Reinvent Money Sep 20, 2026 39m 24m saved
With Alasdair Macleod, publisher of MacleodFinance
Alasdair Macleod expects the Federal Reserve's quarter-point rise to do nothing at all to the 10-year Treasury yield, which was back above 5% within two hours of the decision.
The conventional reading of a rate rise is that it dampens inflation and takes the inflation premium out of long-dated bonds. Macleod said the opposite is happening: central banks are reacting to prices rather than getting ahead of them, and governments carrying this much debt cannot pay the rates their own bond markets are demanding.
"With very high debt to GDPs governments cannot afford high rates they're going bust when governments go bust basically what happens is that they collapse their currencies that's really where we're going."
Macleod, a former banker and stockbroker who publishes MacleodFinance and writes on money, credit and precious metals, on Reinvent Money, had written the week before that the fiat currency system has about 18 months left. He spoke the morning after the Fed decision, with the Bank of England meeting the same day.
The full interview is covered here so you can skip it. 39 minutes of audio, 16 minutes of reading.
Here are the 16 arguments that matter.
Key Takeaways
The hike took a little steepness out of the yield curve and did nothing else — the 10-year was back above 5% within two hours
A break above 5% is the psychological trigger he thinks bursts an equity bubble he rates as the largest in financial history
Oil measured in gold is far below its long-run relationship, which is why he will not rule out $200, $300 or $400 a barrel
The crash comes in two stages: the market break, then the rescue — and the rescue is what kills the currency
He expects G7 emergency meetings, possibly closed markets and price controls
The AI stocks have no income behind them, and China is doing the same thing for a fraction of the cost
Three European central banks have now questioned the New York Fed's gold custody, which he reads as evidence the metal is not there
Monetary policy is decided by politics, not economics, which is the lesson he takes from Weimar Germany
Bond yields do not stop at 10%, on his reckoning, and he will not rule out 20%
1. The Hike Changes Nothing
Asked whether the Fed's move from 3.75% to 4% buys any time, Macleod said no, and explained what he had expected instead. With almost no bulls left in the Treasury market, he thought a quarter-point rise might trigger profit-taking by the bears and pull the 10-year yield back toward 4.95%.
The relief lasted two hours
Very very briefly it did track back but really within an hour or two it was back up over 5%.
Alasdair Macleod
That tells him the people selling the market are not short-term traders.
The hedgers are serious, and that is the worrying part
And I think that it shows that the people who are hedging if you like the risk in that market are extremely serious. They're not sort of speculators as such. And that I think is rather a worrying sign.
Alasdair Macleod
The hike only flattened the curve slightly
All the rise in short-term rates does is it just takes a little bit of steepness off the off the yield curve and that's about it.
Alasdair Macleod
He said the Treasury secretary is intervening heavily to hold the yield under 5%, and had 4.984 on his screen as he spoke, but that he does not expect the defense to hold.
2. A Diesel And Food Crisis
His reason for expecting more inflation than the market is pricing is physical rather than monetary in the first instance. The Middle East crisis has created three shortages at once.
Diesel, ship bunkers and kerosene hit land, sea and air
When you think about it, we got a shortage of diesel, shortage of ship bunkers and a shortage of kerosene. This basically is going to screw up global logistics over land, sea and air respectively.
Alasdair Macleod
On top of that he set European drought, which he said has cut crop yields well below expectations, and the loss of Ukrainian grain exports with Russia blocking access to the Black Sea.
A food crisis and a distribution crisis arriving together
We're going to get a food crisis on top of this plus a distribution crisis. We're going into a winter which is going to be no fun at all.
Alasdair Macleod
3. Reacting, Not Anticipating
Before answering a question about government interest costs, Macleod made a point about what this round of tightening is. Central banks are following prices rather than leading them, so nothing about the move suggests inflation has been dealt with.
This is a response, and it does not stop yields rising
They're doing this in response. They're not doing it in anticipation if you like. And consequently, they're not going to stop rates rising further.
Alasdair Macleod
He expects the same across the G7, with the Bank of England meeting as they spoke, and said the change in the rate outlook is itself what markets are now absorbing.
4. Governments Cannot Afford It
The host's question was what continued rate rises do to government interest bills. Macleod's answer skipped straight to the end of the sequence.
A government that cannot pay collapses its currency
With very high debt to GDPs governments cannot afford high rates they're going bust when governments go bust basically what happens is that they collapse their currencies that's really where we're going.
Alasdair Macleod
A quarter point or a half point either way does not change that, he said.
5. Oil Priced In Gold
Macleod then reframed the oil price as a currency problem. Gold holds its purchasing power over long periods, he said, and prices quoted in fiat currencies do not, so measuring oil in gold separates the two.
Oil in gold sits far below its long-run relationship
If you look at the price of oil measured in gold then it is roughly at 29% of where it should be if you like on a long-term basis which implies that it's got a triple measured in gold.
Alasdair Macleod
If the gold price in dollars does not move, he said, the adjustment happens in the oil price instead, and the same logic runs across commodities.
The super-cycle story is a currency story
And the way in which commentators describe this they say oh it's a commodity super cycle and all the rest of it but that's absolute rubbish actually what it is a decline in the purchasing power of the currency
Alasdair Macleod
He will not rule out $200 a barrel, or more
So, I would not rule out the price of oil going up well over $200 a barrel, perhaps even over $300 or $400 a barrel, though that's probably looking forward a little bit too far because this adjustment isn't necessarily going to happen overnight.
Alasdair Macleod
The host pushed back with the standard remedy, that the cure for high prices is high prices, and made the point that energy and food are not discretionary, so demand cannot simply be dropped. Macleod agreed and said that is precisely what drives the private sector into a slump.
6. Equities Are Due A Crash
His equity view follows from the bond view. Shares are expensive against bonds, so higher yields take the valuation apart, and the buying that got them there was borrowed.
The market was carried up by credit aimed at financial markets
Indices are due for a crash. They are they've been boyed up basically by bank credit aimed at financial markets. It's as simple as that.
Alasdair Macleod
When that credit contracts, he expects the Fed to try to replace it with its own — expanding currency and bank reserves to keep the economy going.
The policy response is the only one they know
All this Keynesian stuff is going to go into overdrive because they know nothing else. they don't know what else to do. That's what the textbooks since 1936 tell governments to do.
Alasdair Macleod
The result he describes is both things at once: a shrinking private sector, and money losing purchasing power along with the faith that supports it.
7. Stage One, Then Stage Two
Macleod laid the sequence out in two parts, and it is the second that does the damage.
The rescue is what kills the currency
So the authorities will band together. I can see G7 emergency meetings, perhaps even markets being closed, perhaps even price controls being brought in. All this stuff to try and steady the ship and it'll probably work for a few months, but no more than a few months because the action that they will take will guarantee the death of fiat currencies.
Alasdair Macleod
After a couple of months, if they are lucky, the slide resumes.
8. The 1929 Pattern
His template for the shape of it is the last time bank credit went into the stock market on this scale. The first fall came in the autumn of 1929, the market steadied into about April 1930, and the real decline came after that.
Even on a gold standard the Dow lost most of its value
And then it really started sliding and it was inexraable going down and down and down to the point where even under a gold standard we saw the S&P or rather the Dow lose 89% of its value.
Alasdair Macleod
Measured in gold, he said, this time will be at least as bad; measured in fiat currencies it may look milder, depending on how fast those currencies lose purchasing power. He also pointed at foreign holders of US equities as a source of selling, and said the dollars they receive will mostly be sold, with some of the proceeds going into gold.
9. The AI Bubble Has No Income
Asked about Elon Musk's view that growth from AI and robotics solves the debt problem, Macleod said Musk is a good entrepreneur who does not follow the monetary argument, and that the distinction between money and credit is the one that decides how this ends.
There is no income behind the AI securities
And this AI bubble, have they produced any profits yet? I think not.
Alasdair Macleod
His comparison was Facebook's early valuation, bought on the assumption that a business model would be worked out later. Then he turned to cost.
China is doing it for a fraction of the price
Chinese AI costs a fraction, a tiny fraction of what US AI costs.
Alasdair Macleod
He could not recall the name of the first Chinese model to arrive and the host supplied it, DeepSeek. He put its capitalization at about $5 million against the American spending.
A trillion dollars of AI infrastructure cannot be justified
So, can you really justify throwing, a trillion dollars at AI infrastructure and raising the finance to do it? Of course not. It's just it's crazy.
Alasdair Macleod
10. Regulation And China
The host asked whether the American AI executives calling for regulation are worried about Chinese competition rather than about humanity. Macleod said competition is part of it and that nobody is saying so out loud, because the moment buyers notice there is a much cheaper way of doing this, the expensive version is finished. He thinks the safety worry is also genuine, and that the remedy is not available.
Regulators do not achieve what a market cannot
And the idea that you can regulate it, yeah, it's nonsense. What regulator do you know of who's actually achieved something that the market cannot generally they stand in the way of progress
Alasdair Macleod
11. Why Not Ten Years
Asked to justify the 18-month timeline he had put on the fiat system, Macleod began by conceding the obvious.
Nobody knows the date, and it could be sooner
Well, the answer to this, Paul, is we just don't know. So I'm just sort of penciling in what I think at this moment is likely. It could be quicker.
Alasdair Macleod
What he was arguing against is the assumption that there is a decade to prepare, and the idea that governments will manage an orderly reset through central bank digital currencies.
The timeline is now, not five or seven years out
I'm trying to make the point actually that this is serious now, not in four or five years or six or seven years time.
Alasdair Macleod
The mechanism is the bond market. Yields through 5% produce a securities market crisis, and the response is already known, because a central bank with a dual mandate drops the inflation half when the economy is falling.
They abandon the inflation mandate and print
They will abandon the inflation mandate and they will do what they can to rescue the economy from a slump
Alasdair Macleod
12. Why 5% Is The Trigger
Asked why that level in particular, Macleod described the relationship he tracks: the long bond yield and the S&P 500 move inversely, closely enough to chart, with the dot-com bubble the clearest case of shares overvalued against bonds.
The market has risen while yields sat just under 5%
But today what we have quite simply is a stock market that has risen and risen and risen while at the same time bond yields have held just under 5%.
Alasdair Macleod
The leverage behind it is what makes the break disorderly. He put brokers' loans at $1.1 to $1.2 trillion and the hedge fund position in securities, bonds included, at about $4.5 trillion, and said foreign holders who own US equities for no regulatory reason will sell as well.
5% is a psychological break point under the biggest bubble on record
So what we have I think in this 5% level is essentially a psychological break point which is going to burst this extraordinary bubble. And this bubble is the biggest bubble in history in financial history so far as we can tell.
Alasdair Macleod
Everyone is carrying on as though the risk were not there
This is not this is not a good situation and everybody's just continuing as if this danger just does not exist.
Alasdair Macleod
13. No Bretton Woods II
The host raised the Treasury secretary's recent reference to Bretton Woods and asked whether a negotiated new system, with gold underpinning it, is the third stage. Macleod ruled it out and gave the two ways a currency can actually be stabilized.
The first is rates high enough to pay holders for the risk of holding the currency, which he said is nowhere near where rates are and would bankrupt the government, the zombie companies and the markets on the way.
The second is a gold standard, which he said brings its own conditions.
A gold standard requires surpluses and no intervention
Well, the only way that can last is you have to cut your public spending way back so that you're getting surpluses and you have to withdraw from intervening in markets.
Alasdair Macleod
That means discarding the macroeconomic framework in use since the 1930s and returning to the Austrian tradition running from Menger through Mises and Hayek, which he does not expect anyone to do.
14. Politics Drives The Fed
His closing argument on policy came from Weimar Germany, where he said there were economists who understood the problem better than today's macroeconomists and were still part of the currency's collapse.
Monetary policy is politics, not economics
What this tells us is that it's not rational economic thinking that drives monetary policy. It's politics. It's politics.
Alasdair Macleod
Applied to the present, that means the president's demand for rates no higher than 1% becomes the pressure on the Fed chair as soon as the economy turns down. He credited Warsh with resisting it so far, said Warsh was put forward partly through his father's Republican connections, and said he has a mind of his own and a job to do.
Pressuring the Fed is counterproductive for the president
And I think that intervention by Trump, if anything, is going to be counterproductive as far as Trump is concerned because all it will do is it'll undermine yet more faith in the currency.
Alasdair Macleod
15. Where Bond Yields Go
Macleod tied the yield outlook to two wars: the proxy conflict in Ukraine the US has withdrawn from, and the Gulf, where energy exports have been interrupted. The East-West pipeline that carried four to five million barrels a day is out of action, he said, and will take at least a month to fix.
He will not put a ceiling on yields
And so, where do bond yields go? Well, they're going to go a lot higher. And if you asked if you ask me, will they stop at 10%, I would say probably not.
Alasdair Macleod
The exceptions he named are Swiss and Chinese bonds. Chinese yields are very low, which he reads as preparation rather than strength.
China is getting ready to put the yuan on a gold standard
China by her mood is quite clearly preparing to put her yuan on the gold standard
Alasdair Macleod
Whether that covers the international yuan, the domestic one or both is unknown, he said, and he thinks Chinese yields are being suppressed and should be higher.
16. The Gold In New York
The last subject was the Dutch central bank cutting the share of its gold stored in the United States from 31% to 18.5% and raising the share held in London. The host said the stated reasons, easier trading and crisis readiness, do not hold up when the metal could simply be flown home, and Macleod agreed, dismissing both the London argument and the explanation the Dutch gave about the age and quality of the bars in New York.
What he draws from it is the pattern rather than the reasons.
Three European central banks have now questioned New York's custody
The fact of the matter is that this is the third instance when the New York Fed has not supplied gold to those who it has storing earmarked funds for. First one was the Bundes Bank, second one was the Bank of France.
Alasdair Macleod
His conclusion is that the gold is not there
the fact that this is the third major central bank in Europe, which has called into question the New York Fed's custodial role, tells me that in these central banks there is increasing knowledge and concern that their gold there doesn't exist.
Alasdair Macleod
The workaround the Dutch and the French have used, he said, is to take payment in dollars instead of metal and buy the gold in the open market, which leaves them carrying the price risk. Spain and Germany have their own debates running about moving holdings home.
He calls it theft of custodial gold
it is plain theft theft of custodial gold but I it shows that the Americans do not take other people's property seriously or property rights seriously and this is something which is now widely understood around the world
Alasdair Macleod
Bonus Insights
The Russian reserves are the precedent everyone remembers
Macleod connected the gold story to the freezing of Russian foreign reserves in Europe after February 2022, and to Putin's appearance at the St Petersburg International Forum that year, where he told an audience drawn from dozens of countries that reserves held in the dollar system are not secure. The conclusion Macleod draws is about trust rather than about Russia: other countries watching this reduce their exposure to the currency and bring their gold home.
Selling is already visible in the bond market
The host listed what he has seen over recent weeks: Dutch pension funds selling US bonds in size, the Norwegian sovereign wealth fund doing the same, and Japan reducing holdings. He put it as a pattern rather than a set of separate decisions.
The interview was arranged at short notice
Macleod noted at the top that the booking was last minute and promised to keep it shorter than usual, and the host set a target of 30 to 40 minutes.
Macleod's bottom line is that the 5% level on the 10-year Treasury yield, not any central bank, is what decides the next twelve months: a sustained break above it takes the equity market down, forces a rescue larger than any before it, and the rescue is what finishes the currencies.
Products, Companies & Tools Mentioned
MacleodFinance (His own publication on macroeconomics and precious metals, where the exponential chart of the S&P 500 against the long bond yield goes to subscribers)
The Federal Reserve (Raised to 4% the day before; he says it will have to keep raising, and that its New York bank's gold custody is now doubted by three European central banks)
De Nederlandsche Bank (The Dutch central bank, which cut the share of its gold held in the US from 31% to 18.5% and moved it to London rather than home)
The Bundesbank and the Banque de France (The first two central banks he says were not supplied with the gold they had stored in New York)
DeepSeek (The Chinese model the host named for him, as his example of AI built for a fraction of the American cost)
The Bank of England (Meeting the same morning; he expects G7 central banks to have no option but to keep raising)
Books & Resources Mentioned
MacleodFinance's article archive (Where he published the piece giving the fiat currency system about 18 months, and where the bond-yield-against-equities chart is shown)
The Austrian school, from Menger through Mises and Hayek (The framework he says would have to replace post-1930s macroeconomics for a gold standard to hold)
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