Rick Mills, Editor/Publisher, Ahead of the Herd:

Silver47 (TSX-V:AGA) came out with what to me was a bit of a surprise very big announcement.

Bob Moriarty, Founder, 321gold:

Well obviously it’s a big deal, now what the impact of that’s going to be is hard to say. Silver47’s property in Alaska is nothing short of brilliant, it’s got $5 billion of VMS, it’s a high-grade VMS and it would not be difficult to build a road into it.

That project is going to go into production so what they’re doing is diversifying by doing a merger with Summa, and they’re doing it at no premium. It’s not as if they went in and bought it at a 25% premium. It’s an even swap. So, we’ll see but I love Silver47, I love their project, I’m not familiar with Summa other than what’s in the agreement, but I think combined it’s a brilliant company with a brilliant future.

Silver47 and Summa Silver merge into high-grade US silver explorer

RM: What I like about the deal living is in living in northern Canada I know cold, I know what winter’s like, and I know how hard it is to work in the winter. I was a signalman for the CNR, and in the middle of January or December you’d get a call at 2 am, “Oh the track circuit’s down.” It’s -40 degrees Celius and the wind’s howling out of the north, and you’ve got to go outside, go down to the office and get in your little motor car, there was no high rail trucks then, there’s no heaters in these things and you’ve got to go find a broken rail that might be 30 km away.

It’s actually so cold the rails wouldn’t twist or bend they would pull apart, and you’d get out there and find that this 132 pounds-per-foot rail is pulled apart 2-3 inches sometimes more from the cold and it’d take hours to get it fixed but I know what working in the cold is like, I know what cold can do so I know why companies don’t like working in the cold.

It magnifies everything, it magnified expenses, it magnifies injuries, it magnifies the effort, it magnifies the time and yeah you can do it, and some companies do work in the cold.

But what this does is being in Alaska you might not be able to work year-round, and we call these northern stocks because they can have extreme difficulty and a lot of extra expenses working in the winter and that limits their news flow.

What I like about this is with the with the merger with Summa you get into New Mexico, Arizona and you get projects that can be worked all year-round and that is incredible, and you can run your drill programs 12 months of the year.

You can have exploration and assay news all year-round and what I like about that is — and both you and I know this — is that news is the actual lifeblood it’s the heartbeat of a junior resource company. You can’t make up news, but now you have quality news, important news coming out and if you can have that year-round that’s great for investors, it’s great to bring attention to the stock and when you have great projects like they do I think it’s just a win for shareholders all the way around.

BM: You’ve raised a great point. It’s true of everybody in Canada and Alaska and it’s not true that it’s harder to work, what is true it costs far more money. You could still work in wintertime you just have to pay 10 times as much money for it, so people tend to be three to six-month companies.

So, I think it’s been a brilliant point on Silver47’s point of view and you raise some good issues. They’re not going to be a 3 to 6-months-a-year company and that’s a big deal.

RM: Storm Exploration (TSX-V:STRM) is working a banded iron formation, a BIF.

They’re going to do a financing; they’re going to be drilling their flagship project this summer. I like the management, I love the project, it’s already got gold on it, they’re going to do a very good-sized drill program. The market cap when we started talking about STRM was $2 million and since then it’s a little more than doubled.

I like Storm so I’m going to participate in an upcoming private placement, I think it’s still undervalued for where they’re going and what they’ve got on that project.

BM: Well, here’s what’s funny, I don’t know that much about Storm, but I will tell you I know more about banded iron formations than anybody you could talk to.

The world’s largest banded iron formation is the source of much of the wealth of Australia, it’s found in the Pilbara region of WA, and it was discovered in 1952-1953 by a prospector named Lang Hancock.

Now the reason I know so much about banded iron formations is I delivered an airplane to Lang Hancock in 1976 and his daughter Gina Rinehart is the richest woman in Australia and many times you’d see a picture of her, and she’s got her dad in the background standing next to the airplane that I took over there in 1976.

Well as it turns out Quinton Hennigh invited me to go on a six-week trip to New Zealand and Australia in 2009. We went to the Pilbara and obviously he showed me the banded iron formation, and he showed me a paper he’d written for Newmont where he had said that banded iron formations have an affinity for gold because the iron precipitates out of salt water in the presence of oxygen, and his thesis was gold precipitates out of salt water in the presence of oxygen, so you have an absolute affinity. Where you have banded iron formations inevitably you have gold.

I’m talking to the management of Storm on Monday, so I’ll know a lot more about it then but you’re going to hear me say the same thing again and again, the very best reason for buying anything is because it’s cheap and it was cheap at 2 cents share and it’s cheap at 6.5 cents a share.

RM: They’ve got gold at one end of Miminiska, and they’ve got gold at the other end of the 14-kilometer trend at Frond, and they’ve got a gold showing in the middle. And we’re not talking about 1 gram a tonne here, there is 6 g/t over 21 meters and 14 g/t over 5 meters, and you’ve got other gold showings located on the property.

We’ve got something exciting to talk about this morning Bob, it explains everything that has been going on with the US and its trading partners and its allies, we’re putting it all into perspective.

In 1944 the Bretton Woods Agreement established the US dollar as the world’s reserve currency, which at the time was 100% backed by gold.

Other currencies were linked to the value of the dollar and all international transactions were settled in dollars. The US dollar became the rock the international monetary system was anchored to because the dollar was backed by gold.

The Bretton Wood system reflected the US vision, at the time, for a post-war world order of free trade, stable exchange rates and an effective international monetary system.

How important is it to have a reserve currency? Well, French economist Frederic Bastiat said that “when goods do not cross borders soldiers will.”

No nation can achieve a decent standard of living because it’s impossible to have a completely self-sufficient economy in all things, if you are not trading you are fighting.

So, you need a reserve currency to conduct international trade, and we have one, but a whole lot of countries are starting to question whether the US deserves to have the world’s reserve currency.

Stephen Miran served in Trump’s first administration; he’s a Harvard graduated American economist who’s currently serving as chair of the Council of Economic Advisors.

Miran is calling for a total global economic overhaul, one that’s going to weaken the dollar, enact new tariffs and force foreign nations to pick up the bill for America’s military umbrella and financial dominance.

He’s got up a multilateral strategy in which the United States, and its trading partners, and here we are back at the Mar-a-Lago Accord, are going to intervene in foreign exchange markets to sell dollars.

To offset any resulting upward pressure on US longer-term bonds, their trading partners, the foreign governments holding US debt, are going to agree to increase the duration of their remaining dollar reserves, something that US Treasury Secretary Steve Bessent has already talked about.

At the same time foreign central banks raise their rates and that strengthens their currency while the US lowers their rates and that weakens their dollar. This strategy is thought to, by Miran and the Trump administration, fix the US deficit and bring back manufacturing to the States.

But you can’t do it without the cooperation of the Fed in lowering US interest rates, but they are on the fence and reluctant to move.

Another problem with Miran’s plan is that most of these countries are not going to voluntarily go along. So, the US is threatening them with tariffs and ejection from the US military defense umbrella.

They’re being forced into this, or they’re trying to be forced, and if you think back in hindsight to what’s been happening, what’s caused all the chaos, this is exactly the playbook the US has been using.

There is zero doubt the US is using Mar-A-Lago accord as their playbook to try and weaken the dollar and force manufacturing back to the US.

We can expect conditions are going to get a hell of a lot worse.

BM: That’s true, the idea that governments can control economies like you control a puppet is fatally flawed. The amazing thing is the best governments are the governments that do the least. When they start becoming activist, they always screw it up.

I think the Trump tariff tantrum is an utter disaster and it’s going to be obvious very soon. Bessent, the secretary of the treasury, was interesting because I think that he’s saying, “we’re going to have a default.”

Now when governments go into debt there’s three different ways they can pay it. They can have taxes and pay it against taxes; they can have inflation and of course inflation is tax but it’s an invisible tax so governments love inflation. Or you can have an outright default, and I don’t think the United States government has ever defaulted but I think the Trump administration is going to default. They think they have control of things that you just can’t control.

RM: It doesn’t seem like anybody’s cooperating with them. The agreements that have been signed between the US/UK and the US/China might be brought up in a debate, but both those agreements are not signed and are fluff.

Miran, when he was speaking at a Hudson Institute event said that the administration is willing to ‘burden share’ as he called it, which means that countries that benefit from the dollar’s status as the reserve currency have 5 options to invest in the US, avoid punishments, and provide revenue to the US Treasury to finance public goods, which was never in the Bretton Woods agreement.

First, they can accept tariffs and not retaliate, just rollover.

Second, they can stop unfair and harmful trading practices by opening their markets and buying more from America.

Third, they can boost defence spending and procurement from the US, buy more US-made military stuff.

The fourth, they can invest in and install factories in America, and they won’t face tariffs.

Fifth, they could simply write checks to the Treasury that helps the US finance itself.

All this is what’s causing the chaos because it’s not working. Nobody’s going to volunteer to destroy their own economy just to benefit America’s.

This is going to get worse, if we think we see chaos now it’s going to get much worse.

BM: I totally agree, can I give you proof?

RM: Yeah absolutely.

BM: Trump is amazing because he negotiates the same way a mafia boss does, and Trump doesn’t do things in cooperation okay. When somebody comes up to you, you’ve gone to the bank and you’ve pulled out a couple hundred bucks to go out for dinner, somebody comes up and pulls a gun on you and says “Okay give it up” how much do you cooperate? And the answer is zero.

You give it up, you give them the money, but it certainly was not done through cooperation.

I’m astounded at what Trump has done with Canada and Mexico and China. These are important trading partners why would you want to insult them? Why would you want to make demands of them? That’s way Trump does business.

And I’ll be real candid, I totally agree with you, it’s going to get far worse and it’s the wrong way to negotiate. There’s three different ways to negotiate: You could have a positive sum game; that’s a negotiation in which both sides are better off at the end of the negotiation. You could have a zero-sum game, and that’s a game in which there is one winner and one loser. You could have a negative sum game.

Now in the United States the way we do divorces is a negative sum game. Both sides lose and it’s a stupid thing to do. But Jeff Bezos and Steve Jobs and Bill Gates and Trump all use the zero-sum game. And they believe the way to win is to make the other guy lose. And it’s the very worst way to negotiate; it’s the worst form of game because in the end everybody loses.

I would like to see Trump recognize that China’s got some tremendous advantages over the United States, Canada’s a big trading partner, Mexico’s a big trading partner. When I was a kid, we would drive down to South Texas and we would cross the border, we would go duck hunting, you could do it back then. Everybody in Mexico was driving around in 20-year-old, beat-up pickup trucks, Mexico now has a middle class.

Until Trudeau came along Canada was a very wealthy country, Trudeau fucked it up, and now Canada’s in deep serious trouble. The last thing they need is a trading partner that wants to threaten them. So, I disagree philosophically with Trump’s form of negotiation.

RM: The true art of the deal isn’t beating somebody until they submit, the art of the deal is getting them to recognize and agree to a win/win. Why make an enemy out of a very much needed, critical, trade partners?

Shifting gears, what is going on with Japanese bonds?

BM: We’ve got an interesting situation; I think you picked up on the fact there are things going on under the surface in bonds. The Japanese bond yield is skyrocketing and that’s going to have a major impact so there’s some scary stuff going on and it’s a good time to look for a safe haven.

RM: The Japanese were suffering severely from deep stagflation for decades and they had a zero interest rate policy, and all of a sudden, the government comes out and does two rate hikes, boom boom and now the interest rates on the bonds are soaring, and then we see the US 10-year Treasury starting to soar so what’s going on with that?

BM: The insurance companies and the banks are dumping bonds because they’re getting creamed by the increase in interest rates.

They were holding those assets and it’s exactly what happened to the UK two years ago when interest rates shot up like 54% in one year. The theory in bonds is you get a safe, steady return on your investment. You buy stocks to make 5 or 10 or 20% a year, but you buy bonds to make 3 or 4% but it’s a guarantee. And they’ve turned that upside down. So, what’s going on in Japan is very dangerous, Trump’s tariff tantrum is very dangerous, and certainly Korea, Vietnam, Thailand, China, Japan appear to be unloading Treasures.

I think it’s the beginning of the end for the dollar, the world’s reserve currency. I’m not sure what’s going to replace it but I think it will be based around gold. I think that’s obvious; something is going on with gold that everybody wants to ignore.

RM: Yeah, there it is, the narrative that the US dollar’s reserve currency status is getting eroded, there’s a lot of momentum to that.

There are two scenarios that are eroding the dollar’s status. The first is the events that undermine the perceived safety and stability of the dollar, and the US’s overall standing as the world’s leading, some think only super-power. And we’re seeing that, the chaos being caused by the drive to reduce yields and weaken the dollar to reduce the trade deficit and bring back manufacturing, we’re seeing all that right now.

People are questioning the privilege that the US has, they’re questioning the safe-haven status, so that that’s the first one.

There are also positive developments outside of the US that could boost the credibility of alternative currencies but none of the candidate countries for reserve currency status have got what it takes. They need to have a safe and stable currency and right now I don’t think there is a currency that fits that.

I’ve been looking at what might replace the dollar. The euro is top of the list, but I think the whole EU is a basket case, they’re not unified, there’s too much political fragmentation and economic instability plus all kinds of geopolitical concerns. I just don’t see the euro as a replacement,

There’s the British pound, it was a global reserve for a very long time before the US, but the UK’s not big enough, the countries that comprise the United Kingdom’s economies aren’t nearly big enough.

The Chinese yuan is not going to work, it isn’t accepted as a global currency, and it won’t be accepted as a reserve currency in a lot of the world. It might be in their trading block with the BRICS one day, but globally you’ve got limited convertibility, no transparency, a communist government and there’s no financial integration with the rest of the world.

The last possible replacement I looked at was Bitcoin. It gets a lot of attention and popularity as a decentralized digital currency but there’s no control, it’s extremely volatile and again it’s got even less adoption than the Chinese yuan, there’s also zero regulation.

The only other international reserve currency that’s possible is a basket of currencies that is gold backed from the International Monetary Fund. You might be able to get that but again nobody can get along, so it’ll be extremely politically and economically fragmented, there really isn’t anything out there that steps up and says, “I could be the reserve currency.”

Seems like a dead end, but in my opinion the answer has involve gold.

BM: Absolutely it must involve gold. You talked about the UK having the world’s reserve currency prior to Bretton Woods, but if you go back 150 years the UK was on a gold standard, Switzerland was on a gold standard, Italy was on a gold standard, France as on a gold standard, Germany was on a gold standard, Canada was on a gold standard, Australia was on a gold standard, the United States was on a gold standard, Chile was on a gold standard, Mexico was on a gold standard. What do all those countries have in common?

RM: None of their currencies are backed by gold.

BM: If a gold standard worked 150 years ago, why couldn’t it work tomorrow, and the answer is it absolutely could.

Now I’ve seen some interesting things, I’ve got people who claim to be insiders, I’m not sure that’s true but I’ve got people telling me that Trump is going to revalue gold by some order of magnitude to pay off the debt.

I think while his people are arrogant, I think they do understand the United States is bankrupt and the idea of default on Treasury notes and extending the maturity that is a default.

Supposedly the United States has the greatest reserve of gold so that could be the basis for a new monetary system. And if the United States did that, the US economy would be far smaller, but I think a lot of other countries would adopt gold.

Now Trump’s doing some very dangerous things, what is the one thing that he wants to bring home in his hand after this week and claimed victory?

What is Trump’s goal in the Middle East?

RM: A crypto deal that’s going to benefit his family to the tune of a billion dollars.

BM: Well, that’s true but he’s also over there on a big sales pitch for the military industrial complex. Now while I make the comment it’s very accurate that you cannot have a barbershop and an Indian casino and call it an economy in a small town you also cannot have a country whose primary economic activity is creating weapons, it is self-defeating, and he’s looking at it and saying “We need to sell more weapons”.

That’s what the whole Ukraine war was about, was selling weapons from the United States and some of the things they’re doing are so stupid.

We should talk about India versus Pakistan. It seems that while India should have a competitive advantage in a conflict over Pakistan, it appears that the Chinese-supplied weapon systems Pakistan uses are far more effective than the Indian weapons system.

I’ll tell you as a guy who was in a war for 20 months, the American weapons are crap. The big German newspaper came out they were talking about the German tanks, they said they’re crap. Since WW II the direction of the West has been to build weapons for weapons sake not to win wars, and when you’re dealing with the Chinese, when you’re dealing with the Russians, their purpose is to win wars. They’re not fighting just to be fighting; they fight to win. And their weapons systems are cheap, but they work.

RM: That’s something I remember reading about WW II, there was a German officer, he was riding around in a Tiger tank during the war and after the war they asked him “What do you think of the Sherman tank?” And he said, “The damn thing’s a piece of crap. We take out 10 of them no problem at all.” Then he added, “The problem was there was always an 11th.”

BM: Yes, but you raised a really good point. I find the Trump family intervention in cryptocurrencies I find that highly offensive, and I think it’s going to mark a top for the cryptocurrencies.

As much money that Donald Trump claims to have, his son in law and his sons are literally pimping the Middle East for their cryptocurrency scams.

RM: Hopefully it marks the end of the meme coin bullshit at least. It’s a total grift operation going on over there but let’s bring it back to gold for a minute.

We see countries from across the world bringing their gold home so to speak. The US is auditing Fort Knox; Basel III now has gold as a Tier 1 asset the same as currencies as that they have to count it at full value now.

And you’ve got central banks buying a lot of gold, they switched quite awhile ago from net sellers to huge buyers. So, you’ve got all this going on with gold.

Let’s get back to what a currency would look like, would it be a basket of reserve currencies partially or fully backed by gold or the US dollar partially or fully backed by gold?

BM: Okay, let me ask a trick question. In 1970 an ounce of gold was $35, a month ago an ounce of gold was valued at $3,500. Did the value of gold change?

RM:  No.

BM: What changed?

RM: The worth of the dollar.

BM: Thank you. Everybody’s confused: “Gold went up 100-fold.” No, it didn’t. The dollar went down 100-fold. There is nothing stopping any country in the world from turning around and going to a pure gold standard tomorrow.

And if Trump came out and I’ve been told it would be done by July 1^st, if Trump came out and said, “Okay the value of gold is now $20,000 an ounce,” we would be on a gold standard.

What we’ve seen since 1970 is the apparent price fluctuates when in fact the value has not fluctuated. And if gold became an anchor and countries stopped running costed deficits, I think gold would make a great reserve currency. The world economy was a hell of a lot healthier when the UK, France, Chile, Mexico, Canada, the United States, Australia were all using gold as currency.

RM: Agreed, and I think we’re going to get back to it in some form.

BM: That’s a good way of putting it, I believe it would be a pure gold standard, you’re saying in some form, and there’s a good chance that they’ll at least try that. But you know if everything collapsed, if world economies collapsed everybody would say, “Okay we’re going back to a pure gold standard.”

France of course had a revolution in 1789 because they got involved in the American Revolutionary War and without the assistance of the French government the rebels would’ve lost the war. Period. It was France that won the Revolutionary War for the Americans. But it bankrupted the king. So they went through a revolution, they chopped the heads off I think 35,000 people. What did Napoleon do to restore the economy of France?

RM: Went to war.

BM: No, he sold the Louisiana Purchase to the United States for gold. And when he started the war, all of the wars that Napoleon fought were financed from the gold and silver that they got from the United States.

They didn’t go into debt, and from about 1850 until the Prussian War in the 1880s France had a booming economy because they didn’t have any debt. I just hate debt. If you are in debt, you are a slave.

RM: We worry about a lot of things but the one thing that we should really be concerned about is debt, the global debt and country debt and business debt and personal debt, we’re drowning in debt, and it’ll never ever be paid back and we’re going to have a consequence, there’s going to be a reckoning for this someday.

We can keep kicking the can down the road for awhile but eventually you’re not going to be able to kick that can anymore.

Anything else you want to talk about here today Bob, it’s been a pretty good talk; we’ve covered a lot of stuff.

BM: Well, the interesting thing is we have a lot of geopolitical events going on that could turn red-hot literally overnight. You’ve got Germany issuing ultimatums to Russia to declare an immediate ceasefire and I find that very funny. Germany’s given their military munitions away yet there they’re still running their mouths about ultimatums which is very funny. If you’re going to give an ultimatum to somebody you better have a loaded gun in your hand.

Ukraine/ Russia is very dangerous, Israel swears up and down they’re going to attack Iran, that would destroy Israel.

You’ve got India and Pakistan, I’m hearing mixed results, I’m seeing some things saying the Pakistani Air Force has decimated the Indian Air Force, and some things that say the Indians have destroyed four air bases in Pakistan.

They both cannot be true, so I don’t know whether that’s a big game being played but that’s conflict between two nuclear nations that could destroy the world in 72 minutes.

RM: I think the US capitulated to China and I certainly don’t see this deal lasting three months to get a new one.

BM: Exactly what you just said. The United States appears to have capitulated but at the same time if you lower tariffs from 145% to 31.8% and that’s what the effective tariff would be on China the demand is exactly the same in both cases and it’s zero.

And the American consumer’s going to find out the next couple of weeks how many things they count on come from China or used to come from China. So that’s another dangerous situation and strangely enough all of these things are arguments for owning gold.

RM: The United States is is on a mission to bring back manufacturing and fix the deficit. And the way they’re doing it by trying to get the Treasury yield down and weaken the dollar obviously isn’t working. The US Dollar Index is at 101 and the Treasury yield last time I looked was at 4.4%. Other countries aren’t cooperating, so I think people better be looking at gold and silver and commodities because they are going to be the only safe havens left standing, like we said in our last talk.

BM: Absolutely.

RM: Thank you for your time.

BM: Thanks Rick.

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Rick owns shares of Storm Exploration (TSX-V:STRM). STRM and Silver47 (TSX-V:AGA) are paid advertisers on his site aheadoftheherd.com

Bob owns shares of Silver47 (TSX-V:AGA).

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