Ex-Citi Chief Economist on Gold, Bitcoin and the Debasement of the US Dollar - Ep. 935
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Hi, everyone. I'm executive editor Steve Ehrlich, and I'm here today with Willem Bauter. Willem is a longtime practitioner in the financial space. He was a member of The UK's MPC, which is basically their equivalent of the FOMC here. He's a former chief economist at Citi and has had a long distinguished history, career in in the financial industry. So so welcome, Moham.
Thank you. It's a pleasure.
Let's get right into it. You wrote an op ed in the in the Financial Times a couple of weeks ago that really kinda caught my eye. And, basically, the gist of it was that central banks should, quote, unquote, get out of the gold game. You started it by pointing out, I guess, your belief that gold is in what you call, I believe, a six thousand year bubble, and I think that's a great place to start. Can you just explain what you what you meant by that?
Gold is valued mostly for the belief that it is a good store of value. There's very few intrinsic services that it yields, either as a consumption good, yes, I can hang jewelry around my neck, but much of the jewelry even is viewed as an investment, rather than something done for its beauty itself. And of course, there's some uses in dentistry, some advanced technology that may make use of gold, but it basically has very little intrinsic value. So this $4,000 plus value that we see today is that high simply because people believe it will be a valuable store of value. And these beliefs, self fu
Okay. So a few things to to unpack there. I I know some of the crypto people listening here will love one of the things that you said and will strongly disagree with one of the things that I'll begin with the latter, the the the statement that most Bitcoin payments are used for illicit purposes. We could have an entire other conversation. I've had plenty with data pushing back on that statement. That's not what we're gonna do here, though. But the idea that Bitcoin has more intrinsic value than gold, I know the industry will love. But let's just unpack what you said a little bit more here. I m
Gold has been a very risky commodity in the past. Remember, when we had the gold standard, in the thirties, forties, and all that, gold was priced at $35 a fine ounce, right? And before we got the gold standard, gold prices in the sixteenth, seventeenth century were significantly higher than that. So bubbles can last forever. They have ups and they have downs. And so gold could go on as a bubble for another six thousand years. But the willingness of people to hold something simply because they believe many other people, including central banks, view it as a valuable investment instrument, reli
So let's get to it then. I mean, let's say The US sells its trillions in gold. What should they buy? You you said a diversified portfolio, I guess, various stocks and and commodities. Should they just purchase, diversified index funds? Is there a case to put some Bitcoin on the central bank balance sheet?
I myself consider Bitcoin to be extremely risky investment, and I don't think that even in that risk of a portfolio, central banks should invest in it. They central banks can afford the loss if the price of Bitcoin were to go to zero even. But this is not something that I think should be part of a well structured portfolio. The portfolio of the central bank could include exchange traded funds, holding commodities, stocks, shares, and other financial insurance. So it should just be diversified and without any crazy exposures, like gold and Bitcoin.
Let's just talk a little more about the world we live in today. Debasement trade is sort o
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