Axel Merk Exclusive: Dollar Weaponization and Trump’s Big Beautiful Bill

Mike Maharrey: Greetings. I’m Mike Meharry, a reporter and analyst here at Money Metals, and I’m joined today by Michael DiRienzo. He’s the president and CEO of the Silver Institute. How are you doing, Michael?

Michael DiRienzo: Doing great, Michael. Thank you so, much.

Mike Maharrey: Well, I really appreciate you coming on and talking a little bit of silver with me. Before we dig into kind the market and some things that are going on, I wanted to give you a chance just to real quick explain to folks exactly what the Silver Institute is and what it does.

Michael DiRienzo: Sure. So, it was started in 1971. It’s ongoing with no interruption since it was originally based in New York for a year. Now it’s in Washington DC. Our members are the leading mining companies, refiners end users of silver and so, forth. And we we’re charged with Marketing Silver. So, we put together programs that will hopefully lead to greater demand and awareness for silver throughout the world. We’re involved in programs in China, Peru, and Mexico and in India. We’re small. Okay. We’re not as big as the World Gold Council staff wise or monetarily, but we do a lot with what we have. So, we put out reports like the World Silver Survey. We do reports called Market Trend Reports. We put out one earlier this year on above ground silver stocks. We’re putting out two more this year, one on silver’s use in batteries and another one on the silver bullion market.

Michael DiRienzo: So, taking a close look at coin and bar demand. We have a bimonthly silver news. We just put out a press release yesterday on US Retail Jewelers Sales and Interest from 2024. We commissioned a study on that. So, look, we do a lot with what we have and we speak at a lot of conferences. Mike, I’m going to, I was in India last month, this month or next month I’m going to Singapore for the Asia Pacific Precious Medals Conference. We’ll be at the LBMA in October. Also, in October, we’ll be co-hosting a big conference in China, the China International Silver Conference. So, we have a global reach and we’re also, very active on social media.

Mike Maharrey: Yeah, I use a lot of your data. You guys are invaluable for folks like me who are reporting and keeping watch over the market. I really appreciate the work. In fact, you mentioned the jewelry survey for the US jewelry market and actually use that data and put together a little article today that’s published over at moneymetals.com/news.

Michael DiRienzo: Terrific.

Mike Maharrey: Yeah, really appreciate the work you do. So, I wanted to talk a little bit first about the 2025 World Silver Survey that came out. I think it’s been about a month ago now, but it kind of got some of the final numbers for supply and demand trends last year. And I’ll just give people a real quick overview if they’re not familiar, they should be. We’ve been reporting on it, but we had the demand outstripping supply for the fourth consecutive year, so, structural market deficit of 148.9 million ounces. We had a record in industrial demand, although overall demand was down slightly, not significantly. Was there anything in the report that really stood out to you or surprised you?

Michael DiRienzo: Well, this is, you talked about global overall demand and that number not being as high as it has been in the past, and that’s really primarily when you delve into the report. The reason is that on the investment side, on bullion and ETFs. ETPs actually did pretty well. But retail coined and bar demand, especially in Europe and in the United States was really down last year and that’s one of the reasons why that number was lower than usual industrial demand. You mentioned that that hit another record. We thought it would be in November. We thought it would be over 750 million ounces, but it didn’t quite get there.

But nonetheless, it was 680.5 and some of the reasons why that number didn’t hit 700 was the Chinese and the Chinese economy, as you know, is not performing as it was in 2011 and 2012. And so, that has had some impact. Fortunately, India has picked up a lot of China’s normal demand center. So, for example, they’re leading the world in jewelry demand, silverware, demand. You can’t believe what they’re doing on the investment side these days. They’re launching basically a new exchange traded product every week, if not month, and they really are a major player just like China in the global silver market.

Mike Maharrey: Yeah, it’s interesting. Do you see a dichotomy, I talk about this a lot in the gold market. There’s definitely been a shift in recent years from the west to the east where we’re really seeing Asian markets, particularly China driving the gold demand. It’s been a big part of the Gold Bull run we’ve seen in recent months. Do you see that same dichotomy in the silver market particularly maybe on the investment side or maybe on the industrial side as well? We have this.

Michael DiRienzo: Yeah, we are seeing that. I mean, you look at the importance of those two countries, and China is the world’s third largest producer of silver, and we started a program with them 20 plus years ago, the moment their government allowed its citizens to hold gold and silver, which opened up those markets.

We were on the ground a couple months later and formed relationships with the key silver players in China. And of course you’re dealing with a lot of government officials, quasi-government organizations and so-forth, and also, their exchanges and gold and silver are such different metals when it comes to investment. And primarily because gold has a greater monetary value. I mean, it’s held by central banks, whereas silver is not. So, the Chinese in the last 20 plus years just look at the China Gold Exchange, the Shanghai Futures Exchange. There’s another exchange that we work with quite often called the Shanghai Huong, which deals primarily in the white metals, so, platinum, palladium, and silver.

And yeah, there’s been a significant increase. And as China goes on the gold side or as China goes with respect to gold, so, does the gold market and you can clearly see when the Chinese are on a national holiday with gold because the interest in gold demand or as an investment sorts to come down a bit. So, yeah, there are two important centers. We think that the Asia Pacific region is a key market for silver. My speech next month at the Asia Pacific Precious Medals Conference will be further developing that market and I’ll suggest some ideas to the attendees at that conference. So, they’re very important countries. Yes.

Mike Maharrey: So, we talk about the market deficit, and we talk about demand outstripping supply, and I’m not sure people really have a grasp on what exactly that means. I mean, if you’d listen to it and take it at the extreme, you would think, oh no, there’s not enough silver. And obviously people are getting the silver to do the things that they need to do. What exactly is a market deficit and how is that deficit covered?

Michael DiRienzo: Well, it’s quite interesting. We get that question a lot. There are others in the world of silver analysis who do not believe that we are in a deficit market, but it’s just simply looking at the supply that comes to the market in a certain year and the demand that comes to the market in a certain year. And quite frankly, over of the three previous years prior to 2024, mine supply was pretty even and it was slipping and that had a lot to do with some geopolitical issues in certain countries.

Had a lot to do with strikes and so, forth, and some of the leading producing countries, but demand continued to grow. So, our struggle on the silver side to outperform reflects basically you got to go back to the gold side, it’s monetary attributes, which makes it more attractive for portfolio diversification. And as I mentioned earlier, central bank and institutional investors who hold a long-term view. One of the things that people ask us about is that if there’s such a, like you mentioned a deficit, why then isn’t the price higher? Why isn’t the price at even 35, 40 or 45 or even 50? We feel that silver is a dual use metal. You know that on the industrial side, it’s also, a store of value and it has been for centuries, it’s industrial demand. While it’s robust, investors today still have a cautious look at the Chinese economy, but when you look at the deficit, the question you asked, I mean we have a lot of silver above ground and those stocks are being drawn down.

You just have to go back just a few months ago, the importation of silver from London and from Asia with respect to the potential threat of tariffs, 25% tariffs coming in from Canada and Mexico. And we’re proud that that has been alleviated to a certain extent. You never know in this administration when that could change, but quite frankly a lot of silver came over, a lot of gold came over, and quite frankly, that was all a result of the various banks and so, forth, and the end users who rely on a silver supply to have it on the ground in New York in the vaults before the tariff. So, look at, yes, there is a deficit in the market. We’re calling for a fifth consecutive year of a silver market structural deficit. While it may not be as big as in years past, it still will be a deficit. And as mine supply ramps up throughout the world, if and when any new major silver deposits already discovered, that number could shrink. But for now, this is the case and our consultants at Metals Focus who have 35 plus employees, eight offices across the world are in regular contact with the major silver players.

Mike Maharrey: So, if I’m somebody that’s trying to source silver, just to make sure I’m understanding this correctly. It’s not that I can’t get it, but when you have a deficit like this, you’re having to maybe pull silver from an investment area over into an industrial situation. Is that of right?

Michael DiRienzo: That’s correct.

Mike Maharrey: So, that’s the movement of metal that’s already above ground that’s really being impacted at this point.

Michael DiRienzo: Exactly. Yeah. I really encourage your readers to look at the report we put out in February on aboveground stocks because the complexity involved with aboveground stocks is quite striking. You’ve got, like you mentioned, you’ve got silver that’s going into industry. You’ve got silver that’s going into investment, you’ve got silver that’s going to for the production of whether it be Canadian Maple Leafs or the American Eagle coin using those two as an example, I mean there’s a steady demand for silver and we haven’t really seen a squeeze in the market yet with respect to those entities able to obtain silver.

Mike Maharrey: Right. You mentioned the tariff situation, and as you alluded to at this point, it seems that precious metals have been by and large exempted, but we did see that big movement of metal, particularly as people were worried about it, they’re like, what’s going to happen? And people were very proactive in both a silver angle. Do you feel like that the situation has kind of been alleviated and what are your takeaways from the whole tariff incident?

Michael DiRienzo: Well, on a personal side, I don’t necessarily believe in tariffs. I believe in fair trade and the president made the argument that we were being treated improperly by many countries. You remember when he was elected in 2016 and 2017, he had real targeted narrow in scope tariffs. So, for example, Chinese washing machines, Chinese manufactured solar panels and so, forth. And his intent obviously was to build up a domestic base here in the United States of on the manufacturing side and to get fair trade. We were very happy to see, as I mentioned earlier, that bullion was carved out, I believe it was line item six in his trade note on April 2nd. But nonetheless, it could change. It could change in a minute. And what was happening, Mike, especially on the gold side and also on silver, you had these huge premiums. You had the exchange physical EFP that potentially could have squeezed the market even more than it already was. There was, I don’t want to say or use the word panic, but after the election in November, you started to see these banks and other end users of silver really taking a different viewpoint and trying to get as much of it to the United States as possible before them. We are also, concerned, Mike, with Dore being shipped from Canada and Mexico to the United States for refining.

Michael DiRienzo: And whether or not they would be subject to a tariff, but they were always included in the US Mexico Canadian trade agreement. So, that is pretty much is ongoing as of now. So, we have a wait and see attitude, but I think what we’ve proved, just like what the world proved during covid, that you could work from home, you could work in office and so, forth, and we think we’ve proven that in the event something of this nature arises again, we can get the shipments of silver into the United States for industrial or investment usage.

Mike Maharrey: Yeah, I was just thinking that very same thing. It did kind of show the robustness of the market, I guess its ability to adjust to that situation, and I thought that was pretty interesting. I also, think it’s interesting just from kind of a broader economic standpoint, it goes to show that incentives matter, right? When you have even the threat of taxation or fees or all of these type of things that governments can impose for various reasons, they do matter and they do have significant impacts on the way the market actually operates. And I think people forget that sometimes.

Michael DiRienzo: Yeah, it’s a great point. And they do, and sometimes you’re not prepared. We work with the World Gold Council and the International Precious Metals Institute on perhaps writing a letter to the incoming trade ambassador to the president elect himself. We chose not to, we didn’t want to really raise a red flag about gold and silver. Sometimes if you’re waving too much in the back of the classroom, the teacher’s going to call you out. So, we took it as a wait and see approach. But the industry itself, like you mentioned, really was a droid in coming up with a game plan.

Mike Maharrey: That was my strategy in high school. Sit in the back and keep my head down. Don’t raise my hand.

Michael DiRienzo: There you go!

Mike Maharrey: So, looking at the pricing of silver, the number one question I’m getting, I’m sure that you get this all the time too. We’ve had this huge rally in gold. We’ve seen gold hit multiple record highs, and we’re still well off of silver’s all time high of around $50 an ounce. And people are like, when’s it going to catch up? What’s going on? What is your overall impression of where the price of silver is? Right now we’re at a hundred to one roughly gold to silver ratio, which is very wide. How are you kind of seeing the pricing situation right now? Do you feel like gold or silver is priced where it should be in terms of the market, or are we going to see some adjustment? And obviously I’m not asking you to have a crystal ball. None of us knows for sure what’s going to happen.

Michael DiRienzo: Yeah, exactly. And while we don’t give up price projections, we do have thoughts on that issue. Look at, we’ve had some deficits since 2021, and we’re also, challenged with an ample supply of above ground stocks. So, that takes some of the incentive for an investor to get into the silver side. Gold’s Run was in tandem with constant and significant purchasing by central banks of gold. Okay, that’s

Mike Maharrey: True.

Michael DiRienzo: And on the other hand, too, gold is also, fortunate to experience a lot of institutional investment demand, whereas on the silver side, it’s not as robust as it is for gold. So, there are some VAT taxes in Europe on silver coins and so, forth. There are some challenges facing the market, but we think that when it tightens up, again, institutional investors will come back into the market. And this is something that we’re working on this year where through our Silver Institute’s membership and executive committee, we kind of want to go on a road show to some of these large institutions that are in the gold market and really start to point out some of the benefits of also, taking a close look at silver. Because quite frankly, as the world becomes greener, as electrification begins, it already has continues to take off. Silver is going to play obviously an extraordinarily important role.

And we think that when you’re looking at countries that are focusing on climate, when they’re focusing on solar energy, electric vehicles and so forth, it’s solar. I mean, silver is going to have a greater runway than some of the other precious metals because it is a dual metal. It has uses in an industry, anything really that has an on and off switch. There’s some silver contained within. And going back, I believe it was 2011 when the silver price and the gold price were doing really, really well. And silver again got to like 49 in change at the close on a Friday, and everybody has sort of anticipated that the next week was going to take us over the $50 mark. And then that Sunday night, president Obama announced that Osama Bin Laden had been shot, and all of a sudden everybody in the world felt, well, terrorism is over and the risk is no longer there.

Michael DiRienzo: And the gold and silver price suffered as a result. So, the case for silver is strong. It’s been that way for centuries, even more so, today with some of the before mentioned, the uses of silver in the green energy platform. And I think Americans need to realize that we’re not the only country in the world just because our Congress and Senate are looking at ways to reduce incentives for green energy projects, solar panels and homes and so, forth, other countries are ramping up those incentives. So, I think that from the silver point, we think that the silver price has a lot more room to run.

Mike Maharrey: Yeah, I think it’s interesting. You made a really good point. First off, I say this all the time, Americans, we tend to be a little bit myopic, we think, especially when it comes to investing what’s happening in America. And as I have become more and more immersed in precious metals, I’ve realized the impact and the importance of Asian markets and European markets that are out there. So, I think that’s an important, I want to emphasize that point that you made, but I think it’s also, interesting, and I’ve been making this argument, I’m curious to see if you agree with me, but the price of silver tends to be a bit more volatile because of its industrial use and people, so, therefore they’re looking at the trajectory of the economy and the global economy. And sometimes if you have a recession, then that can take a chunk out of industrial demand as demand for stuff goes down. But I’ve argued that because silver is so, integral in the green energy movement and the green energy movement’s not going anywhere, and so, much of it is driven and supported by government and official policy, I would argue that that provides a little bit of support for industrial demand even in the potentiality of a recession. Would you agree with that?

Michael DiRienzo: Absolutely, 100 percent. I think that there are times when government for certain industries, if not all an incentive is great. I remember back in 2004 in the Bush administration, when the house and Senate passed an energy bill and that energy bill included a provision for people to buy hybrid vehicles, you’d get a $2,000 federal state tax write off $700 state level write off. And I went out and bought a Toyota Prius that was in the market for a new car. I mean, I had it for four years or whatever, but I got those incentives for two years. And more importantly, Mike, I was able to drive on the HOV lanes as a single passenger because I have a clean fuel vehicle plate. Now, I took a lot of ribbing from my friends for driving a Prius at first, but I got great gas milage. The car ran like a top, and I got the incentive. So, they do work even with somebody as pigeon headed as I!

Mike Maharrey: Yeah, like I said, we’re developing a theme here. Incentives matter.

Michael DiRienzo: Exactly.

Mike Maharrey: We’ve got solar panels on our house.

Michael DiRienzo: Oh, that’s terrific.

Mike Maharrey: Of course, we’re in Florida, so, it’s an ideal place for solar power. Honestly, the house came with the solar panels, but that’s great. I’m really good. And the guy that put them on the previous owner of the home, the incentives were a big part of that. He got a number of tax write-offs and incentives for installing solar.

Michael DiRienzo: Absolutely.

Mike Maharrey: Along those same lines, I’m curious about this. We hear a lot about the green energy policy and I’m sure that silver is also, very important in the world of defense and military and national defense use. Do you have any sense of just how much silver is used in that? I’m sure it’s not quite as transparent as some things, but

Michael DiRienzo: It’s not as transparent as it once was. In the 1940s through World War ii, up until the end of the 1960s, the US government used to publish those numbers.

Mike Maharrey: Oh, really?

Michael DiRienzo: As did some other governments throughout the world, but it’s rather opaque now. It’s hard to get a handle on silvers use in defense. We think it is significant. We do write about it, not as much as some others do, but we do mention defense and military use in our world Silver Survey, that number is included in our other category. When you’re looking at overall demand, I mean, quite frankly, look at a tomahawk missile guided missiles, drones. They have to have some form of silver. It just wouldn’t operate otherwise. The question is how much, and I don’t have a number, I just don’t have a number. We’d love to have a number that I could present to you and some of the others, but we know it’s being used, they just don’t report on it.

Mike Maharrey: Yeah. Well, it’s better to say, I don’t know than to make up a number. So, I actually appreciate that. Absolutely. I appreciate that answer.

But it is interesting you mentioned the fact that the current administration is not as friendly to green energy as the previous administration, but it does seem like that this administration is pretty intent on wrapping up or ramping up defense spending. And of course, I think you’re going to see a big jump in defense infrastructure in Europe given the dynamics that are over there. So, it’s another interesting thing that could play on that.

Michael DiRienzo: Sure, that’s true.

Mike Maharrey: Well, I really do appreciate you taking time. I know you’re a busy man. Before we go, I do want you to have an opportunity to let folks know where they can find the Silver Institute, and if you’ve got anything really cool upcoming, tell us about that too.

Michael DiRienzo: Sure. So, I mentioned some of the reports we’ll be putting out through the remainder of the year. In six months in November, we’ll be taking a look at the 2025 Silver Market and we’ll issue an interim report on it. We’re looking forward to participating in some of these conferences and so, forth. And one of the great things that we’re seeing more and more people do are podcasts and webinars and so, forth. So, we’re very active in that. But beyond that, you can contact us at our website, silver institute.org. You can sign up for our newsletter there. You can follow us on X and our dedicated page on LinkedIn Silver Institute. And we put out two posts a week on average, on various aspects of the market, whether it be on jewelry, whether it be on silver’s use in electronics or what have you. We even put one out earlier this year on Silver is for Champions. And what I mean by that is that if you look at all the trophies throughout the world for major sporting events, America’s Cup, the Super Bowl, the World Series, the Stanley Cup, of course, they’re not made of gold, they’re made of silver. Silver is champions.

Mike Maharrey: Even gold medals are silver, mostly.

Michael DiRienzo: Even gold medals are silver. Exactly, exactly. We make that point as well. So, yeah, thank you, Mike for this opportunity. I really appreciate it.

Mike Maharrey: Yeah, I really appreciate it, and we love the work that you do. As I’ve already mentioned, I find the information and data that you guys put out absolutely invaluable and it really makes my job a lot easier. So, I appreciate that and appreciate what you’re doing. We definitely love to have you back on as we move into the future and keep people aware of what’s going on in the silver market.

Michael DiRienzo: Anytime. Mike, thanks again for the opportunity.

Mike Maharrey: Alrighty. We have a great day.

Michael DiRienzo: Thank you.

Mike Maharrey: Greetings. I’m Mike Maharrey, a reporter and analyst here at Money Metals, and I’m joined today by Axel Merk. Axel is the president and chief investment officer of Merk Investments and he is an expert on macro trends as well as an innovator in gold and currency investing. How are you today, Axel?

Axel Merk: Doing great, especially when I talk with you.

Mike Maharrey: Well, it’s my pleasure to talk with you. I really appreciate you taking time out of your busy day to hang out with me for a few minutes. So, I want to start the conversation out with a quote, a quote that you said, I guess that’s the right way to say it, that I thought was really interesting and I’d like for you to elaborate on this. You said the interest of a government in debt are not aligned with those of investors. So, can you just elaborate on that a little bit because an intriguing quote?

Axel Merk: Yeah, so, I think I first said that over 20 years ago, and it’s highly getting some traction because people I think can relate to it more. When a government has a lot of debt. Very simply their interest is to inflate the value of the debt away, where the whole point of investing is to try to preserve purchasing power. Now of course some of us invest because we think we putting Lake Gold mine, no pun intended, that will make a fortune. But really for the most part, and of course people have different investment goals, but the big reason why we’re investing is because there is inflation that even price stability means 2% inflation. And so, we want to make sure that the nest egg we are building is worth something in the future and say there is this back and forth. Milton Friedman, he once said, I think that’s been quoted more of late as well, is that citizens always pay for debt for deficits. And if it’s not through taxation, it is through inflation. There’s always a way that they kind of get you. And of course when the deficits are substantial, especially if they unsustainable, that really creates a question mark whether government is aligned with its citizens when it comes to investments.

Mike Maharrey: Yeah, that’s a very, very good point. And of course here in the United States, I don’t think anybody can deny that there’s a bit of a debt problem. Now I think a lot of people try to downplay it though, and I’ve heard that a lot in the context of the big beautiful bill, which I was surprised to find. That’s actually the name of the bill, which I thought was kind of crazy, but it’s got this mix of tax cuts and some spending cuts and tax increases. But the CBO, which I find to be relatively conservative in their guesstimating because they don’t tend to factor in the possibility of any major problems, they say it’s going to add like $2.4 trillion to the deficit. Does this kind of signal to you as it does to me that the government really doesn’t even have any intention of trying to address the debt and deficit problem?

Axel Merk: Well, you raise a few things here. First of all, the Big Beautiful Nill is a budget reconciliation Bill. And Mike Johnson actually gave a superb interview a few days ago where he kind of was going through that and he says he’s a fiscal hawk, he doesn’t like it and so, forth. But the point of this mechanism that is being used is so, that 51 votes in the Senate can pass it because anything else needs 60 votes and there’s only so, much that they can do, and you have to stay within that framework. And he says, we’re getting all these priorities in there, all the tax, all the promises, the campaign promise and so, forth. And so, that’s kind of the context of it. And even he says, well, now we’re not fixing any big issues. Now of course my broader point is there’s no appetite for entitlement reform and whatnot, but he says, well, you got to live with the realities. And of course that’s his life and he gets hate for it from any size of course, he’s just trying to do his job. The CBO O is of course another beast by mandate. They have to do certain things and so, they’re extrapolating things and of course everybody knows it’s unrealistic. Am I an equal opportunity offender. Try not to take sides too much. And to me, the important thing be that with the Congressional Budget office or other ways of scoring these things, the important thing is that this disclosure of who does it and what is the rationale, people aren’t stupid. They realize that it’s completely unrealistic that growth is not affected. People shall also, be excused to think that, well, maybe the party and power will embellish the numbers a little bit, and then depending on where you are politically, you’re going to be lean more towards one or the others. Ultimately, people use this as a political football.

I think what matters at the end of the day is that this bill does not fix our long-term entitlement issues. And depending on how you lean politically, of course there are some things you like and dislike and you’d say, “Oh my God, if somebody else was in power, it would be much worse.” From an investor’s point of view, I mean, obviously, if you can be company specific of which company may benefit, I tend to look at it more from a fiscal sustainability point of view and it just confirms its business as usual. Obviously, that doesn’t mean that DOGE wasn’t worth it and whatnot. If we want to get things under control, you need entitlement reform. And Scott Adams who talked other day, who talks every day on things, he said, well, should be able to do something on energy because energy is the one area that where you have a big enough pie where you could fix things.

Well, he’s right. What he didn’t mention is that if you want to go that route, a carbon tax would generate enough revenue to fix some of these things. Good luck getting that passed. The same with what the Europeans do with a huge value add tax or a national sales tax. You could fix some of these things. Good luck getting that done. And so, you got to do it on the spending side, and there you have to do it on the entitlement side. I mean, the short of it is if you make all these promises, you’ve got to pay for them somehow or you’ve got to update the promises that you have made.

Mike Maharrey: Yeah, I think that’s a really good point. It goes to the meat of your quote that government has interests and they aren’t line with ours. Actually, I do my own podcast and I talked about this today, the fact that political incentives being such as they are, there’s really not any incentive to deal with something that is going to be a problem 20 years from now, right? They’re concerned with, I need to get reelected. And so, it’s easy to talk about cutting, spending, et cetera, et cetera. It’s not easy to actually cut programs. It makes people mad and people get mad, they don’t vote for you and then you’re out of office. So, I think you hit the nail on the head. We’re dealing with… we’re not trying to be partisan. We’re not being critical of Trump. It’s just the reality of politics.

Axel Merk: Yeah, there’s a brilliant book called The High Cost of Good Intentions, the History of US Federal Entitlement Programs, and it was published in 2017. It goes through how entitlement programs were created and how the pendulum swings back and forth over the years. Unfortunately, when it swings back, it only swings back a little bit and then it swings even more in the other direction. And then at the other end of the spectrum, that’s not covered in that book. And we’ve seen, of course in practice, what gets politicians attention is if the bond market forces them to, and we’ve seen in Europe that the bond market can do that. But we also, have learned that politicians are absolutely amazing, can kickers. They know how to push this down the road, and I would argue the US has a greater capacity to push things down the road than others do. And the one thing too, just as an investor, since I think we kind of somewhat of an investment channel here, the one concerning thing is of course, that we’ve seen in the rest of the world that the rules get changed along the way. You may have a brilliant analysis and the crystal ball to know how this will play out, and then the rules get changed. Sorry, we didn’t mean that. And the government can do that, and especially when they get cornered, and I’m not suggesting that’s going to happen tomorrow, but if you’re trying to have a long-term plan about how to deal with any of these things, just be in, keep in mind that this game is rigged and when the interests of government are not aligned with yours, it’s something to be thinking about.

Mike Maharrey: Well, so, along those lines, let’s talk a little bit about how as investors, and obviously we have most of our audiences interested in precious metals, how do you see gold and silver kind of playing into this investment landscape, say in the next, let’s look at it, let’s say short term and longer term. How do you see gold and silver playing into a good investment strategy in your view? Axel Merk: So, let me answer this in various ways. The first one is, more broadly, all of investing is for many people about addressing that issue. Some people do it by investing in the S&P 500. Obviously, in our audience, we manage over $2.3 billion in gold and gold mining. That whole audience is very much on that side. On the physical gold side, it tends to be more the defensive investor. Now clearly the price of gold is volatile when priced in dollars. On the gold mining side, it tends to be more the speculator, and that’s kind of in two groups. One is that, oh, I use a little bit of gold mining because it gives me good diversification in case my portfolio doesn’t work so, well. Or, it is somebody who allocates a substantial portion because they really believe that is the place to be and that’s going to give them outsized returns clearly with very significant volatility.

One of the challenges has been that the large gold miners haven’t really performed as well as many expected. Obviously they’ve done quite well in the recent times, but not as well as you might’ve expected. And there are a few reasons. One of them is that they got their act together, and while that might sound like a good thing, their balance sheets are in much better shape, which means they actually have less leverage to the price of gold than they used to. And the other one is that they’re so, large that they can’t replenish the gold they mine out of the ground easily. So, they’ve gotten involved in these huge projects that difficult to execute on time on budget.

And then similarly, we’ve had this decline of active management. And so, it is very difficult for investors to get good information on where to invest and what to do. We focus more on the junior end where we help institutionalize many of these assets where we think that beyond the price of gold by being added to indices or some other events might give disproportionate appreciation. But it’s a niche market. It’s not for everybody, and it is highly speculative. I mean, we say, “Oh my God, we’re concerned about purchasing power,” but then we invest in something that has an outrageous volatility. So, it’s not exactly safe. It is something that for certain investors plays a good role. I embrace it. I can afford that risk. I do have to say things not just because of compliance, but because also, I think it’s a better experience for investors if they have open eyes as to what they’re getting into because there is nothing worse to invest in something during a period of low volatility and then the volatility source. And I said, “Oh my God, I didn’t sign up for that.” The good news is we’ve had good volatility of late, although it’s of course been mostly to the upside in recent months.

Mike Maharrey: And just putting it into a broader context, when you look at precious metals, you’re looking at gold and silver and a macro environment where not only is the US government loaded up with debt, we’ve got high levels of consumer debt, we’ve got high levels of corporate debt, so, we have a debt laden world. I would assume, I probably shouldn’t assume what they say, assuming does, but I’m going to assume that you’re probably pretty bullish, gold and silver moving forward. Yes.

Axel Merk: Well, first of all, of course, our entire fractional reserve system is built on debt and credit growth. That’s the world we live in. And for those who say, “Oh, we should go back to the gold standard,” or this or that, well, we can only do that if we revamp the entire system. Revaluing price of gold doesn’t do anything. You’ve got to get the fiscal house in order, and then you can think about whether you want to have a bit of system. But just like monetary policy is a victim of fiscal policy because they ultimately have, I mean, it’s whatever it takes. Right. Mr. Draghi, but I forgot your question. You were asking something else. So, just say that again.

Mike Maharrey: I’m just asking that are you generally given the macro situation or are you generally bullish gold sold?

Axel Merk: Well, let’s put it this way. I’m on record of being an insider buyer on the gold mining side, and I haven’t sold anything. And so, that kind of speaks for itself.

The other portion of that is that I do believe we are somewhat in a Goldilocks environment in the sense that the price of gold has gone up leading to significantly higher margins, whereas we haven’t had as many other headwinds historically. What often happens is other commodities are soaring, providing competition, which makes it more difficult to get labor. For us, energy prices are very high, which is a huge cost of mining. Governments want to have higher taxes. So, we haven’t had all of that. I’m not quite as explicit in that statement as there was a few weeks ago because other commodities, notably also, silver that you mentioned has started to pick up more. So, there might be more pressure that extreme Goldilocks might not last forever. But on the longer end of things, as I alluded to, the big beautiful bill is one thing, but I don’t see big entitlement reform.

I don’t see these big issues being addressed dos depending on how effective it is. Yes, it will make a dent, but we need to cover the big issues. And I just don’t see the majorities in Congress. And by the way, that’s in the US and the rest of the world. China is desperately trying to keep its economy running. Europe is spending over a trillion on infrastructure and defense spending, and those are all inflationary. And we haven’t even talked about the favorite topic of recent weeks, tariffs and whatnot. And those make an economy less efficient. There might be good reasons why you want to re-engineer the economy, but those that reduce the efficiency will induce some inflation. And not just once, but because of the sort of things it does. And then importantly, one of my pets, you might’ve talked about it last time we were speaking, I believe that terrorists don’t just change the flow of goods, they change financial flows. When you have fewer goods flow, you have less money flow.

And that is a key reason why long-term rates have been rising, because deficits need to be financed more domestically. And so, there may be good political reasons to do this, but there is a cost, and that cost is a higher cost of financing, and that increases the pressure on the Federal Reserve. And also, we increase the pressure to reduce the deficit, but it’s easier to increase the pressure on the Federal Reserve than to get your fiscal house in order.

Mike Maharrey: Yeah, yeah, for sure. It’s interesting. I wrote an article earlier this week about the Germans talking about, Hey, let’s bring our gold back from New York because they’re worried about the fact that we’ve seen this weaponization of the dollar with the US using the dollar as a foreign policy tool. We’ve seen Trump using tariffs as a bargaining tool and trade negotiations. And as you say, you can look at those policies on the surface and say, yeah, that’s a good idea. It’s important to project power in the world, et cetera, et cetera. But you always have to look at the blowback. And somebody told me, well, it’s not fair for the Germans to call this weaponizing trade. And I said, well, it doesn’t matter what we think is fair. What matters is what people actually do in response. So, those incentives are what really matter.

Axel Merk: Yeah. Well, the political pressures, of course, in every country, just on the physical gold side, a few years ago, of course, there was a first wave of that. And one reason it took so, long is that dealing in physical gold is not trivial. You need to have a certain expertise on that. And the recent, you may recall this thing about, oh my God, there might be tariffs on gold. And there was a flight of gold out of London. The bottleneck was the Bank of England, because a lot of the clearing banks in London have some of the Gold Bank of England, the modern vault, and Bank of England is not one of them. They have the goal for a client on a pallet or a series of pallets, whereas the Bank of England, they have a computer system where they just reallocate a bar from one client another.

So, one pallet could have gold of numerous different clients. And so, when a clearing bank says, yeah, I’d like to have 10 tons shipped out, that says, okay, I’ll give it to you in two weeks because we got to find all these different bars. They are there, but it’s just a messy system because it’s a government bureaucracy that has managed it. And I mentioned that only that when you have to rebuild evolved in Germany because you’re the gold, it’s not just like, Hey, it’s an executive decision. Please deliver the gold tomorrow. There are not many people that work in that quote industry. You need to rebuild that skill. I know numerous vault managers, and most of them have worked on these jobs forever. Some of them are quite old, and so, that it’s a skill that needs to be rebuilt. Now, Germany did rebuild that skill and they would have the capacity to take some back. I just mentioned that because people sometimes forget with dealing with a real commodity, and if people can’t relate to this, just like to remind people that at some point we had negative oil prices, and that was because the small print matters, you’re dealing in real goods. The cost of storage at that time was just very high. And so, there are these little nuances that matter in the physical world.

Mike Maharrey: Yeah, that’s a really, really good point. You mentioned the recent run of silver over the last week or two. What do you make of that? Are we kind of seeing maybe this breakout where silver starts to catch up with gold and maybe we start seeing silver challenge those records? Or do you think maybe this is just kind of a faint, how are you viewing this?

Axel Merk: Well, the gold silver ratio has finally come down a tad. And the way I look at silver is that it has more of an industrial component. And so, it is much more subject to what’s happening in the underlying economy. And we’ve seen since unquote liberation day, and just as we’re talking today, there was a quote agreement on tariffs with China.

So, we’ve gone through the peak uncertainty on tariffs, and of course the next wave is going to be the midterm election passing the bill. And so, if you want to re-engineer trade aside from what I call the sticks like terrorists, there’s lots of carrots to give out, like deregulation. So, we may hear a lot of good news in the coming months, and in this context, there may well be an upward revision on the economic outlook. And so, one of the things I’ve observed is that the rate cuts that are priced in at the Federal Reserve have been pulled back. And so, meaning the overall, the market thinks not by a big margin, but the economy might do a tap better.

Axel Merk: And so, in that kind of context, it’s perfectly natural for the price of Ziva that is more dependent on the real economy, might get a little bump relative for gold. And of course, gold has had an amazing run. Now, does that mean that I know where the price of silver is going to be tomorrow? I dunno. I mean, gold is difficult enough. Silver is even more gut-wrenching to try to predict, but it is, and I’m not suggesting this economy is going to take off tomorrow because re-engineering economy will be a lot more than just allowing higher depreciation. That is one of the things that’s under consideration. But it’s those dynamics, the relative changes that do affect the prices.

Mike Maharrey: Yeah, yeah, very good point. Yeah, none of us have a crystal ball. I really try to emphasize that sometimes you listen to folks and you listen to podcasts and they’ll make these, we’re going to see $3,000.

Axel Merk: Well, the reason I stay away from that is because it’s, again, we don’t have a crystal ball. The role I see myself having and presumably many of your guests, is to provide food for thought. The audience, they have a certain view. And so, I’m giving them food for thought to say, oh, I haven’t considered that. And whether or not I’m right, I don’t know. I’m obviously biased. I think you right. But it’s also, my goal, one of the reasons I’m active on social media is because then in my company, I mean, I’ve trained my folks pretty well to try to contradict me, but on social media, nobody has any deference to title or status or whatever it is. And so, if I say something stupid, but people will point it out, then that’s kind of the idea to be able to challenge your theories. And some of what I say is mostly a risk scenario. There is a risk that certain things will happen, but the caution I like to give, and I gave it before, is because policy makers are subsequent can kick us. The timing of much of this is always very, very difficult.

Mike Maharrey: Yeah, that’s a really good point too. There’s so, many things in the economy and in the world of finance that are interlinked. And it’s impossible for me or you or anybody, no matter how smart we might be to catch onto everything. So, it is good to have those underlying assumptions challenged and to have other ideas thrown out that people may not have considered. So, I’ll get you out with this. On that note, what is something that you have picked up on that you think is not getting as much attention out there in the mainstream as maybe it should?

Axel Merk: Well, I alluded to that I do believe the plumbing of the financial system is changing with tariffs. That President Trump likes to have 10% baseline tariffs and some higher ones for certain countries, notably China. That will affect financial flows. It does impact the long rates. It acquires greater financing domestically when Moody says, oh, don’t worry. And by the way, that’s the foundation of the reserve currency status. And the exorbitant privilege is that the free flow of money. And I’m not saying we’re going to have capital controls, but these trade barriers have a real impact.

Axel Merk: And Moody’s said, when said, oh, don’t worry, because there’s no alternative. Well, what people don’t realize, there doesn’t need to be an alternative. The alternative is greater fragmentation. And that is, I think, what doesn’t get enough attention. Now, I’m not suggesting that, oh my God, the interest rates are going to zoom through the stratosphere tomorrow. But these marginal things do make a difference. And again, if President Trump gives enough carrots, he can compensate for some of that. And because of this back and forth on all these policies, many of these views get drowned out. But to me, it’s an important underlying theme that I don’t think people pay enough attention to.

Mike Maharrey: Yeah. Yeah. I like that point, that fragmentation. I’ve heard it put as a multipolar financial world where it’s not just the dollar or it’s not just gold, but you have many different currencies that are serving in various capacities.

Axel Merk: But of course, the US has this unique thing that we have these very developed financial markets. And then of course, the Goldbergs hate it, that the derivatives manipulate the prices. Well, it’s part of a developed financial system, and the gold bugs aren’t special. You have that in every market where the derivatives market, but in other countries don’t have these things as developed. And so, when we see this fragmentation, it’s not that somebody else will pick up the slack. It means that the role of finance is going to be reduced. Now, some people may think that that’s a good thing, but it does have an impact for investments. It does have an impact for currencies. It does have an impact for the price of gold.

Mike Maharrey: Yeah. Okay. Yeah, I get exactly what you’re saying. Appreciate that insight. Alright, before you go, I do want you to let people know where they can follow you and avail themselves of your knowledge in the work that you do.

Axel Merk: MerckInvestments.com is our website. We have a newsletter sign up. I can’t talk about the products we manage here, but you can see a link to the products. I’m on Twitter (X) @AxelMerk where I cannot tweet about products, but you’ll get all my 2 cents and then some on what’s happening and how it might affect financial markets. I’m a monitored policy buff, so, when the federal ECB meets then expected barrage of tweets.

Mike Maharrey: Alright. And I think with inflation is probably your 4 cents worth it now. Not your 2 cents worth, but at least 4 cents at this point.

Axel Merk: I do have views on that. And then importantly of course, for what is very important is who’s going to be the next fed share in year from now? That will be very, very interesting. And we can take another session in the coming months to maybe dive into that a little bit more.

Mike Maharrey: Yeah, that would be a very interesting conversation, for sure. Well, I definitely appreciate your time. Appreciate all of your insights and the work that you do. And again, thank you so, much for taking time out of your busy day to join us here and appreciate it. Thank you.

Axel Merk: Yeah, my pleasure.