The Recession Comes First. Then the Printer. Then Gold.
Michael Pento sat with Jesse Day on Commodity Culture and did not buy Judy Shelton’s story that rising Treasury yields are a victory lap for growth. The United States has debt past $40 trillion. Annual deficits are running near $2 trillion. Pento does not even bother with debt to GDP as the scoreboard.
“You cannot tax 100% of GDP. Debt as a percentage of revenue is 720%. It’s an insolvent nation.”
That is the frame. Growth, he said, is bifurcated. The top 20 percent of consumers are still standing. The bottom 80 percent have been wiped out. Outside AI capital spending, the economy is growing very slowly, and that spending is debt fueled. The yield rise has a longer list of causes than a hot GDP print.
Inflation has now spent approaching six years above what he called the Fed’s “asinine 2% target.” His target would be zero. Foreign creditors are leaving the dollar and the Treasury complex after sanctions and confiscations. The Bank of Japan is selling Treasuries to defend the yen. The yen carry trade, borrow nearly free in yen and park it in Treasuries, is losing its fuel as Japanese yields climb into the 3s and the spread narrows.
The US savings rate is about 3 percent, “the basement of history,” so there is no domestic piggy bank to absorb the paper. The old anchors, zero rates in Japan and Germany, are gone. German bunds are well into the 3s. And the Fed, after printing hundreds of billions into the spring, has slowed the pace of balance sheet expansion under Kevin Warsh, which means more of the new debt has to clear in the free market.
“Those are secular tailwinds pushing yields higher. Which are the pin that breaks the bubbles that are extant in real estate, equities, and credit.”
He brushed off the comfort that yields were 15 percent in 1980. Markets care about the rate of change, not the souvenir level from Volcker’s decade.
A move from zero to 5 percent in a short window is not safe because the 1980s were worse on a chart. The debt stock is not the same either. He would not name the day or the yield that snaps equities. Pressure on credit, on the AI capex boom, and on junk bonds builds until a tipping point. He has already added hedges. He is not net bearish yet. He is getting there.
Long bonds as a recession shelter did not get his blessing. The defensive asset in his map is not duration. It is what comes after the recession forces the official response.
“In the next recession, we’re starting at an insolvent place. We have a very over leveraged economy. What’s the worst thing that can happen in an over leveraged economy? Interest rates rise. Gold really thrives in recessions the most. People understand that in a recession, what’s coming next? Massive money printing.”
He has sold gold stocks into the strength. The chapter title on the episode is the tell. He is not abandoning the metal. He is separating the recession trade from the mining trade. Stocks and credit break when yields pin the bubble. The recession is the event. The print is the response. Gold, in his telling, is the asset that gets paid when the market finally prices that sequence instead of the growth story still being sold on television.
