💰 Commodities Super Cycle! $20K Gold, $500 Silver & $500 OIL After The Global Bust | David Hunter
Summary
TLDRThe video script discusses a looming global economic bust, driven by unprecedented levels of debt and derivatives, which could exacerbate a downturn. The speaker predicts a recession turning into a bust, with central banks likely to print money in response, leading to high inflation by the end of the decade. They also foresee major bank failures and a deflationary period before a surge in commodity prices, including oil and copper.
Takeaways
- 📉 The speaker predicts a global economic bust due to unprecedented levels of leverage in the global system, including a staggering $320 trillion in debt and a notional value of derivatives in the quadrillions.
- 💔 Leverage, while beneficial during economic upswings, can greatly exacerbate problems during downturns, as seen in the 2008 financial crisis, and the current leverage is far beyond that of the 2008 crisis.
- 🌐 The potential for a global recession is heightened by the interconnectedness of the world's economies, with European, Canadian, Australian, and Chinese banks being particularly vulnerable due to high leverage.
- 🚨 A catalyst for the downturn could come from overseas but would affect the global economy, including the U.S., which is not immune to these risks.
- 🔄 The speaker suggests that the pandemic has caused underlying economic imbalances and fragility, which will be exposed during the anticipated recession, making the downturn more severe.
- 💡 The formula for a bust, according to the speaker, is leverage plus economic fragility caused by the pandemic, plus a potential policy error by central banks.
- 🏦 Central banks may not fully understand the underlying risks and are currently pursuing policies that could lead to a rapid downturn if not adjusted in time.
- 📉 The speaker anticipates an 80% bear market and a significant drop in commodity prices, including oil and copper, indicating a broader deflationary trend.
- 💸 However, the speaker believes that central banks will resort to printing money in response to the crisis, which will eventually lead to high inflation and a commodity price boom.
- ⏳ The deflation phase is expected to be short-lived, with inflation expected to rise to high single digits or even 25% by the end of the decade.
- 🏦 The speaker agrees with the current concerns about bank failures, especially among regional banks, and anticipates a significant financial crisis with major bank failures in the coming year.
Q & A
What is the main thesis for a global economic bust according to the speaker?
-The speaker's main thesis for a global economic bust is the unprecedented level of leverage in the system, which includes both private and public debt and the notional value of derivatives, which can exacerbate problems during a downturn.
How does leverage impact the economy during an upturn and a downturn?
-Leverage enhances returns during an upturn, but during a downturn, it can exacerbate problems and turn a normal downturn into something far worse, as seen in the 2008 financial crisis.
What are the current global debt figures mentioned in the script?
-The current global debt figures mentioned are 320 trillion, which includes both private and public debt.
How does the speaker compare the current economic situation to the 2008 financial crisis?
-The speaker compares the current situation to the 2008 financial crisis by stating that the leverage in the system is far beyond what it was in 2008, and that banks, especially European and Canadian banks, are in trouble or very leveraged.
What is the role of central banks in the potential global economic bust?
-The speaker believes that central banks may not fully understand the underlying risks and could make policy errors that could exacerbate the situation. They might print money in response to a crisis, which could lead to massive inflation.
What does the speaker predict regarding asset prices and commodity prices in the event of a bust?
-The speaker predicts an 80% bear market and a significant drop in commodity prices, with oil potentially falling to $30 and copper to as low as $1 in the event of a bust.
How does the speaker define a 'bust' in the context of the script?
-In the context of the script, a 'bust' is defined as a situation similar to 2008 but potentially more severe, where the financial system starts breaking down, leading to a global recession.
What is the speaker's outlook on inflation following a potential bust?
-The speaker predicts that after a potential bust, central banks will print money, leading to a lag in inflation. Initially, there might be deflation, but by the end of the decade, inflation could reach 25%.
What is the speaker's view on the current state of regional banks in the US?
-The speaker believes that regional banks in the US are very vulnerable and could face major failures, especially if there is counterparty risk and major banks fail globally.
How does the speaker describe the process leading up to a potential bust?
-The speaker describes the process as not happening overnight. There are underlying issues that are already moving in the direction of a bust, but it doesn't all happen in a timeframe that everyone expects.
What is the speaker's long-term prediction for commodities like oil and copper?
-The speaker predicts a huge commodity cycle with $500 oil by the end of the decade and copper prices going through the roof due to massive money printing and lack of infrastructure to deal with the money chasing fewer goods.
Outlines
📉 Global Economic Downturn and Leverage Risks
The speaker discusses the potential for a global economic bust due to unprecedented levels of leverage in the system, including a staggering $320 trillion in global debt and an immense notional value of derivatives. They argue that while leverage can amplify returns during economic upswings, it can also exacerbate downturns, as seen in the 2008 financial crisis. The speaker highlights the vulnerability of European and Canadian banks, as well as the systemic fragility caused by the pandemic and economic policy responses, which have created imbalances that could worsen in a recession. They also anticipate a significant policy error from central banks, who they believe do not fully understand the underlying risks, and predict an initial phase of deflation in asset and commodity prices, followed by a sharp economic downturn.
💰 Central Bank Response and Inevitable Inflation
The speaker forecasts a response from central banks to an impending economic crisis, involving massive money printing that will ultimately lead to high inflation. They define a 'bust' as a situation akin to the 2008 financial crisis but more severe, and predict that central banks will expand their balance sheets significantly to combat the crisis, which they believe will result in a substantial increase in inflation. The speaker anticipates a transition from deflation to high single-digit and eventually double-digit inflation rates by the end of the decade, with commodities like oil and copper experiencing extreme price fluctuations. They also discuss the potential for bank failures, referencing recent events and suggesting that even large banks could be at risk due to counterparty risks.
🏦 Anticipated Recession and Bank Failures
The speaker predicts an imminent recession, possibly before the end of the year, which could evolve into a full-blown economic bust as the financial system begins to falter. They acknowledge that while large banks may be in a better capital position due to lessons learned from the 2008 financial crisis, regional banks are particularly vulnerable, and there are signs of stress within the banking system. The speaker emphasizes that economic crises do not occur abruptly but are the result of underlying issues that gradually surface, and they suggest that the current situation may lead to a 'melt up' before the downturn fully materializes.
Mindmap
Keywords
💡Leverage
💡Global Debt
💡Derivatives
💡Economic Downturn
💡Bust
💡Fragility
💡Policy Error
💡Deflation
💡Inflation
💡Commodity Prices
💡Central Banks
Highlights
The speaker suggests a global economic bust due to unprecedented levels of leverage in the system.
There is currently $320 trillion in global debt, both private and public, indicating high systemic leverage.
The notional value of derivatives is in the quadrillions, representing significant market leverage.
Leverage enhances returns during economic upturns but exacerbates problems during downturns, as seen in 2008.
European banks are in trouble, and Canadian banks remain leveraged despite lessons from 2008.
China and Japan are also facing leverage-related issues, indicating potential global economic problems.
The pandemic has caused underlying imbalances and fragility in the economy, despite statistical recoveries.
The speaker predicts a global recession due to economic fragility and imbalances caused by the pandemic response.
Central banks may make significant policy errors due to a lack of understanding of underlying risks.
The speaker recalls being one of few predicting a hard landing in 2008, which was met with pushback.
Leverage can quickly turn a stable economy into a disaster, as seen with the Lehman Brothers collapse.
The speaker anticipates overall deflation, including in asset prices and CPI, but not a long-lasting depression.
Deflation will not last long due to central banks' actions, such as quantitative easing and money printing.
The speaker forecasts an 80% bear market and a potential drop in commodity prices, including oil to $30.
Copper prices could plummet to as low as $1 in the event of a bust, indicating a significant impact on commodities.
Inflation is expected to rise to 25% by the end of the decade, following a period of deflation.
The speaker predicts a massive commodity cycle and high inflation, with oil prices reaching $500 by the end of the decade.
Small and regional banks in the US are vulnerable, with some potentially failing or dipping below capital requirements.
The speaker agrees with experts suggesting that bank failures are not over and could increase.
A recession is predicted before the end of the year, potentially morphing into a full-blown economic bust.
The speaker warns of counterparty risk and the potential for major global bank failures impacting the US.
Problems in the economy are not immediate but are already moving in a negative direction under the surface.
Transcripts
you know there's shorter Term Policy and
longer Term Policy
implications um I think basically uh my
my thesis for a global bust is that we
have leverage in the system so much
higher than it's ever been before and
we're heading for a downturn so you know
I think um when I say leverage higher
than ever before we've got 320 trillion
in global debt right both private and
public um we've got
um quadrillions in notional value of
derivatives which is leverage on the
markets so you know even in even looking
in comparison to
20089 we are so far beyond anything
we've ever seen
before leverage works well on the way up
right it helps enhance Returns on the
way down it really exacerbates problems
so so first and foremost the reason for
a bust is that leverage can turn a
normal downturn into something far worse
we saw we saw that in 20089 in Spades um
you know the leverage in our banking
system was why we had a financial crisis
like we've never had this time you've
got leverage far beyond that um our
banks particularly our large banks are
in better shape because of
20089 but European banks are in trouble
um Canadian Banks didn't learn our
lesson they were in good shape back in
20089 you know their their system is
very leveraged today um Australia's
leveraged China's got problems obviously
Japan's very leveraged so I I think the
problems could come you know the
Catalyst could come from
overseas uh but it's going to be Global
we'll be a part of it um and and the the
other piece to this so I go if I put a
formula together it's
leverage plus fragility caused by the
Pand mic I think under the surface we
still have a lot of um imbalances caused
by what happened in the you know the
20120 to
202 area you know there's yes we've
recovered statistically yes lots of
areas have done well but lots of small
businesses failed and lots of others are
hanging on by a thread it created
because of the response the five
trillion in in QE and uh and all the the
debt we put out to deal with the
pandemic it's caused a very fragile
system you know we've got a and this is
I'm talking about the us but it really
is around the world there's more
fragility in the system going into what
I think will be a recession this time
around and that just will exacerbate the
it'll be a global recession um I think
the problems the imbalances are around
the world we're not unique in that and
then thirdly so I go leverage Plus
economic fragility from the you know
caused by the pandemic plus um what I
think will be a very big policy error on
the part of central banks so central
banks don't in my opinion don't really
understand the underlying risks they're
not they're not thinking any they
wouldn't be doing what they're doing now
if they understood how fast this thing
can go from looking fine to disaster you
know the leverage will take this thing
down fast we saw it in 2008 I I remember
in 2008 in early September of 2008 I
remember I was one of the only voices
out there saying we're we're heading for
a hard landing and I got a lot of push
back because every Economist out there
was saying soft Landing no recession in
sight three weeks later we had Leman
brothers and a huge financial crisis so
that's how fast things can come look
look okay and then turn around and go
sell um and I think that's what we're
going to see leverage will do that again
when you say deflation are you referring
to deflation in asset prices or
deflation in CPI consumer prices yeah I
think we'll actually see um overall
deflation it won't last long it's not a
depression it's not a long drawn out but
I think technically even our price
indexes will be in deflation so it'll be
it'll be asset prices for sure I'm
calling for an 80% bare Market or the
potential of an 80% bare Market from the
top but um but it's more than just asset
prices I think you'll see commodity
prices fall through the floor my my oil
Target in the bust is
$30 so that gives you some idea I think
we're gonna see Commodities get hit hard
copper could go from I have a copper
Target for pre-bus meaning this year of
of $66 and I had that when copper was
three and a quarter you know six months
ago um I have a copper I think copper
could go to as low as a dollar in the
bust so you're gonna have some big moves
in in Commodities you're gonna have you
know other prices coming down across the
board so but I I think any deflation
lasts Le you know not more than a year I
I when you say that this is not going to
be a depression I wonder why you think
that is these problems that you've
highlighted are long-term structural
problems that if they do manifest in
some sort of sharp economic downturn it
sounds to me like it might last a while
right but it won't good good question it
won't for one reason and that is the
printing press they will we we saw what
they did in 2020 right we saw what they
did in
20089 um and and you know the period
after that with qe1 two and three what I
think you're going to have when I when I
say Bust I should Define bus because
people use terms without really
understanding what they mean I've I've
started to talk about bus many years ago
before it was being used um global bus
to me is something sort of like 20089
except it goes farther in
20089 we were on the verge of a bust
when G when GE was about to um go under
because the commercial paper Market was
frozen if you remember that the in the
fall of 2008 the the commercial paper
Market froze up and fortunately the
government responded very quickly and
that was right after Leman and and
responded with with a lot of money you
know um and so um we Pro we avoided the
bust we avoided that stage that would
take us over the cliff we got very close
but we didn't get there this time I
think we go over that cliff and the
reason is because of 20089 and because
of 2020 our Central Bankers are all
telling us they won't do that again
right they're all saying we don't want
to go back there we know it was a
mistake we're not going to print money
like that again that's nice to say until
you're staring it in the face and you've
got Banks across the the globe Domino
you know Domino across the globe and
failure you know they can't sit there
and say well but we don't want to cause
inflation so we're not going to print
money or we don't want to prop this up
they will come in and my estimate is
that what it will take this time around
you know took five trillion in 2020 or
at least that's what they did this time
around I think you'll see the FED
balance sheet expand by 20 trillion so
you'll go from you know nine or 10
trillion to 30 trillion um and you'll
see like proportionately like amounts
coming from every Central Bank that's
going to spark massive inflation would
it not with a lag because they're
dealing with deflation and financial
crisis you know of major proportions it
will take a couple years for that to
manifest in terms of inflation starting
to break out you'll go from negative
inflation in 2025 maybe into the first
half of of the following year it'll be
low single digits by by by the end of 26
and into 27 inflation is going to move
in high single digits toward double
digit by the end of the decade I think
we'll be looking at 25% inflation in
this country so so yes it's going to
manifest in a huge commodity cycle a
huge inflation cycle I'm calling for
$500 oil by the end of the decade um you
know like I said gold 20,000 copper will
go through the roof you're you're going
to cause a real collision between this
massive money and no infrastructure to
deal with all the money chasing fewer
Goods by by the way uh this financial
crisis that you're speaking up down the
line well we're getting sort of a uh uh
renewed fear of a financial crisis now
in the US with the uh Republic First
Bank recently shut down by uh Regulators
people are commenting that hundreds of
small Regional Banks across the US are
feeling stressed this came in from an
article from CNBC uh Christopher wolf
managing director of Fitch ratings told
CNBC that you could see some banks
either fail or at least you know dip
below their minimum Capital requirements
it seems to me like even the people at
the top are believing that this is not
the end of bank failures where do you
stand on this yeah I agree with that I
think I think in the in the bus which is
mostly next year like I said it could
start before the end of this year uh who
knows because because we we will start
with an economy in recession right it'll
look like a recession
and then then morph into a bust as as
the financial system starts breaking so
so I think we'll see recession before
the end of this year whether the bus
hits before the end of the year or not
we'll see um yes I think there's major
bank failures going to happen like I
said in terms of the big Banks our big
banks are in better Capital shape than
they've been you know they they were
forced to get religion at the um you
know back in the 20089 G GFC however
there's so much counterparty risk out
there and if we see major Banks failing
around the globe it's going to come back
to us so I can't say our big banks are
immune certainly our regional banks are
very vulnerable we saw that a year ago
and like you said there's some signs and
that's why um it's important to remember
this stuff doesn't happen overnight you
don't go from everything healthy to
everything breaking there's things under
the surface that are moving in that
direction already it just doesn't all
happen um in a time frame that everybody
expects so I think by the end of the
year I think some of those problems you
know we've got obviously commercial real
estate problems in those Regional Banks
um you know there's a lot of things
under the surface but that does not
prevent a melt up before we get there
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