💰 Commodities Super Cycle! $20K Gold, $500 Silver & $500 OIL After The Global Bust | David Hunter

Summary

The 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

00:00

📉 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.

05:01

💰 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.

10:03

🏦 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.

Keywords

💡Leverage

Leverage refers to the use of borrowed money or debt to finance investments, with the expectation that the returns on the investment will exceed the cost of borrowing. In the context of the video, the speaker highlights that the current global leverage is at an all-time high, with $320 trillion in debt and quadrillions in derivatives, which is a significant factor contributing to the potential severity of the next economic downturn.

💡Global Debt

Global debt encompasses the total amount of money owed by all sectors, including governments, corporations, and individuals, across the world. The script mentions a staggering $320 trillion in global debt, emphasizing the precarious financial situation that could exacerbate economic problems during a downturn.

💡Derivatives

Derivatives are financial instruments whose value is derived from the value of an underlying asset, such as stocks or bonds. The script points out the 'quadrillions in notional value of derivatives,' indicating a vast amount of financial leverage that could amplify market volatility and economic downturns.

💡Economic Downturn

An economic downturn refers to a period of negative economic growth, often characterized by falling business and consumer spending, reduced industrial production, and rising unemployment. The speaker's thesis for a global bust is predicated on the high leverage in the system and the potential for a severe downturn.

💡Bust

In economic terms, a 'bust' describes a period of economic contraction following a boom, often marked by a sharp decline in asset prices and economic activity. The speaker defines a 'global bust' as a situation worse than the 2008 financial crisis, with the potential for a rapid and severe economic collapse.

💡Fragility

Fragility, in this context, refers to the vulnerability of the economic system to shocks and instability. The script discusses the fragility caused by the pandemic and the imbalances that have been created, which could make the system more susceptible to a severe downturn.

💡Policy Error

A policy error occurs when decisions made by policymakers, such as central banks, lead to unintended negative consequences. The speaker believes that central banks may not fully understand the risks and could make policy errors that could accelerate an economic downturn.

💡Deflation

Deflation is a decrease in the general price level of goods and services in an economy, often associated with a reduction in the supply of money or credit. The speaker predicts an overall deflation during the bust, affecting both asset prices and consumer prices, although it is expected to be short-lived.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The script suggests that after the initial deflation, there will be a significant increase in inflation, potentially reaching 25% by the end of the decade due to central banks' responses to the crisis.

💡Commodity Prices

Commodity prices refer to the cost of raw materials and primary agricultural and mineral products in the commodity market. The speaker anticipates a significant drop in commodity prices during the bust, with oil prices potentially falling to $30 and copper prices to as low as $1 in extreme scenarios.

💡Central Banks

Central banks are the main monetary authority in a country or economic union, responsible for setting monetary policy and ensuring financial stability. The script discusses the potential actions of central banks during a crisis, suggesting they may expand their balance sheets significantly, which could lead to high inflation.

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