Silver, We Have a Problem (and investors are missing it) | Jeff Christian

Mark (0:00)

Brought to you by the Ore Group, connecting people, objects and capital to fund the next generation of mines. My name is Mark and you're watching Resource Talks Weekly News Roundup for the week ending 4th of October, 2026

This week, US core inflation came in at 3%, easing pressure for another rate rise. Chile's Centinela copper mine faces a strike threat after producing more than 240,000 tons of the red metal last year. And China's factory survey is back above 50, signalling a return to growth. And joining us to make sense of it all is Jeffrey Christian, founder and managing partner of CPM Group, an independent commodities research and advisory firm.

Jeff has worked in commodity since the 1970s with a particular focus on precious metals. And at the end of the show, I'll ask Jeff what change he'd make to our $1 million model portfolio. So, Jeff, thanks for coming on the show again.

Jeffrey Christian (1:00)

Mark, thanks for having me back.

Mark (1:04)

So I want to start off with this story about the Fed's preferred inflation measure, the personal consumption expenditures coming in at 3.4% over the year to August. And we also got poor inflation figures, which we call strip out food and energy coming in at 3%.

And markets have since scaled back their expectations of an October like after this release. And Jeff, you've said in previous interviews that you thought the Fed would raise rates again. So I want to ask you how this new data impacts on your view. Do you think the Fed might reassess based on this data?

Jeffrey Christian (1:51)

You know, it's interesting because I looked at the same PCE report that everybody else looked at yesterday. And, you know, core inflation is basically unchanged month to month, and it's still around 3%.

And the headline inflation is still around 3.4%, you know, largely unchanged, maybe slightly higher than it was in July. So I don't necessarily see that this changes the picture. On the flip side, I mean, you know, the Fed has two mandates. One is fighting inflation, and the other one is trying to work for toward full employment. But then it has this other task, which is as the banker to the US Treasury, it has to sort of act in a way to make sure that its primary client, the US Treasury, doesn't go bankrupt, doesn't run into financial problems. And over the last 40 years, really, the fiscal irresponsibility of the US government has forced the Fed at times to downplay its dual mandate in order to pay attention to the need to finance the ongoing deficits and growing debt. And Fed chairman for 40 some odd years, going back to Paul Volcker, have said repeatedly to the Congress and to the administration, you have to get your fiscal house in order. The Fed's policy actions really affect short-term rates, which has to do with bank liquidity and financial market liquidity. Long-term rates, which are much more important to the real economy, mortgages, business lending, consumer credit, is really determined by the actions of the Fed, or by the actions of the Treasury, and the need to finance the government.

And the Fed, like the central banks everywhere, has been sort of forced to pay attention more to that, to keep economies out of deep recessions, if not depressions, and to allow governments to function even though they're running these massive unsustainable deficits. And as you said at the beginning, I've been in this business since the 1970s. And in 1970s, the US government had a debt of less than a trillion dollars, and its deficits were like 40, 50, 55 billion dollars a year. And people were saying, this is unsustainable, it's going to break. And now we have two, three trillion dollar deficits and 40 trillion dollars in debt. And people were saying, this has got to break. And at some point, maybe they're going to be right, but it's sort of like the boy who cried wolf, you're not going to see that. And you hear all these people talking about this, but they've been talking about it for 50 years. So it's kind of hard to say. So we're looking at the long rates. We're looking at the inflation figures. We're looking at signs of weakening economic activity. We're looking at a massive increase. If you go back to the PCE and you look not necessarily at the PCE index, but if you look at the disposable personal income figures and the expenditures, outlays by consumers, that was enormous. I mean, we went from, we had 4% growth in debt consumption, in the debt taken on by consumers in August alone.

And so you've got signs of economic weakness. So I think the Fed's going to be looking at persistent inflation, despite what people say, continuing deficit issues, moving into the midterm elections, the congressional elections, and weakening the economy. So if you look and you go back to earlier, well, last month now in September, when the Fed increased its Fed funds rates 25 basis points, all of a sudden people went from saying, oh, they're not going to increase their interest rates two times, they're going to increase their rates four times. Now they're coming back and say, well, maybe that was just a one-time shot. And I tend to have a more stable view of the economy. So we were saying, well, they might increase interest rates another time, but we don't see four increases yet this year. We just think that that's excessive. And now when people have gone the other side of us and said, oh no, maybe that was, they won't increase rates at all beyond the first 25 bips, we're saying, no, they're probably going to do it because inflation is still problematic. While the economy is showing cracks, it still is relatively strong. We had what, 2.2% real GDP in the second quarter.