Inside today’s Daily Journal…

In the mid-1990s, I met the last of the great pre-war, Austrian economists, Kurt Richebächer.

At the time I was a young equity analyst working for Bill Bonner. He’d recently bought The Fleet Street Letter and named me its editor. We were hosting a conference of the world’s top Austrian economists in Washington, D.C., to announce the launch of The Fleet Street Letter in the United States. Kurt was our keynote speaker. I picked him up from the airport and we spent the day together. He was an incandescent genius. And I was a sponge.

That began a decade-long friendship that lasted until his death in 2007.

In addition to being an academic economist, Richebächer was also chief economist of Germany’s Dresdner Bank. Like all Austrian school economists, he understood that credit, not money supply, is the true measure of inflation. Currencies are inflated when outstanding debt grows well beyond increases to economic activity (GDP) and productivity. The resulting increase to prices – what most people think of as inflation – only happens later (creating the Cantillon Effect) and dynamically, depending on a myriad of factors.

Gold, in Richebächer’s framework, is the real monetary base. It is the one thing that cannot be manufactured by a central bank or conjured into existence by a lending officer. Every other currency in the system is someone’s liability. Gold is no one’s liability. Gold is a physical proof of work that can only be created with labor, capital, and energy inputs. Thus, it is the natural reserve of the economic system. (Richebächer died before Bitcoin was invented. Bitcoins are also a proof of work. They require labor, capital, and energy inputs to be created.)

Money supply – M2, M3 – only captures a fraction of total dollar-system leverage. It counts cash, checking accounts, savings accounts, and some short-term instruments. But it misses the vast ocean of credit that sits outside the banking system’s deposit base: the $39 trillion in federal government debt, the trillions in corporate bonds held by pension funds and insurance companies, the $14 trillion in offshore dollar-denominated loans and bonds extended to borrowers in Brazil, Europe, and Asia. None of that shows up in M2. But all of these “invisible” dollars represent claims on future production, promises that will need to be honored, rolled over, or inflated away.

Richebächer’s Austrian school insight was that gold prices respond to the total stock of dollar-denominated promises, not just the narrow money supply. When you measure credit instead of money, you capture the full weight of the dollar system — every mortgage, every Treasury bond, every eurodollar loan. That is what gold is really pricing: the sheer mass of dollar obligations relative to the one asset that cannot be diluted.

This is why models built on M2 struggle to explain gold’s behavior from 2020 to 2026. M2 actually shrank in 2022 and 2023 as the Fed tightened. If money supply were the right variable, gold should have fallen. It didn’t. It kept climbing — because total credit never stopped growing. The government kept borrowing. Companies kept issuing bonds. Offshore dollar lending kept expanding. The credit machine never turned off. And gold, priced against that credit, kept rising.

Understanding the gold price – and being able to predict it accurately – is one of the oldest and most valuable secrets in the world.

For centuries, the ability to build a credit-based model was impossible because the data required to calculate global credit growth was a closely guarded secret. By aggregating this data, and keeping it secret, the world’s most powerful bankers (the Medicis, the Rothschilds, the Warburgs, the Morgans, etc.) could accurately predict future asset prices, such as real estate and commodities, currency exchange rates, and, most importantly, gold.

We’ve built our own global credit database that measures how much total dollar-based credit exists in the world and how much it’s growing (or shrinking) each month. Our database has two core parts: domestic credit and offshore credit.

Domestic credit is all the borrowing done by the U.S. government, U.S. households, and U.S. companies. It does not count borrowing between banks or financial firms – just the regular economy. This data comes from an organization called the Bank for International Settlements (“BIS”). You can also find this data on the Federal Reserve’s website under the code QUSCAMUSDA. As of Q3 2025, domestic credit stood at about $76 trillion. But there’s a key caveat to this data source: the BIS only releases this data after a six-month delay. (Mmmm….)

Offshore credit is dollar-denominated borrowing by people and companies outside the United States, like a Brazilian company taking a loan in dollars. Or a European government selling a bond priced in dollars. The BIS tracks these loans, too. As of Q3 2025, offshore dollar credit stood at about $14.2 trillion.

Thus, there’s roughly $90 trillion in total dollar credit. To make this easier to track over time, we turned that number into an index. We set it equal to 100 as of March 2009 – the very bottom of the Global Financial Crisis, when things looked bleakest. Today, that index stands at 216. In plain English: total dollar credit has more than doubled since the crisis. And… the rate of credit growth has exploded since COVID.

Before COVID – from 2010 to 2019 – U.S. credit grew by about $2 trillion per year. Then COVID hit. From 2020 through 2025, U.S. credit has been growing at about $3.6 trillion per year. That is nearly double the pre-pandemic pace. The system never went back to normal. It shifted into a higher gear and stayed there.

Why hasn’t it slowed down? There are four reasons.

I’ve been warning about a pullback in gold’s price because it had run far beyond our model’s predicted range and because, with the trouble in private credit, I was expecting credit to contract, not to continue growing. Those risks are still out there, but… so far… there’s absolutely no sign that, overall, credit growth is slowing.

How do we know? It’s not from the BIS data that powers our model. The most recent BIS numbers cover Q3 2025. So how do we know what is happening right now?

To see what’s happening now in credit issuance, we use a different data source, the U.S. Federal Reserve. Each week, the Fed publishes a report on outstanding bank loans and you can find it on the Federal Reserve’s website under the code TOTBKCR. It covers every loan and every security held by commercial banks across the country.

This report covers almost $20 trillion in lending, which is far from a complete view of the credit markets. But changes in credit happen in this category first. When credit starts picking up or slowing down, the banking system usually shows it before the other sources of credit. And right now, that front edge is very clear: bank credit growing at 6.5% year-over-year, the fastest pace since early 2023. This is not a credit system that is slowing down.

What does this tell us? When the BIS eventually publishes its Q4 2025 and Q1 2026 data later this year, it will almost certainly show the same thing: U.S. dollar-based credit growth is re-accelerating. Not slowing down. Not “normalizing.” Speeding up.

When dollars are created through lending at a much faster pace than increases to production (GDP) and growth in productivity, the result is inflation. Each existing dollar becomes a little less special. Their purchasing power erodes over time.

Gold is a natural reserve of economic value. You cannot print gold: you have to mine it with labor, capital, and energy. When there’s credit inflation, the price of gold will move higher. But there’s a catch: it does not happen right away. It takes time to impact gold prices. Historically. there’s a lag of roughly three years between when credit accelerates and when gold prices fully reflect it.

Why three years? The Cantillon Effect. When new money is first created, it typically goes into business investments. Businesses hire workers, buy equipment, pay contractors. Then as all that spending ripples through the economy, prices start to rise. Then people start to notice that inflation is not going away. Then central banks and large investors start buying gold to protect themselves.

I’ve modified Richebӓcher’s model in one important way.

Most people don’t know that former Fed Chair Alan Greenspan was an Austrian. He understood gold’s role in the world’s economy. Although he almost never spoke about gold publicly, in private, he explained its role in the world economy with great clarity.

In 1999, Greenspan gave a secret presentation to a select group of bankers in Washington, D.C., about the stability of the global dollar-based financial system. He’d developed an objective measurement – which I’ll call the Greenspan Test – that’s based in part on gold, that captures the overall risk inherent in the dollar-based financial system.

This is not about day-to-day market stress or volatility. It is about whether the architecture of the global dollar system as a whole will remain stable. The Greenspan Test measures the relationship between what America owes foreign creditors in the short term and what it holds in reserve. When the Greenspan Test reaches crisis levels, gold’s price can increase well beyond normal model ranges because the entire system is at risk of collapse.

Currently, the credit inputs for gold’s price are modest (8.9% cumulative three-year growth). The standard model would say gold should be in the $2,800 to $3,400 range. But gold is at $4,600. And our adjusted model says the bottom of gold’s range is now around $4,000.

Let’s walk through the model’s standard components.

The single most important variable is three-year cumulative credit growth. This measures how much total dollar credit expanded over the prior three years. The bigger that number, the higher the model predicts gold will go. It is the engine of the whole thing.

The second input is real interest rates – that is, interest rates after you subtract inflation. When real rates are low or negative, gold becomes more attractive. There is no “opportunity cost” to holding it because bonds and savings accounts are not paying much either. When real rates are high, gold gets dragged down because investors can earn real returns elsewhere.

Third is the dollar index – a measure of how strong or weak the dollar is against other currencies. A weaker dollar tends to push gold higher, both because it makes gold cheaper for foreign buyers and because dollar weakness signals trouble for the currency itself.

Now here is where it gets very interesting. The three-year credit growth inputs feeding into this model are accelerating rapidly:

As of Q3 2023, the three-year cumulative credit growth was 8.9%. That number feeds the model’s gold price estimate for 2026. As of Q3 2024, that same figure had grown to 10.7%, which feeds the 2027 estimate. As of Q3 2025, it jumped to 14.4%, which feeds the 2028 estimate. And by our estimate for Q3 2026, the three-year cumulative credit growth could reach 17% to 19%, feeding 2029’s range.

Each year, the credit impulse feeding future gold prices gets larger.

The machine is not winding down. It is winding up. And something is driving gold’s price even higher than the standard Austrian model would predict. That’s the system risk factor in play.

So where is gold heading from here?

For 2026: $4,000 to $5,200.
For 2027: $4,500 to $6,000.
For 2028: $5,000 to $7,000.
For 2029: $5,500 to $8,000.

The bull case – the scenario where gold reaches $8,000 or more by 2029 – requires two things.

First, the credit acceleration we are seeing in the data needs to persist. Given government borrowing, inflation, and offshore dollar expansion, that seems likely.

Second, the structural vulnerability we measure with the Greenspan Test needs to stay elevated. Right now, it is flashing the strongest warning signal in the history of our dataset.

We cannot share the specifics of this indicator publicly, but we can say this: it measures something about the dollar system’s foundation that most market participants are not watching. And the reading today is not just bad. It is off the charts. If these conditions worsen, or if the market wakes up to these risks, the model’s upper ranges will be breached by a wide margin.

The bear case – the scenario where gold reaches “only” $5,500 by 2029 – assumes credit growth moderates, the dollar stabilizes, and the risks implied by the Greenspan Test fade.

But here is the key thing: even in this pessimistic scenario, gold is still going higher than where it is today. That is because the credit impulse feeding 2028 and 2029 prices is already baked in. The loans have been made. The bonds have been issued. The dollars exist. They are already in the system. Gold will eventually price them.

My advice: use gold as your primary savings device. Keep at least 20% of your liquid net worth in gold through at least 2029.

Tell me what you think of today’s Journal: [email protected]

Good investing,

Porter Stansberry
Stevenson, Maryland

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1. It’s beginning to look a lot like the 1970s. The closure of the Strait of Hormuz is driving up commodity prices and driving down all non-commodity sectors. The biggest dispersion is between energy stocks, up 41% year-to-date (“YTD”), and financials, down 12%. This is the same market dynamic last seen during the 1970s energy shortages, also caused by a disruption in oil flows from the Middle East. That resulted in a lost decade for the overall stock market, while energy and other commodity-related sectors outperformed.

2. More good news for coal. Italy is extending its coal phase-out plan by 11 years to 2038, as Europe’s green fantasies collide with reality. Geopolitical chaos – first Russia, now Iran – keeps exposing the folly of dismantling baseload power before legitimate replacements are ready. This is bullish for coal producers like Complete Investor recommendation Core Natural Resources (CNR), which is up 35% since the Iran conflict began.

3. U.S. banks reported $306 billion in unrealized securities losses as of Q4 2025. Bank of America (BAC) alone sits on $80.3 billion in underwater held-to-maturity (“HTM”) bonds – the largest absolute unrealized loss of any U.S. bank. CEO Brian Moynihan’s 2020-2021 decision to plow $500 billion into mortgage bonds at the top of the rate cycle remains one of the worst bets in banking history. With 30-year Treasury yields now on the verge of hitting 5%, Bank of America’s unrealized losses are only getting worse.

Mortgage finance giants Fannie Mae (FNMA) and Freddie Mac (FMCC) surged more than 35% today after hedge fund manager Bill Ackman called them “stupidly cheap” in a post on X (formerly Twitter) over the weekend.

Chet K. writes:

Porter Comment: Please see Porter’s Permanent Portfolio for our recommended cash allocations. But, to answer briefly, we recommend a mix of short-term U.S. Treasuries (T-bills) and short-term corporate bond ETFs.

On Thursday, Tech Frontiers editor Erez Kalir wrote about the decline of the petrodollar system, which began in the 1970s.

Levi N. writes:

Porter Comment: For more than 50 years, we’ve had the ability to buy anything we wanted, from anyone in the world, in exchange for dollars that we printed! That “exorbitant privilege” was ours primarily because of the sacrifice our troops made in winning World War II. All we had to do was honor their sacrifice by running our economy and our country with integrity. What did we do instead? We ignored President Dwight Eisenhower who warned us. We ignored the CIA’s assassination of JFK. We elected Richard Nixon as president! We gave preferential treatment to a group of Americans who, as a group, won’t learn to read, won’t stop using drugs, won’t follow basic social norms, won’t raise their own children, and won’t stop killing people. They destroyed our cities – shocker. We printed trillions, defrauding our Treasury bond holders. We have defrauded voters with Social Security. We’ve opened our borders. And now America – a country founded on the idea of no taxation without representation – gives half of the votes in our country to people who don’t pay any taxes at all. Is that going to change? No. We elected an Islamic communist to be the mayor of our most important city! And now the Democrats openly prevent the enforcement of our laws to protect the voting rights of people who not only don’t pay taxes, they aren’t even citizens! We’ve become an entire society of leeches and losers. So, yeah… no… I don’t think the end of the petrodollar is going to help.

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