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Money Metals News Alert
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June 16, 2025 –
The war between Israel and Iran heated up over the weekend, but gold, silver, and
oil have not reacted strongly to these developments.
At the same time, U.S. and European
stock indexes started off strong today – apparently shrugging off the
conflict.
The Federal Reserve meets this week,
and we'll learn more about whether to expect some rate cuts later this year.
Currently, two are expected.
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Gold : Silver Ratio (as of
Friday's closing prices) – 94.4 to
1
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Why Investors Can't Trust the System –
and Should Trust Gold
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In a wide-ranging and candid interview on the Money Metals podcast, host Mike
Maharrey sat down with Axel Merk – President and CIO of Merk Investments
– to explore the deepening divide between government fiscal behavior and
investor interests.
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The conversation centered on growing
sovereign debt, entitlement reform avoidance, shifting macroeconomic dynamics, and
the critical role of gold and silver in a volatile financial system.
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Government vs. Investors:
Conflicting Incentives
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Merk began by highlighting a quote he
first coined over 20 years ago: "The
interests of a government in debt are not aligned with those of
investors." He elaborated that governments with massive debt burdens have
every incentive to allow inflation to erode that debt's real value. In contrast,
investors aim to preserve purchasing power.
Merk cited Milton Friedman's famous
observation that citizens always pay for government deficits – either
through taxation or inflation.
Referencing the recently proposed "Big
Beautiful Bill" – an actual name used for a U.S. budget reconciliation
measure – Merk noted the CBO's estimate that the bill would add $2.4
trillion to the federal deficit.
Despite public claims of fiscal
conservatism from lawmakers like House Speaker Mike Johnson, Merk argued that the
lack of entitlement reform shows that "business as usual" continues. He added, "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."
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No Appetite for Reform, Only
Kicking the Can
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Merk recommended The
High Cost of Good Intentions (2017) for historical context on entitlement
programs, showing how reforms rarely reverse expansionary trends. While Europe has
shown that bond markets can force governments to act, the U.S. enjoys a much
greater capacity to "kick the can down the road."
That said, Merk warned
investors: "This
game is rigged. When the interests of government are not aligned with yours,
it's something to be thinking about."
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He also cautioned that governments can
change the rules unexpectedly – especially when fiscal pressures mount
– making long-term planning for investors even more challenging.
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Why Gold and Silver Still
Matter
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Turning to gold and silver as
investment tools, Merk described the metals as essential in addressing systemic
risk, particularly amid long-term
inflation and global debt. Merk's firm manages over $2.3 billion in gold and
gold-mining assets, offering a unique view of both the physical and speculative
ends of the metals market.
He distinguished physical gold
investors – whom he called "defensive" – from gold mining investors
who typically seek outsized returns with higher volatility. While large miners
have recently underperformed expectations, their cleaner balance sheets now reduce
their leverage to rising gold prices.
Merk noted the decline in the
gold-to-silver ratio, pointing to silver's more industrial nature and sensitivity
to economic momentum. He said the latest uptick likely reflects optimism around
trade stabilization with China and a possible upward revision of the U.S. economic
outlook.
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Tariffs, Fragmentation, and
Financial Plumbing
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He warned that policies
like Trump's proposed 10% baseline tariffs don't just shift trade – they
also change capital flows, leading to higher domestic financing needs and upward
pressure on long-term interest rates.
Merk criticized the
mainstream narrative that the U.S. dollar's dominance is unshakable. "There
doesn't need to be an alternative," he said. "The alternative is greater
fragmentation."
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He warned that the erosion of global
financial integration threatens the very plumbing that supports U.S.
reserve currency status.
He also referenced Germany's moves to
repatriate gold as a symptom of growing distrust in U.S. monetary stewardship and
the weaponization of the dollar.
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Caution, Complexity, and No
Crystal Balls
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Merk made clear that while he's
bullish on gold, he avoids hard price predictions. "I don't have a crystal ball,"
he said. His goal is to provide "food for thought" and challenge
assumptions.
He emphasized that the world is
entering a "multipolar financial system" where many currencies – not just
the dollar – play
strategic roles. That, in turn, will have unpredictable implications for
investments, currencies, and gold prices.
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Axel Merk left listeners with a
sobering message: long-term fiscal pressures, lack of political will, rising
tariffs, and financial fragmentation will continue to fuel uncertainty. Precious
metals remain one of the few reliable hedges against these structural problems.
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