Luke Gromen: "All Roads Lead To Gold"

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**Luke Gromen** (0:30)
I think all roads lead to gold when you look at it, whether it's deflation, whether it's inflation. We had deflation with where we are. You quickly have credit risk to Western sovereign bonds, Western bond market, and that's not going to be allowed to happen. If you have inflation, obviously. And so what I feel very strongly about is we are in a new secular regime where over time, stocks should keep going up in dollar terms and keep going down in gold terms.

**Adam Taggart** (1:04)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Today's guest has long warned that the US and most other countries are hurtling into a global sovereign debt crisis. One that's increasingly forcing them to quote, get busy inflating or get busy dying. To get an update on where things stand in this timeline, where all this is likely headed and what investors should be tracking most right now, we're fortunate to welcome Luke Gromen, founder of macro research firm, Forrest for the Trees, back to the program. Luke, thanks so much for joining us today.

**Luke Gromen** (1:37)
Thanks for having me here, Adam, it's great to be with you again.

**Adam Taggart** (1:38)
Hey, it's always a pleasure, my friend. Again, I hope you and your family are staying warm through this brutally cold weather that the mid part of the country is getting. You look good, so whatever heat system you have in your house looks like it's working.

**Luke Gromen** (1:54)
Thank you. Yeah, we're doing good. I'm a belt and suspenders and Velcro guy. We've got gas heat, we got geothermal heat, I got wood-burning stoves, I got solar panels, I got it all.
We're in good shape.

**Adam Taggart** (2:10)
Okay, good. As I was just telling you before we turn things on here, I'm in Reno and Nevada now and it's colder than California, and I might need to swing by your place then to stay a little bit warmer. But all right, let's get into the heart of the matter here, Luke. Folks have been very excited to hear that you're coming on the program, and I guess why don't we just start with where I kicked the intro there off, the global sovereign debt crisis. What's your current assessment of where we are in that right now?

**Luke Gromen** (2:40)
I think we're in an acceleration phase of that for multiple different reasons, and there's a number of different crosswinds.
For a long time, people said, well, the US is just going to be Japan, and Japan's just fine. Well, we can crumple that statement up and throw it in the trash heap of permanently high prices and transitory inflation, no inflation, subprime is contained, all of these nonsensical things. It took longer than expected, but Japan's starting to have an issue now. And something I've highlighted repeatedly to clients, we actually put it up on my ex feed last week, I said I thought it's the most important chart macro potentially right now, which is the 10-year treasury yield minus the 10-year JGB yield compared to the yen against the dollar. And it shows that essentially the yield differential between the 10-year treasury and the 10-year JGB, Japanese government bond, is shrinking meaningfully. And that historically has implied a much stronger yen, but instead the yen is weakening against that. And this has happened that divergence, which had held for at least five to six years before, only really started happening in the third quarter of 2025 So not that long ago. And my interpretation of that chart is the bond market, markets more broadly, are beginning to discount that the rate that puts Japan, and therefore much of the rest of the world, into a debt spiral, isn't that far north of here. Higher JGP yields driving a weaker yen is completely contradictory and counterintuitive to every what every economics textbook would tell you for developed countries, for developed countries. Now, if we went down and talked to friends in Brazil or Argentina or any number of other countries that have had a Southern deprecation, hey, no, no, no, Turkey. You go ask a you go ask a Turk that chart panel like, oh, we recognize that one. You go to the Latin Americans. Oh, we've seen this before. But the issue is, it's Japan. And so that's why I say it's an acceleration. And then within that, you have a number of different things that are complicating that. You've got the Chinese seemingly, you know, trying to shove the JGB market over the cliff, putting on dual use export goods tariffs or controls, excuse me, which all SQL will, you know, I saw one estimate that 40% of Japan's imported goods come from China. So you start having supply issues there. You start having upward inflation pressures. That's not going to make the bond market in Japan happier. You look at what's going on in resources, where we've seen all of a sudden in the last, I mean, really just in the last three months, four months, kind of a starting gun being fired in earnest to a global scramble for actual physical commodities, not paper claims on those commodities, actual physical supplies of those commodities. And obviously, we've seen, you know, silver and copper and a whole number of other metals, gold, et cetera, rally sharply in the last three, four months. And then further complicating all of this is what's going on in AI, which seems to be moving much faster than expected in a number of different ways and ultimately undercutting, you know, a key underpinning of Western and global sovereign bond markets, which are tax receipts. And I can't speak to Japan, but I can tell you in America, half of tax receipts come from employment. And so we're seeing this dynamic of a snake eating its own tail, where these hyperscalers are spending slash borrowing more and more money at a faster and faster rate to undermine the tax base of the United States government faster and faster at a time when, you know, 10-year treasury yields are kind of ticking back up again, despite lower oil prices and being pulled higher on some level by Japanese government bond yields. So we're in this sort of acceleration phase that, I think some of what we've seen with Bitcoin is the leading indicator of what it implies. It's telling you that liquidity, et cetera, is getting tighter. And I think it's probably going to stay relatively spicy, so to speak, for the first, you know, for the next three to six months in terms of what that means for markets.