PodcastGoldRepublicAlasdair Macleod

Alasdair Macleod: Gold Could Explode as Fiat Currencies Collapse

Macleod portrays rising debt, constrained credit, and a potential energy-cost shock as strains on fiat currencies, arguing that policy responses could further undermine confidence. He also points to pressure in sovereign bond markets, including French and Japanese developments, and expects yields to rise. In his view, gold's gains would reflect currency depreciation, while commodities could be sharply undervalued relative to gold.

GoldCurrenciesGovernment DebtFixed IncomeCommoditiesMonetary Policy

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Key Takeaways

Macleod presents the Houthis’ claimed ability to strike targets up to 2,000 kilometers away, along with attacks on Saudi airports and an oil pipeline, as a threat to Saudi infrastructure. He argues that because Saudi Arabia depends heavily on oil exports, an inability to export oil and its derivatives could collapse its economy and lead to civil strife.

Macleod argues that France’s crisis has broader European stakes because France and Germany shape the ECB’s response, while France has debt of about 115% of GDP and no national currency. He says Japanese institutions’ unwinding of French bonds has contributed to sharply rising French yields and a French-German spread of 1.4, and expects the spread could widen further as perceived French risk increases.

Macleod argues that GDP can be inflated by government deficits and an understated inflation deflator, saying a more accurate measure could turn the UK’s forecast 2027 growth of 1.2% or 2% negative. He contrasts G7 debt at about 30% of GDP during the 1973–74 oil shock with roughly 120% today, and warns that a contraction could raise the debt-to-GDP ratio further, potentially doubling it.

Macleod predicts that winter shortages of diesel, kerosene, and ship bunkers will raise costs broadly, squeeze industry margins, and contribute to a slump; he also expects bond yields to keep rising. Separately, he says Japan’s long-standing role as a capital exporter is changing amid its reliance on Middle Eastern energy and disrupted supply routes, while describing Russian winter-grade diesel availability and possible Iranian-origin supplies as uncertain.

Macleod expects banks to contract lending to protect leveraged balance sheets, with governments and central banks replacing some of that credit with central-bank credit, currency, and reserves—a response he argues would undermine currencies. He characterizes the crisis as an existential threat to fiat money and says CBDCs would not solve the underlying problem because they would still depend on holders’ faith.

GEO-POLITICS

Houthi Missile Range — Macleod says the Houthis can fire missiles up to 2,000 kilometers, with claimed accuracy of 5 to 10 meters. He cites attacks on Saudi airports and an oil pipeline as evidence of a threat to Saudi infrastructure.

“And of course you got the hooties kicking off. And they're proving incredibly effective. I mean, this is another thing, Alex here…”—

French Political Stakes — Macleod argues France's crisis differs from Greece's because France and Germany are major European powers whose politics will shape the ECB's response. Citing Germany's 1920–23 inflation, he says politics drive crisis outcomes. He also points to France's debt of about 115% of GDP and its lack of a national currency.

“When it comes to France, that's a completely different kettle of fish. I mean, it is really with Germany…”—

ECONOMY

GDP Measurement — Macleod argues GDP reflects the quantity of credit and can be boosted by government deficits, making it a poor measure of underlying performance. He says an understated inflation deflator could turn the UK's forecast 2027 growth of 1.2% or 2% negative if a more accurate measure were used.

“Well, I mean the point about GDP is all it tells you is the quantity of credit in the economy and the great thing as far as governments are concerned…”—

Winter Energy Costs — Macleod predicts winter shortages of diesel, kerosene, and ship bunkers will raise costs broadly and contribute to a slump. He says industry cannot pass on the costs while maintaining margins, and expects bond yields to continue rising.

“The fact of the matter is that we're coming into the northern hemisphere's winter months when energy consumption increases…”—

Saudi Oil Dependence — Macleod argues Saudi Arabia depends heavily on oil exports. If it could not export oil and its derivatives, he says, the economy could collapse and civil strife could follow.

“I have no doubt that the outcome of this as far as Saudi Arabia is concerned is a collapse of that economy and I think civil strife.”—

MARKETS

Treasury Auction Demand — The host says the latest 10-year Treasury auction cleared around 5.3% and drew relatively robust demand compared with previous auctions. The discussion raises the possibility that buyers are accepting higher yields rather than refusing to fund U.S. debt.

“if we look at the latest 10-year Treasury auction it cleared around 5…”—

Japan Capital Flows — Macleod says Japan has been a major capital exporter for roughly 20 years, but that pattern is changing. He links the potential shift to Japan's reliance on Middle Eastern energy and claims regional supply routes are disrupted.

“Over the last what 20 odd years Japan has been the major exporter of capital it has been the basic investor in everybody else's markets that is now changing now…”—

Bond Market Stress — Macleod says Japanese institutions' unwinding of French bond positions has contributed to a French bond-market crisis, with sharply rising yields. He cites a French-German spread of 1.4, wider than at any point since 2011. He also expects foreign hedge funds to leave UK debt and London-based funds to sell eurozone debt, adding to broader bond-market pressure.

“And I have no doubt that the unwinding of those positions has triggered a real bond market crisis in the French bond market…”—

FORECASTS

Yields And Equity Risk — Macleod predicts bond yields will rise significantly over the next two to three months, making it difficult for equities to sustain their bubble. He also describes a potential deeper decline if banks call loans tied to leveraged equity positions and investors cannot meet margin calls.

“At the moment bond yields ticked back and that's all very nice and all all the rest of it, but, the fact of the matter is that governments are in…”—

Japanese Repatriation — Macleod says pressure on Japanese pension funds and insurers to repatriate capital is only beginning. He predicts the shift will affect markets broadly.

“And I think the pressure on the Japanese institutions, pension funds, and insurance companies to repatriate their capital, I think, is only just started…”—

Bond Spread Outlook — Macleod says the French-German bond spread could widen as perceived French risk increases. He also expects German yields to rise.

“And, while I would not rule out, the spread between French debt and German debt rising to reflect, if you like, the increased risk in, in in French debt…”—

GDP Forecast Credibility

Macleod argues GDP figures can be manipulated through deficit spending and inflation measures, making them poor guides to productive economic activity or underlying conditions.

Energy Shock Risks

Macleod warns that disrupted Middle Eastern energy supplies could raise diesel, aviation fuel, and shipping costs, squeezing industry and aggravating debt stress.

Equity Bubble Timing

After acknowledging he called an equity downturn early, Macleod maintains that high yields, leveraged positions, and margin calls leave markets vulnerable to a sharp correction.

Treasury Demand And Japan

Macleod dismisses supportive commentary from large financial firms and says Japan's changing capital flows and exposure to energy disruption could pressure international bond markets.

France's Sovereign Debt

Macleod sees France as a leading debt-trap risk, citing rising yields, political instability, high public debt, and the country's inability to control its own currency.

ECB And French Contagion

Macleod expects political decisions, rather than treaty rules, to determine the ECB's response to France and argues that foreign investors could intensify a broader bond selloff.

Fiat Currency Crisis

Macleod argues that sovereign debt has exhausted governments' room to maneuver and that replacing contracting bank credit with central-bank money would undermine confidence in fiat currencies.

Oil Shock And Gold

Comparing current energy risks with the 1970s oil shock, Macleod says today's far higher debt burdens make the adjustment more dangerous and potentially more financially violent.

Gold And Commodity Values

Macleod says gold's rising price reflects currency depreciation and argues that commodities are deeply undervalued relative to gold, leaving room for substantial repricing.

Gold-Backed Bond Proposal

Macleod doubts Treasury advisers can steer policy toward gold-backed bonds, arguing that uncertain gold liabilities and the political preference for inflating away debt make the idea unlikely.

Russia And State Economics

Macleod challenges Western accounts of Russia's economy, pointing to lower public debt and its economic ties with China while criticizing interventionist macroeconomic policy.

Gold Market Outlook

Macleod attributes gold's recent weakness to paper-market trading and subdued sentiment, while arguing that the longer-term outlook depends on the pace of currency depreciation.

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