(Money Metals News Service) In a recent Money Metals Podcast interview, host Mike Maharrey spoke with Brien Lundin, editor of The Gold Newsletter and CEO of the New Orleans Investment Conference, about the outlook for gold and silver amid swelling federal debt, rising Treasury yields, Federal Reserve policy, and what Lundin views as the return of the “debasement trade.”
Lundin said the central question is not whether officials can talk tough on inflation, but whether the math permits a sustained tightening campaign. With U.S. federal debt above $40 trillion and the debt trajectory steepening, he argued that the country cannot simply “grow its way out” of the problem.
The Limits of Rate Hikes
Maharrey asked why Lundin considers expectations of aggressive Federal Reserve rate hikes under Chair Kevin Warsh to be misplaced. Lundin said Warsh may sincerely want to fight inflation, but that the size of today’s debt burden severely limits the Fed’s options.
He contrasted the current situation with the late 1970s and early 1980s, when Paul Volcker could raise interest rates dramatically to combat inflation. At that time, Lundin said, federal debt stood near 35 percent of GDP. Today, he put the figure closer to 135 percent of GDP.
That difference changes everything. Higher rates increase the government’s debt-service burden, and Lundin said rate increases now have far greater leverage on an already heavily indebted economy. He believes Warsh may be able to deliver a symbolic quarter-point hike, but a sustained campaign of increases is effectively impossible.
Why Debt Points Toward Debasement
Lundin rejected the suggestion that the United States can solve its debt problem through economic growth alone. He said only an extraordinary, unforeseeable leap in productivity—such as unlimited energy or interstellar travel—would make that plausible.
Absent that, Lundin argued that governments historically resort to debasing their underlying currencies when debt becomes too large to manage through normal fiscal means. He said the “debasement trade,” a term popularized on Wall Street, is again becoming a major force in markets.
Maharrey agreed that the debt issue has been discussed for decades, including during the 1990s and the “Contract with America” era. But both men noted that debt has compounded dramatically since then, while policymakers have shown little willingness to impose the political pain necessary to reverse the trend.
Treasury Buybacks Sent a Message
The discussion also turned to Treasury Secretary Scott Bessent’s decision to increase long-end bond buybacks from $2 billion to $4 billion. Lundin acknowledged that the increase was technically small in the context of a bond market worth more than $30 trillion.
Still, he said the market’s reaction was understandable. The move suggested that the Treasury was willing to influence yields at one end of the curve and could be prepared to intervene further if necessary.
Lundin argued that the effort was not technically yield-curve control, but it nevertheless revealed an inclination to manage yields. In his view, the Treasury’s attempt to project strength instead signaled weakness and desperation.
Gold reportedly jumped about $180 in response. Stocks, bonds, gold, and silver all initially rallied, but Lundin said equities faded as the day went on while gold and silver continued to advance.
Gold and Bonds Are Seeing the Same Danger
One of Lundin’s most important observations was the positive correlation between gold and the 10-year Treasury yield since late June. Ordinarily, higher yields are often viewed as negative for non-yielding gold. But Lundin said today’s relationship is different.
He argued that yields are rising not because of strong economic growth or normal monetary tightening, but because investors are increasingly concerned about debt and deficits. Bond investors, often described as bond vigilantes, are demanding greater returns to hold sovereign debt while also turning to gold as a hedge.
Lundin said gold and bonds are among the most sensitive predictive mechanisms in financial markets. Their behavior, he argued, suggests markets may be anticipating a future crisis, even if no one can identify the precise trigger in advance.
Complacency and the Debt Endgame
Lundin cautioned against predicting the exact date of a financial breaking point. He said many respected analysts have warned of a debt crisis for 30 years or more, and the system has continued operating.
But he also stressed that complacency can be dangerous. Drawing on his experience near Lake Pontchartrain before Hurricane Katrina, Lundin recalled noticing inadequate efforts to reinforce levees only months before the storm devastated New Orleans.
For Lundin, the debt situation carries a similar lesson. A risk can remain ignored for years until an event exposes the vulnerability all at once. He believes the U.S. may be in the endgame of more than 45 years of increasingly easy money and expanding debt, though he does not claim to know exactly how long that endgame will last.
Rising Yields Do Not Automatically Hurt Gold
Maharrey asked Lundin about the conventional belief that higher interest rates and rising yields are always negative for gold. Lundin said that view is historically incomplete.
Some of gold’s strongest advances since the metal became investable after 1971—and especially after the United States permitted private gold ownership again in 1974—occurred during periods of rising rates and yields. During the 1970s, yields rose to fight inflation, but they did not keep up with inflation, allowing gold to rise.
Today, Lundin sees a different version of the same dynamic. Yields are rising because debt and deficits have become more ominous, not because the economy is necessarily strong. He added that this is a global phenomenon, with sovereign yields around the world moving sharply higher.
Lundin said he watches the price of gold more closely than the dollar index. In his view, all fiat currencies are competing against one another while depreciating over time, making gold a more meaningful measuring stick.
A Long-Term Tailwind for Gold and Silver
Lundin said he expects the macroeconomic trend to remain supportive of gold and silver until governments resolve their debt and fiat-currency problems. However, he cautioned that a bull market does not move in a straight line.
He said the first 18 months of the current metals bull market were unusually forgiving, with corrections largely playing out through sideways consolidation rather than steep price declines. As Western investors and algorithmic trading play a larger role, he expects more volatility and sharper headline-driven corrections.
For physical precious metals holders, Lundin said the larger question is whether they can afford not to own gold or silver when cash savings may lose purchasing power over time. For mining-stock investors, he emphasized the importance of buying dips during a bull market and taking some profits when markets become excessively frothy.
The Next Crisis May Come From the Unexpected
Lundin said he believes gold and bonds may be “sniffing out” the next major financial crisis. He did not claim to know what will cause it, noting that the bubbles in markets are often obvious while the event that punctures them tends to arrive from an unexpected direction.
Maharrey pointed to 2018 and 2019, when market weakness, a late-2018 stock selloff, and repo-market strain preceded the COVID-era monetary response. Lundin noted that the Fed began a roughly $500 billion liquidity effort in late August and early September 2019, even as officials resisted calling it quantitative easing.
Both Maharrey and Lundin argued that the Federal Reserve’s balance sheet is again expanding through bond purchases, regardless of the terminology officials use. Lundin said efforts to manage Treasury yields may provide temporary relief, but they do not eliminate the underlying debt problem.
New Orleans Investment Conference
Lundin also encouraged viewers to attend the New Orleans Investment Conference, which he said brings together roughly 40 speakers, mining companies, investors, and analysts during a metals and mining bull market.
The conference will take place over Halloween weekend in New Orleans and will include recorded presentations, panels, workshops, and a Metals and Mining Masquerade Ball. Lundin said the exhibit hall is sold out, hotel availability is tightening, and registrations are arriving at the fastest pace he has seen in decades.
For more information, Lundin directed viewers to GoldNewsletter.com and NewOrleansConference.com.
