Your Questions Answered Part 1

When will the Central Bank Digital Currency be introduced?

Where can we place our economic faith right now?

Does government debt matter when interest rates are still low?

Your Questions Answered Part 1

December 14, 2022

“While rates are historically low, the debt is significantly greater today, which magnifies each incremental move higher in interest rates. So even with small moves and rates on a very large number, the IMF puts total global data at 230 trillion. The World Economic Forum figures it’s a little closer to 300 trillion. Wherever you pencil it out. To manage that debt at 0% is easy. It’s not so easy at 4%. It’s definitely not easy 5 or 6 or 7%. 1% on 300 trillion, 3 trillion in debt service, but 4% puts you at 12 trillion.” — David McAlvany

Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany. 

I always enjoy these programs, Dave, but I enjoy it even more when you’ve been traveling. I know you’re over in Europe right now, and this is more common than uncommon where I’m talking to you, you’re on the phone, and we’re doing a Commentary thousands of miles from each other.

David: Well, the last time I prepared for a commentary in Europe, I was on a train between Paris and Brussels, and sometimes I’ll listen to music while I’m doing that, and it was Palestrina then. Now on the same train with a dear friend and colleague and my youngest son, and it’s the Kronos Quartet instead of Palestrina that’s running in the background. 

So we’ve now operated in the US and Europe for a long time as a business, and times change. The way we do business has had to evolve through the years. It’s been 50 years, so some things have to change. We maintain the same relationships here in Europe. Adaptation, of course, has had to take place with new regulatory landscapes, and it’s required us to evolve as well. So a number of years ago, inspired by a very tight supply of physical metals in the US—that was in and through the global financial crisis—we established impeccable relationships in a number of Europe’s gold and silver hubs which allow us to source product even when the US markets are too tight and premiums excessive. So banks, central banks, refineries in the UK, Switzerland, Germany, France, Belgium, they fill the gaps that would otherwise exist and do exist for other precious metals firms. So having superior products and sourcing will continue to serve us well in the bull market that is ahead of us. I’d love to be recording the Q&A; from Durango. I’d love to be in studio. I hope those listening will tolerate slightly inferior sound quality. But here we go, the first of a couple of weeks because we’ve had a lot of questions, and we’ll just dive right in and cover as many as we can today.

Kevin: Well, it sounds good, Dave. And actually I’m a beneficiary. I know my clients have been a beneficiary of just having those inventory resources over in Europe, and I bought a tube of sovereigns last Friday, and we haven’t had sovereigns in a while, so I appreciate that you guys are over there. I appreciate that you’re keeping the relationships going. 

I’m going to start out with the question from Steve. He says, “Over the last couple of years, digital dollars have been discussed by various governments and NGO entities. Recently, it seems the fire has been turned up. In fact, the FTX Ponzi scheme may be the perfect ‘reason’ for Congress to implement rules and regulations on digital dollars in order to ‘protect the public.’ What is the likelihood that CBDC will be introduced or even made mandatory in 2023?”

David: Yeah. So central bank digital currencies, the idea of them being mandatory in 2023, there is no pilot program at this point. So a realistic timeframe is not likely in 2023. If the Fed launched a program in 2023, again, a pilot program, general adoption would still be several years out from that date.