-expected core CPI reading buoyed expectations of a rate hike at the Federal Reserve meeting in September.

Meanwhile, there is a lot more to the inflation story than the CPI.

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Each month, the Bureau of Labor Statistics releases the Consumer Price Index (CPI) report. Policymakers, pundits, and economists use this data to gauge the current inflation situation.

But relying solely on CPI data to gauge inflation is a little like looking at just the temperature and claiming you know the weather.

CPI tracks price inflation – more specifically, the change in the price of a basket of goods. But historically, https://youtu.be/lmvFyBBJORM"; target="_blank" rel="noopener">inflation was defined as an increase in the supply of money and credit. Rising consumer prices are one impact of this monetary inflation. In other words, the CPI measures a symptom of monetary inflation.

The CPI reveals past monetary inflation showing up in the economy, but it can’t predict the trajectory of inflation. That means we need to look at money supply metrics to understand the complete inflation story.

With this in mind, when CPI data comes out each month, I create a more comprehensive inflation report using four metrics – CPI, changes in the M2 money supply, changes in the Federal Reserve balance sheet, and the Chicago Fed National Financial Conditions Index.

August CPI

After a rather sanguine CPI report in July, August came in a bit hotter.

Prices rose 0.4 percent month-on-month, https://www.bls.gov/news.release/cpi.nr0.htm"; target="_blank" rel="noopener">according to the latest BLS data. Despite the rise, the data came in within expectations.

However, a 0.4 percent jump in one month isn’t insignificant. That annualizes to 4.8 percent.

On an annual basis, the headline CPI remained steady at 3.4 percent last month.

Stripping out more volatile food and energy prices, core CPI increased by 0.3 percent, with the annual rise ticking down from 2.5 to 2.4 percent. The forecast was for a 0.2 percent uptick in core CPI and a 2.4 percent annual rise.

The month-on-month jump in core CPI was enough to boost expectations for a Fed rate hike next week. According to the CME Group’s FedWatch tracker, investors now put the odds of a hike at 90 percent.

Northlight Asset Management CIO Chris Zaccarelli reflected this consensus, telling CNBC that while there is no guarantee the central bank will bump rates higher, “It’s hard to see how the central bank can justify leaving rates on hold.”

Higher gasoline prices drove the CPI higher, surging by 3.9 percent in August. That pushed the energy index higher by 2.1 percent.

The 0.3 percent increase in shelter costs on the month was also notable.

Service prices rose by 0.3 percent month-on-month, pushing the annual service price increase to 3 percent.

https://www.moneymetals.com/uploads/content/august-26-cpi-breakdown.png"; width="800" height="448" class="mx-auto p-3" alt="" />

While most analysts seem resigned to a rate hike, not everyone agrees it's the right move. Economist Daniel Lacalle argued that even with the slightly hotter CPI data, a hike isn’t warranted.

“Markets price a 90 percent probability of a Fed hike, but the data do not justify monetary panic. August CPI was lifted by energy. Rate hikes do not drill a single well, build a pipeline, or lower gasoline prices. What they do is raise mortgage, credit card, and business-financing costs, hurting families, investment, and small firms. The entire burden of higher rates falls on the shoulders of job creators and families, while government spending and energy prices will not be affected.”

Lacalle went on to say he thinks a hike would likely kick off a “private sector recession.”

Based purely on the CPI data, it’s hard to argue with Lacalle’s analysis. However, other inflation metrics reveal plenty of inflationary pressure in the pipeline.

M2 Money Supply

While prices are cooling, the money supply is increasing rapidly. That is, https://www.youtube.com/watch?v=lmvFyBBJORM&;amp;list=PLYdILhg0SvdQ&index=1&pp=iAQB" target="_blank" rel="noopener">by definition, inflation. However, we won’t see its impact on the general price level for months.

Between July 2025 and July 2026, the money supply surged from $22.94 billion to $23.22 billion, a 1.22 percent increase.

In other words, we have an actual inflation rate of 5.4 percent.

https://www.moneymetals.com/uploads/content/m2-money-supply-july-26a.png"; width="700" height="381" class="mx-auto p-3" alt="" />

The M2 money supply increased by $10 billion in July alone.

This monetary inflation will eventually find its way into consumer prices. (It could also manifest in rising asset prices such as real estate and equities.)

The Federal Reserve Balance Sheet

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One reason the money supply is increasing is due to central bank money printing.

While Warsh & Co. talk tough on inflation, the Fed is running https://youtu.be/ipaQAgOCJBk"; target="_blank" rel="noopener">quantitative easing (QE) operations to create artificial demand for Treasuries and hold yields lower than they otherwise would be. That means the central bank is buying U.S. Treasuries and holding them on its balance sheet. To run this operation, the Fed creates money out of thin air to pay for these bonds, and it is injected into the economy. Again, this is, by definition, inflation.

The Fed will never admit to running QE. It will tell you it is just a technical operation to keep the financial system’s plumbing clear. But no matter what you call it, the practical impact is the same. The Fed’s balance sheet expands, and new money flows into the economy.

The https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm"; target="_blank" rel="noopener">central bank’s balance sheet began ticking higher in December, and the upward trend continues today. In August, the balance sheet was steady, but it has increased from $6.57 trillion to $6.74 trillion since January.

https://www.moneymetals.com/uploads/content/fed-balance-sheet-sep1426.png"; width="700" height="473" class="mx-auto p-3" alt="" />

I can’t overstate the fact that the Fed is easing monetary policy through its balance sheet operations, even as it claims to be fighting inflation. Sure, the balance sheet increase is modest. But if you’re serious about an inflation fight, why isn’t the balance sheet shrinking?

The answer is the evolving bond bear market. With yields rising and pushing up the federal government’s interest costs, the Fed has no choice but to step in and support the Treasury market.

With the Treasury Department trying and failing to drive long-term rates lower with its bond buyback, it’s only a matter of time before the Fed has to engage in more aggressive QE to control the Treasury market and facilitate U.S. government borrowing and spending.

National Financial Conditions Index

While everybody imagines monetary policy is tight, with the federal funds rate set between 3.5 and 3.75 percent, it is loose from a historical perspective.

The Chicago Fed’s own https://www.chicagofed.org/research/data/nfci/current-data"; target="_blank" rel="noopener">National Financial Conditions Index (NFCI) reveals this.

As of the week ending September 4, the NFCI stood at -0.56. The minus sign indicates financial conditions remain historically loose.

Surprisingly, the NFCI never went positive, even during the height of the Fed’s tightening cycle. The highest it got was -0.09 in October 2022.

https://www.moneymetals.com/uploads/content/nfci-aug-26.png"; width="800" height="364" class="mx-auto p-3" alt="" />

Again, this reveals the Federal Reserve inflation fight wasn’t nearly as aggressive as advertised. It maintained a historically loose monetary policy through the entirety of this inflation cycle.

It also reveals that the economy is addicted to easy money. The fact that the central bank never drove financial conditions tight for fear of collapsing the debt-riddled bubble economy is telling. It certainly wasn’t because inflation was under control.

Conclusion

When you put all the data together, the inflation picture looks much more concerning than the sketch drawn by the CPI data alone. Clearly, inflation is far from "under control." It is on the upswing.

While CPI has generally been trending lower (August’s uptick notwithstanding), the growing money supply means there's undoubtedly more price pressure in the pipeline. Whether it manifests in consumer prices, asset prices, or both remains to be seen.

The bottom line is it’s not the time to celebrate inflation’s demise. One thing you can count on: the powers-that-be will relentlessly devalue your money – at least by the planned 10-plus percent every five years.

Daniel Lacalle: Rate Hikes Won’t Fix Inflation or Solve the Debt Problem

Sat, 12 Sep 2026 00:00:00 EST

Economist https://share.google/vytbBpxbPONuQHXBa"; target="_blank" rel="noopener">Daniel Lacalle joined Mike Maharrey on the Money Metals Podcast to discuss the latest European Central Bank rate hike, the Federal Reserve’s upcoming September meeting, persistent inflation, sovereign debt, and what the environment means for gold and silver investors.

https://uk.linkedin.com/in/daniellacalle"; target="_blank" rel="noopener">Daniel Lacalle, a https://ieknowledge.ie.edu/portfolio_page/daniel-lacalle/"; target="_blank" rel="noopener">professor at IE Business School in Madrid and a fund manager, argued that central banks are trying to solve the wrong problem. Raising interest rates, he said, will not bring down oil or natural-gas prices, curb government deficits, or reverse the monetary debasement that undermines purchasing power.

https://www.youtube.com/embed/d9jS-1wDsg4?si=9pgBqbUhADynAf3-"; title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="allowfullscreen">

Rate Hikes Hit the Private Sector

https://play.libsyn.com/embed/episode/id/42874190/height/192/theme/modern/size/large/thumbnail/yes/custom-color/1e40af/time-start/00:00:00/playlist-height/200/direction/backward/font-color/FFFFFF"; scrolling="no" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="true" msallowfullscreen="true">

The https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.mp260910~314e508016.en.html"; target="_blank" rel="noopener">European Central Bank recently raised interest rates despite an economy Lacalle described as stagnant rather than overheated. He said private-sector lending, credit-card demand, and broader money-supply growth do not point to an economy running too hot.

Instead, he argued, much of the money-supply growth that remains is tied to government spending. In his view, an additional rate hike does little to address inflation while raising costs for households, small businesses, and medium-sized enterprises.

Lacalle noted that financing costs for small and medium-sized businesses in the euro area run between 7 and 12 percent. A 25-basis-point increase may sound minor in isolation, but for businesses already dealing with costly credit, it can mean the difference between accessing financing and getting none at all.

He warned that higher rates encourage banks to hold cash at the ECB instead of lending to businesses. The result, he said, is a policy that risks engineering a private-sector recession while government spending, deficits, and liquidity facilities remain in place.

The Fed Faces a Similar Problem

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Maharrey asked whether the Federal Reserve should follow the ECB’s lead at its September meeting. Lacalle said a https://www.moneymetals.com/news/2026/09/11/the-fed-will-hike-or-it-wont-it-really-doesnt-matter-005195";>U.S. rate hike would have no effect on energy prices or federal deficit spending, while it would add pressure to families and smaller businesses.

He emphasized that the Fed has a dual mandate of stable prices and full employment. According to Lacalle, roughly 90 percent of job creation in developed economies comes from small and medium-sized enterprises, the very businesses most affected by high borrowing costs.

Small-business financing costs in the United States, he said, are running between 6.5 and 8.5 percent. He also pointed to a New York Fed paper that he said found staying above the neutral rate in the average federal funds rate can destroy about 1 million jobs per year.

For that reason, Lacalle argued that the Fed has even less reason than the ECB to raise rates. He said another hike would be “hugely detrimental” to the U.S. economy.

Oil Prices and Monetary Inflation Are Not the Same

A central theme of the conversation was the distinction between individual price shocks and https://www.moneymetals.com/news/2026/03/30/whats-the-real-inflation-rate-004797";>monetary inflation. Lacalle said policymakers and Keynesian economists often argue that higher oil prices automatically mean inflation is rising, but he rejected that premise.

If oil prices increase because of an energy shock while the amount of money in the system remains unchanged, consumers have less money to spend on other goods and services. In that situation, he said, other prices should remain stable or decline.

“War is inflationary” and “oil prices are inflationary” are common claims, Lacalle said, but he called them incorrect. In his view, oil-price shocks are disinflationary unless monetary inflation allows prices to remain elevated and continue rising over time.

What people feel in their daily lives, he said, is the destruction of a currency’s purchasing power. A reported CPI rate of 3.5 percent may not reflect the reality for families dealing with soaring housing, food, energy, and college costs.

Lacalle said consumers often blame the business owner who raises the price of bread instead of the government policies that debase the currency. That misunderstanding, he argued, makes it easier for advocates of greater spending and money creation to present themselves as the solution to affordability problems.

The Global Debt Race Is About Who Loses First

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The conversation then turned to the U.S. debt, https://www.moneymetals.com/news/2026/09/10/treasury-department-announces-even-bigger-bond-buyback-market-shrugs-005192";>Treasury buybacks, and the broader global sovereign-debt problem. Lacalle stressed that America’s debt burden is serious, but he said the greater danger may lie in other advanced economies.

“The race of global debt is not a race to see who wins, but who loses first,” he said.

Lacalle pointed to France, the euro area, Japan, and the United Kingdom as countries facing high debt, large deficits, rising borrowing costs, and rapidly growing unfunded liabilities. He described unfunded liabilities as the part of the debt iceberg below the waterline.

He estimated France’s unfunded committed liabilities at roughly 450 to 500 percent of GDP and Germany’s at around 350 percent of GDP. These obligations come on top of governments that, in his view, remain unwilling to reduce spending or deficits.

The United States, he said, benefits from the dollar’s role as the world’s reserve currency. While the U.S. deficit is unsustainable, Lacalle argued that U.S. debt still plays a foundational role in the global financial system in a way that euro-area, Japanese, and British debt does not.

Rather than true de-dollarization, he said the world is experiencing “re-dollarization.” Investors and central banks may be reducing exposure to developed-market sovereign debt more broadly, but rising yields in the U.K., France, and Japan have been more dramatic than in the United States.

A Sovereign Debt Bubble Leads to Stagnation

Lacalle said excessive sovereign debt may not trigger a conventional financial crisis. Instead, it can create long-term stagnation, persistent inflation, weak productivity growth, and falling real wages.

A real-estate bubble can burst, reprice, and eventually allow an economy to recover. A sovereign-debt bubble is different, he argued, because central banks and banks become focused on perpetuating the government-debt bubble rather than directing capital toward productive parts of the economy.

Lending to the real economy becomes a second- or third-best option, he said. Debt continues to rise as interest expenses rise, and governments struggle to solve the problem through more spending because new programs fail to make a meaningful dent in annual interest costs.

Lacalle also argued that government borrowing crowds out private investment. When the government can refinance debt easily while consumers face credit-card rates of 23 or 24 percent, he said, the private sector is effectively subsidizing the government’s cost of borrowing.

Why Gold and Silver Investors Should Not Fear Rate Hikes

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For gold and silver investors, Lacalle’s message was direct. He acknowledged that precious metals do not rise in a straight line and that volatility should be expected.

But he said selling gold or silver solely because interest rates rise misunderstands the relationship between rates, government solvency, inflation, and currency debasement.

“If you sell silver and gold because there is a rate hike, then it’s because you don’t understand money,” Lacalle said.

A rate hike, he argued, can signal that government solvency is becoming less credible and that inflation remains persistent. Investors may receive a 5 percent yield on the bonds of an indebted government, but that does not necessarily provide a real economic return once currency depreciation and underlying asset losses are considered.

Lacalle noted that the sovereign-debt market has been in a recession since 2022 and has not recovered its 2021 highs. Gold, by contrast, has historically served as a reserve of value, a unit of measure, and real money.

He also said corrections in gold and silver often originate in paper markets that he estimated are at least 30 times larger than the physical market. Instead of treating volatility as a reason to sell, Lacalle encouraged investors to view sharp corrections as potential opportunities to add to positions.

The interview underscores a simple point for Money Metals listeners. Central-bank policy, rising debt, and https://www.moneymetals.com/news/2026/09/10/debasement-trade-gains-ground-as-nations-reassess-dollars-bonds-and-gold-005191";>persistent monetary debasement create volatility, but they also reinforce the case for holding real money and focusing on long-term purchasing power.

Stay in touch with Daniel Lacalle on his website https://www.dlacalle.com/en/"; target="_blank" rel="noopener">HERE.

Daniel Lacalle's X (formerly Twitter) is https://x.com/dlacalle_IA"; target="_blank" rel="noopener">@dlacalle_IA.

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Conclusion

Daniel Lacalle: Rate Hikes Won’t Fix Inflation or Solve the Debt Problem

Rate Hikes Hit the Private Sector

The Fed Faces a Similar Problem

Oil Prices and Monetary Inflation Are Not the Same

The Global Debt Race Is About Who Loses First

A Sovereign Debt Bubble Leads to Stagnation

Why Gold and Silver Investors Should Not Fear Rate Hikes