Growing US Debts & Liabilities Lead to a Bad State of Affairs | Professor Steve Hanke

Silver and gold prices were flat to slightly down for the week.

The silver spot price is closing the week down a few cents at around $14.64 oz while the gold spot price is ending at $1,240 US dollars per troy ounce. Ten dollars less per ounce than last week's closing price.

Concerning some recent discussions on our show, the palladium spot price is closing this week higher than gold's spot price at $1,251 per troy ounce.

The last time in palladium price history, Pd prices were higher than gold was from the year 2000 to the year 2002, during the Russian palladium supply, short squeeze. That episode saw the then palladium price high reach 4Xs the then spot price of gold.

Is something similar to that about repeat?

Russian palladium supplies currently represent about 40% of newly mined palladium globally (see page 113 for that data).

And given some of the points we discuss with our guest this week regarding increased US protectionist trade policies and US treasury sanctions... current and future palladium supply disruptions are not out of the realm of possibility.

As it stands right now, the palladium market is currently in backwardation.

Basically backwardation in precious metal trading is just a sophisticated industry term for instances when NYMEX futures contract prices are lower than the over the counter spot price.

Palladium lease rates have also been recently escalating, hitting near 30% interest rates on 1 month physical palladium lending.

Palladium, like platinum, is also considered a precious metal of both US National and Economic Security.

We'll keep an eye on palladium spot price movements to come.

As for this week, we have a new guest on the show who has first hand experience both in intervening and quelling currency crisis throughout his career.



Welcome to this week's Metals & Markets wrap. I am your host James Anderson of SD Bullion.

With us this week a new guest, he is... Steve H. Hanke, a Professor of Applied Economics and Co-Director of The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.

Steve Hanke served on President Reagan’s Council of Economic Advisers, he has also been an adviser to 5 foreign heads of state and 5 foreign cabinet ministers, and held a cabinet-level rank in both Lithuania and Montenegro.

Professor Hanke is also a columnist at Forbes Magazine, a well-known currency reformer, and a currency and commodity trader.


Professor Steve Hanke, welcome to the show.

Professor, I have watching your twitter account ( @steve_hanke ) for some time now. I know you have deep knowledge of both currency and financial markets.

I would like to start off with a tweet you made yesterday regarding growing US federal government spending and widening deficits.

You tweeted the US government spending is out of control. If we don't reign it in significantly, BIG problems loom ahead.

The US budget deficit for just November 2018 alone was $205 billion US dollars compare to $139 billion only a year ago.

If we continue with this growing trend, where might this lead for the USA and what might the ramifications be?


Doesn't our issuing the dominate trade and world reserve currency (e.g. Federal Reserve notes, aka US dollars) exacerbate this growing trade deficit?


So the Federal government debt is now nearing the $22 trillion dollar mark.

We also have unfunded liabilities and underfunded pension funds out there. Some estimate the latter issues to be way higher, many multiples of the growing US Federal debt ( to tune of $210 trillion USD in net present value total).

When we look down the road, when governments historically get to debt levels like this, their options boil down to either A) default, B) debase their currency, or C) mix of both debt defaults and currency debasements.

Do you see a high chance of us devaluing the US dollar sharply?


As many have, I've been watching the Federal government's involvement with Student Loans,

I believe they got into the business around the mid 1990s. If you look at the exploding prices of college tuition over the last few decades, there is a strong correlation between higher education costs and growing student loan figures.

Student Loan debt levels 2019 Steve Hanke SD Bullion podcast


I suppose you see a lot of similarities between growing college tuitions and the Federal governments involvement in the health care system.

Health Care Education Child Care price inflation Steve Hanke SD Bullion Podcast


I'd like to swing this conversation back to the US dollar if I could.

Before this call, I listened to your recent interview on Global Macro Voices and in that discussion you spoke about how the US dollar remains the dominate reserve currency.

But you also mentioned your concern about our growing use of protectionist trade policies and increasing dependency on US Treasury sanctions.

Don't these policies increasingly encourage our trading partners to begin looking for other potential payment options other than the dollar?

What some refer to as de-dollarization?


Given that the US dollar remains dominate in international trade, yet there is also growing motivations for other trade settlement options.

Ever since the 2008 financial crisis, there has been a growing mantra that perhaps the IMF SDR could fulfill the role for the next monetary system.

I looked but didn't find any of your commentary on the matter.

I wonder that you think of this IMF SDR possibility?

IMF SDR vs Gold SD Bullion podcast Steve Hanke

^^^ A very similar IMF SDR vs Silver, Platinum, Palladium value loss has occurred over this fiat currency basket's existence ^^^ 


I know there has been a lot of speculation that China, given how they have grown in the past few decades, that perhaps Chinese financial markets may become a growing force.

Now of course much of their economic data is fake, just looking at their unprecedented increase in their internal debt levels, and the yuan's m1 m2 m3 figures.

But I wonder when you look out, especially given how much gold bullion China has been importing over the past decade.

Is there any possibility of them perhaps using that gold position to lend credibly to their yuan ahead?


Well Professor Hanke, I want to be respectful of your time. And I want to thank you on behalf of myself and our listeners for taking the time to speak with us today.

I'm going to put your various website links and twitter handle in the show notes for listeners to find.

What do you think is the best option for people to follow you if they want your thoughts real time?


Follow his active Twitter handle. In our experience, no one in the word covers emerging market currency price inflation data and Venezuelan hyperinfaltionary ongoings as thoroughly as he does.

Cato Institute: Steve Hanke profile

Johns Hopkins University: Steve Hanke Co-Director profile


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James Anderson
James Anderson
Content Director

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold