MacroVoices #475 Daniel Lacalle: Is This The End of The Monetary System As We Know it?
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This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Ceresna.

Macro Voices episode 476 was produced on April 17th, 2025. I'm Eric Townsend. Tress's chief economist and fund manager, Daniel Lacalle, returns as this week's feature interview guest. We'll look at Trump's tariffs as the European investment community sees them. And we'll discuss whether this is the dawn of a new age in terms of monetary and economic policy cooperation between the United States and Europe. And we'll look at Trump's tariffs as the European investment community sees them.

And I'm Patrick Ceresna with the macro scoreboard week over week as of the close of Wednesday, April 16th, 2025. The S&P 500 index down 334 basis points trading at 5275. The market continues to consolidate after an extraordinarily volatile start to April. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment.

The U.S. dollar index down 352 basis points to 99.28. The dollar selling continued last week, driving a drop below the lows of the past few years. The June gold contract up 867 basis points to 33.46, an all-time high as gold upside has accelerated into a parabolic advance.

The May copper contract up 1169 basis points, trading at 468. The bounce is underway after a shocking two-week decline. Uranium up 101 basis points, trading to 6505. And that U.S. 10-year treasury yield down one basis points, trading at 432. The key news to watch next week is we have the flash manufacturing and services PMIs.

and then we go deeper into the heart of earnings season. This week's feature interview guest is Trust's chief economist and fund manager, Daniel LeCayet. Eric and Daniel discuss Europe, the EU-US relations, stagflation risks, debt, and the risk of EU de-dollarization. Eric's interview with Daniel LeCayet is coming up as Macro Voices continues right here at MacroVoices.com. ♪

And now with this week's special guest, here's your host, Eric Townsend. Joining me now is Tress's chief economist and fund manager, Daniel LaCaille. Daniel, it's great to get you back on the show. I was particularly keen to get you on the show this year because one of my rules is that when you have a changing geopolitical landscape where the balance of relations between real

really strong allies like Western Europe and the United States is starting to come under question now. I think it's really important for investors to reach out to their friends on the other side of that divide and get their perspective. So let's start with the European asset managers perspective. Somehow I'm guessing that the media in your country is not telling, is not lauding JD Vance for coming and enlightening Europeans on, on,

the benefits of free speech. I'm guessing that the European perspective on the Trump tariffs might be a little bit different than the White House's perspective. Tell us what the international audience, Americans and everyone else, should understand maybe about how European finance is changing its perspective on its relationship with the United States.

I think you guessed correctly, Eric. Thank you so much for inviting me. The media and the political narrative over here is very, very, I would say, one, biased and second, very one-sided. Now, you also have to remember, as you know very, very well, but for the people who are listening, that in Europe, we

We don't have any kind of political party that is in the mainstream parties. There is no one that is similar to the Republican Party. So the exaggerations when there is a Republican president are enormous.

So the position of most fund managers in Europe relative to the situation in the United States right now is a little bit more informed, I would say, than what the media is telling us. In general, there is a perception that there are some merits to the arguments of the United States relative to tariffs and relative to the trade barriers imposed by the partners of the United States.

But certainly there is at the same time a perception that the way in which those demands have been presented and the not particularly diplomatic, one would say, and the extent of the damage created in the financial world are creating also a

quite a significant, let's say, concern that the approach to negotiations can be significantly more damaging than initially expected. I think that the average fund manager is more concerned about the next tweet or the next change in terms

in headlines than looking at the big picture and focusing on what this really is about and what can be improved both for the European Union businesses and North American and US businesses.

So let's talk about what that means, both for a balance of trade and particularly for the dollar euro cross. Dollars already weakened considerably, which I think is part of President Trump and Secretary Besant's objective. So it's no surprise when the head of a country wants to weaken their own currency, it's usually easy to do it.

What kind of damage is that causing in Europe and how are asset managers responding to it? Well, I think that to start with, the European average asset manager was very, very long-term.

European banks and European industrials as some sort of recovery trade, particularly after the announcement of the European Union about some improvements or at least some changes in the fiscal policy so that it could be a little bit more lax.

So the first impact, obviously, is very, very severe on the most cyclical sectors. And in general, I think that the general perception, I would say a consensus perception, was that the euro would continue to weaken even below parity at some point throughout 2025 due to a very dovish position of the ECB and all these fiscal challenges that we mentioned.

So there's probably been some damage in the construction of portfolios that were probably more skewed toward having a long position on the U.S. dollar rather than the euro.

And it's quite puzzling because for a lot of European managers, being long the euro relative to the US dollar is super counterintuitive. It doesn't make sense knowing how the economy is doing in Europe and how the challenges of the ECB and the biggest nations in terms of their fiscal and debt challenges are not only not getting any better, but getting quite worse, no?

Now, for decades, really, one of the big trades in Europe has been for asset managers who have the mandate flexibility to do it. You know, they want to be long U.S. stocks. They want to be in the S&P. And that's...

where a lot of alpha has come to managers in Europe whose mandate is broad enough to allow it, is they're doing a very simple trade. Just invest in the U.S. A combination of dollar strength and the strength of the U.S. economy gives, in Euro terms, really terrific returns.

I'm guessing that that's a little bit less popular right now than it used to be. Is that going to be a permanent change? What are the impacts of that going to be? Have we gotten to a point where the TINA acronym, there is no alternative to the U.S. stock market, is no longer applicable? Where's all this headed? I think that it's not permanent.

Most of the fund managers I speak with see this as a volatility turmoil. I call it the tariff tantrum. That doesn't necessarily change the long-term dynamic

That supports U.S. equities coming from buybacks, better margins, stronger companies, and more dynamic businesses with a better percentage of technology and technology.

value-added businesses relative to Europe that is mostly already developed, mostly banks, industrials, very, I would say, stable but not necessarily growth companies. So I don't think that that has changed significantly. I think that there's been an important shift

coming from all these headlines that has basically made a lot of fund managers have to revert the trade very, very quickly. And that obviously has strengthened the euro rapidly because they were very long. The US dollar has weakened some US stocks or most US stocks, particularly the large components of the indices, because they were very exposed to those.

And basically, the rebalancing has immediately meant a monetary and stock market impact that, interestingly enough, did not translate equally to the fixed income market because fixed income investors were not as heavily exposed to the United States assets. But I think that that

once the tariff tantrum is at least clarified and

the risks of inflation and stagflation, and people don't really know exactly what to expect. Last year, a lot of people were talking about a very, very rapid and consistent pace of rate cuts. Even quantitative easing was sort of talked about quite a bit in the financial circles. And where we're right now is in a different place. So all of that needs to clarify. It may take

a few weeks. But then once that happens, I don't think that there's going to be a change in a structural position that would indicate that European fund managers are going to be more comfortable in the long term being long European banks, European industrials or European telecommunication companies over technology, energy or consumer staples companies in the United States.

Is this a setup for stagflation? I don't think you can have a situation of stagflation the way that people are looking at it right now. The idea that tariffs are going to be fully absorbed in prices and at the same time, consumers are going to

buy the same number of goods and services at a much higher price and reduce consumption, reduce investment, and therefore bring the economy to stagnation and inflation is very, very difficult. Once we understand the way that the monetary system has been set up in the past, particularly in the past 15 years,

It is very difficult to get to stagflation. It is very easy to get into recession with deflation risks or a level of growth that has uncomfortable inflation because money supply growth and money velocity are moving in tandem because they're driven by government spending. History of stagflation used to come from

a period in which money velocity would rise and the level of prices would increase with higher money supply, but it wasn't driven by government spending. If we look at the past, particularly the past 15 years, the entire economy

let's say, leading factor in terms of inflationary pressures has come from government spending leading to higher money supply growth, leading to higher money velocity growth. And it cannot happen in the opposite way and generate, let's say, divergent factors in my view, because you would probably get

it's probably much easier that you get a risk of significant reduction in prices. I think that commodities are already showing that alarm bell all over the place. Oil, aluminum. Aluminum is down despite the fact that tariffs have been implemented on aluminum. So I think that all those factors tell us that we might have

We might have the risk of a slowdown in prices, which I don't think is a risk, to be fairly honest, particularly after the enormous inflationary burst. So a slowdown in prices and a slowdown in the economy rather than the type of stagflation that we remember from the 70s.

Let's talk about the sustainability of U.S. debt. Now, this is already, as you know, been a huge concern even before this tension between the U.S. and Europe. Now it seems like maybe Europe, which has always been a big holder of U.S. debt, may have a changing opinion, or at least that's what we're told. How does both the Europe but also the broader picture of U.S. debt look from your perspective?

Obviously, the enormous challenges of the U.S. financial position, public figures were completely unsustainable already in 2022, 2023.

We all have to go back to 2023 when the Biden administration published a document showcasing the expectations of the fiscal situation of the United States for the following 10 years in which.

Without assuming any type of recession and without assuming any type of employment contraction, they were already outlining an increase of debt almost every year of at least $1.5 to $2 trillion. That was insane.

And that was completely, that was a path of destruction for the US dollar. The United States was already on the path of destroying the US dollar as the world reserve currency. And therefore, what needs to happen is that the government takes care of the fiscal deficit, but also of the trade deficit. The United States doesn't need to have

a fiscal surplus or a trade surplus. It can have a small deficit. What it cannot have is an enormous deficit that ends up creating a larger problem. And this is the key thing. A lot of people in financial markets are complaining right now about the risks and the volatility created by this turmoil.

However, think about what would have happened if nothing was implemented, if we waited and continued with this path of destruction for three, four more years. The risk would not be that of a recession. It would be the risk of a depression. So I think that what needs to happen is to understand that

Developed economies, both the euro area and the United States, but also Japan and the UK, they've all exceeded the three limits that are already warning signs that we are in serious monetary and debt troubles.

The first one is obviously the economic limit. Governments spend a lot more. They enter into higher levels of debt. However, productivity growth, economic growth in the private sector, small businesses, families all hurt at the same time. They're actually weakening. The second is the fiscal limit.

is that despite tax increases, despite monetization of government spending, despite all of the different elements of GDP growth that bloat GDP despite poor private sector developments,

The level of cost of interest, interest expense of governments continues to rise and becomes not only a very large, but one of the largest items in the budget of developed economies. And the third limit is the inflationary limit.

is that we were told over and over again by Keynesian analysts that we would have no inflation from this monster monetary expansion and government expansion, etc. And for the past three years,

we have seen not just persistent inflation, but three consecutive years of central banks that are loss making. And that is destroying the confidence in the US dollar, US debt, European debt as well, because central banks of the rest of the world are not taking sovereign debt as the asset that keeps their balance sheet, their central bank balance sheet strong.

and they're actually going for gold. So all those elements were already in place prior to the tariff tantrum. Right now, it is about whether that is going to be at least partially sold so that the inevitable outcome that was already in place if we had followed the same policies, which would be the destruction of the US dollar as the world reserve currency, is actually going to be sold

or at least, at least mitigate it. I want to go back to what you just alluded to where you said they're going for gold. It seems to me, going back to the TINA acronym, that a lot of people have been very concerned about U.S. debt sustainability for a very long time. But the issue has been that if you look at the prospects of a central banker, they look at the available alternatives and they say,

Darn, as much as we're frustrated with the U.S. fiscal situation, there simply is no alternative to the depth and liquidity of the U.S. treasury market as a deep and liquid place to park central bank-sized asset flows. Central banks care most about what happens in an emergency where they might have to liquidate not hundreds of thousands, but hundreds and hundreds of millions to tens of billions in a day.

And the U.S. Treasury market has always been the only market where that's possible. Are we reaching a tipping point where people say, well, yeah, that's true, but you know what? We've just had enough of this. We can't continue. We've got to find an alternative. I don't think that we've reached yet the tipping point, but ignoring the alarm bells is exceedingly dangerous. And I think that a lot of governments and a lot of central banks are

continued to believe that because nothing allegedly, according to them, has happened, then nothing will happen. That is very, very dangerous, no? So obviously it is very difficult to...

change the monetary system in its entirety. But you don't need to change the monetary system in its entirety. It's a typical fallacy of central planners that say that you basically have to choose between one thing and nothing. No.

The world has been splitting in two for a number of years already. And you and I have been seeing how the Central Bank of China, the Central Bank of India, the Central Bank of Poland, Turkey, so many central banks all over the world are moving away from sovereign debt and moving into gold back to a completely different system.

So it's not just, it's not about the United States providing ample and enough liquidity for the world to continue to function the way that we look at it. It's that it needs to do it in the proper way. So, you know, I always say the following, huh?

You can drown from too much water. Water is essential for our bodies and for life, but you can drown and we cannot drown. And if the path in which the US economy was moving in the past, particularly in the past four years after COVID,

all the alarm bells started to ring. That doesn't mean that everything happened or was created in 2021. But we must remember that a lot of people were already saying that it didn't make any sense that the United States was constantly increasing the debt ceiling, that the United States was constantly increasing its deficit. And that in what was

The logical outcome of COVID, which was to reduce the extraordinary government spending and bring down deficits quickly, what ended up happening was the opposite. And that...

in itself, started to show to people that things were not okay in the Western world. It was also a problem in France. It was also a problem in other economies. But the United States cannot afford to believe in the modern monetary theory, the MMT fallacy, and think that it can print its way out of every problem. It can, to a certain extent,

As long as the level of deficit spending and fiscal and trade deficit is in line with an economic growth that is higher, a level of productive economy that is improving faster, but it cannot do it.

just by bloating government spending and following the European disaster. Because if you follow Europe, you end up with the type of growth, the type of unemployment, and the type of destruction of purchasing power of salaries of Europeans.

Daniel, let's go back to this question of the U.S. dollar and its sustainability as a reserve currency. You know, years ago, we used to ridicule the doomsday bloggers who said one day, you know, Sergey Glazyev is going to architect this de-dollarization campaign.

we're all going to wake up and all of a sudden one day the U.S. Treasury yields are going to be out of sight to the upside. Treasury bonds are crashing in price because everybody has moved on and stopped using the dollar as the world's central bank reserve asset. Now, I don't think that's realistic, but if you stop and think about it, the reason that

that there has been no alternative to U.S. Treasury bonds as a central bank reserve asset really is all about network effect. Everybody says, well, the issue is that there is no other market that's as deep and liquid as the U.S. Treasury market. Well, what makes the U.S. Treasury market deep and liquid is that all the central banks have massive U.S. Treasury holdings.

If they didn't anymore, then all of a sudden it wouldn't be so deep and liquid. And I guess we don't have an alternative yet, but there's increasing motivation for somebody to create one. Maybe somebody comes up with some digital currency alternative that really is super deep and liquid. Yeah.

that could replace the U.S. Treasury market. Do we have to worry about a scenario where maybe those doomsday bloggers scenario that we made fun of 10 or 15 years ago actually starts to come true?

I think that the reason why we made fun of those comments was because many of those bloggers were talking about a doomsday scenario of zero or one, i.e. either the entire world continues to use the U.S. dollar as the world reserve currency or not at all. And obviously,

The other side, the Keynesian money printing machine, said, look, this doesn't make any sense, obviously. So the consensus is,

continue to say, well, no, there's no problem. The United States can continue to increase its imbalances and nothing will happen because the other argument makes no sense. However, it's not about zero or one. It's about the destruction of the confidence in the U.S. dollar economy.

as the world reserve currency, exactly at the same time as the United States continues to increase its imbalances, i.e. everything is down to supply and demand.

whether it's bonds or whether it's any other thing. So the idea that supply is not a problem and will never be a problem because there will always be demand doesn't take into account the fact that that demand may be diminishing, not disappearing, but diminishing just at the same time as supply rises. So

The risk for the United States is that all the benefits of having the world reserve currency become enormous, enormous liabilities. Number one is that increasing supply of debt to the world is more challenging to park in other central banks and in other assets and in other portfolios of other investors.

Number two is that even if you do, it's going to be at a much higher cost. Therefore, the burden on economic growth, the burden on taxpayers, the burden on U.S. consumers is higher. So you get the negatives of having...

The enormous level of debt, the negatives of higher taxes, negatives of persistent inflation, and the challenge of a world that may not get rid entirely

of the US dollar, but may reduce it by 20%. And reducing it by 20% is a ginormous impact on the US dollar. That is the problem, is that because the views are so drastic in the camp of nothing happens if the government prints and borrows, with the camp that says that everything happens if the government prints and borrows,

They don't seem to understand that there is something in the middle that basically brings the United States to the place where the UK is right now.

which is that you have a world reserve currency, but it is not the world reserve currency and that your supply of new currency to the world is not demanded no matter what you issue.

Let's move on to the economic condition of Europe now, because the perspective that we hear on the other side of the pond, and there's no shortage of propaganda inserted into this, is, well, you know, what's happened is Europe has had it easy. Europe has been basically freeloading on the United States. The reason that Europeans are able to enjoy six weeks of paid vacation and shorter work weeks and early retirement ages and so forth is

is all because the U.S. has subsidized the defense costs of Europe. President Trump has been adamant in saying that's going to stop. Europe is going to have to pay its own way, either by paying the U.S. for that defense service or by getting their own, you know, solve your own problem, defend your own country. We're not going to do it for you anymore.

The way that that's presented, at least on the other side of the pond, is that puts Europe into a dire situation where it will be impossible for Europe to continue to provide its social safety network and so forth, that its populace is very much undervalued.

become entitled to and feels, you know, that there's a moral obligation that they have that forever. People are saying that's going to be unaffordable. It's going to bankrupt Europe. It's doomsday for Europe. Clearly, there's at least a little bit of propaganda in that message. How do you see it and how do other European asset managers see it on your side of the pond?

I think that everybody understands that the European Union cannot just continue to rely on the United States 100% for its defense. That doesn't mean that we're going to stop being partners and that we're going to stop supporting each other. It means paying a little bit more of what the Western world requires in terms of defense. And I think that that is perfectly logical.

Now, the problem of the European Union is that because for so many years it grew accustomed to the idea that it did not have to spend on defense.

and that it could spend on any and everything else, is that right now there is no government that wants to administer and to prioritize expenditure. And that is a huge problem because

For so many years, and it doesn't matter what type of party or what type of government, what color the government was in, for so many years, the easy way out when the European nation had fiscal challenges or had to reduce the deficit or found that the level of debt was rising too fast, the easy way out was always to cut defense spending.

And the problem for European Union nations, particularly France, I would say, but it's very similar also for Germany, for Spain, for Italy, etc. The problem is that the level of entitlement spending, the level of government spending is so enormous that...

On the one hand, most governments cannot prioritize and say, well, we're going to cut in these unnecessary items and we're going to accommodate defense expenditure. And on the other hand, many of the political parties have lived a world in which they simply did not have to talk about defense. So there's no way that they are going to defend having more expenditure in that area.

So it's very, very challenging. Is it going to bankrupt the European Union? No, but it is going to add just another nail to a rapidly shutting down coffin of a system that

of alleged welfare state that had become not a welfare state, but a welfare of the state that became an enormous administrative and bureaucratic machine that does not want to cut spending on anything. It's ridiculous when it's ridiculous when you're living in Europe and

and you read that the European Union has committed to an 800 billion euro defense expenditure program,

And almost no media outlet or no newspaper is saying, where's the money going to come from? So that is another element that is important to take into account, is that it's going to make it very, very difficult for fund managers, for investors in Europe to look at that and to think that the euro is going to continue to strengthen or that the European Union fiscal position is going to get any better.

And right now it seems insurmountable. Unfortunately, what a lot of countries are doing is

obscene, which is to try to disguise as defense spending a lot of completely nonsensical expenditures that have absolutely nothing to do with defense. So we're doing a very significant disservice to our partners in NATO. But what I think is that at some point,

the European Union needs to wake up and think that defense is an integral part of having a strong European Union. That it's good to have a strong partner like the United States. It will continue to be a strong partner, but it cannot be basically just the concept of freeloading that we have heard for so many months, no?

Okay, so you've already got a cost of defense risk that it doesn't necessarily threaten the existence of the European Union, but it's a big deal. And it's a big deal that the people of the EU are not used to having to pay for. They're not used to having it cut into the social programs that exist in Europe, which we don't have in North America.

Okay, that's number one. But it seems to me like number two that I want to make sure we don't forget about is just a couple of years ago, Europe was facing a near existential energy crisis threat with, you know, tripling or quadrupling energy prices, electricity prices through the roof. And the salvation for that really was basically

The U.S. kind of coming to the rescue with LNG exports. So natural gas export from the United States could replace a lot of the gas that was lost after, what was it, Russia blew up their own pipeline? Is that how that event went down?

Right. Yeah, something like that. But we were going to save the day, really, by the U.S. building export terminals for LNG, which has now happened, being able to export all this LNG to supply Europe. Europe would have an energy source from the United States. It seems like now any LNG exports are going to at least come with the threat of a tariff if President Trump doesn't get his way. So

How does the energy dimension of this combined with the cost of defense, where does that leave Europe in terms of, I'll call it its economic vulnerability? I think that number one, Europe doesn't have any negotiation power relative to the United States in terms of

the tariffs. Therefore, it can only negotiate to lift its trade barriers and lift its burdens to U.S. businesses and U.S. exporting businesses because the European Union cannot face the next winter without U.S. LNG.

We know that Qatar cannot supply the excess amount that is currently coming from Russia. In the latest figures for 2024, Norway is the largest supplier of natural gas to Europe. The second is Russia at 18.8%, followed by the United States.

Now we know that Ukraine has stopped any type of pipeline deliveries of natural gas to Europe. So the only alternative for the European Union is US natural gas. However, now is a very bad time to go to the United States and say, hey, please send us your LNG because we don't want to develop our own natural resources, which is the reason why we're so dependent on it.

And at the same time, we don't want to negotiate the tariffs and we don't want to negotiate on trade. So if you look at all the angles, defense, the European Union needs to spend a lot more on defense but doesn't have the budget space. Number two, energy. The European Union prides on being on

working to be energy independent but shutting down nuclear plants and destroying the ability to develop its own natural resources has become more dependent on Russia and is now dependent also on the United States. And so

the enormous trade barriers that the European Union has put on the United States in agriculture, in industry, in farming, in machine equipment, all those things. If you put all those things together,

You basically have a European Union that has been sending a bill to the United States for a very long period of time and needs to send another bill in terms of energy that is going to be very difficult to offset. And it's not going to be solved with solar and wind because we already know from the example of Spain, from the example of Italy, from the example of Portugal, from the example of Germany, that...

creating a more volatile and intermittent mix does not give you higher level of security. The European politicians tend to

confuse installed capacity with available capacity and that is not the same so one of the problems that for example spain has found is that has it has a tremendous level of of benefit from sun and from wind and tremendous uh renewable energy however it it has multiplied its

of Russian liquefied natural gas because it needs to...

offset the moment in which demand is uh is very very strong and at the same time supply is limited no so all those elements are are coming together defense uh budgetary problems and obviously the energy problem added to the trade problem the there's only one solution to me

negotiate a much better trading relationship with the United States. What Elon Musk and even the German chancellor is saying, which is that the European Union should actually have a

no trade barrier, tariff and non-tariff, with the United States in order to create the largest market in the world that also would have the most competitive, most productive, and most innovative companies in the world that would be hugely beneficial for the European Union and for the United States. Doesn't seem to me like that is what they're going to look for. It looks to me like the European Union leaders

continue to think that at some point in time, they're going to go back to 2001. And that's not happening. Finally, let's talk about monetary policy and central bank collaboration. As long as I can remember, and as far as I know, probably going all the way back to Bretton Woods and the end of World War II, the Fed and the ECB have

Pretty much. Well, I guess the ECB only goes back to the creation of the European Union. But even before the EU, Daniel, we had very close collaboration between the Fed and the various individual central banks in Europe going back decades and decades. The very first thing that Bernanke did in the great financial crisis was pick up the phone and talk to Jean-Claude Trichet and later to Mario Draghi.

Are we in a situation where this has become so politicized? Certainly the rhetoric I hear out of European policymakers is pretty darn strong. Are we going to get to a situation where the ECB is forced to divorce the Fed, if you will? And what would that mean in terms of monetary policy collaboration in the exact kind of crisis that you and I both see an elevated risk of? I think that it's very, very dangerous. The level of

political interference on the ECB is enormous. And I think that there's a very significant risk when the ECB starts to believe its own hype of thinking that it is like the Federal Reserve. Let's remember that the euro is not the dollar and that the euro is the only reserve currency in the world that has re-denomination risk.

So I find it exceedingly concerning to hear a rising level of comments from the ECB and from the European Union basically assuming that the ECB can undertake a completely different path in terms of monetary policy to that of the Federal Reserve because

it can create the same problem that we were mentioning prior, but accelerated. We can go back to a 2011 type of crisis in which the European Central Bank believes that the path of policy needs to be completely different.

My biggest concern is that the European Central Bank has decided to accelerate the creation of the Euro digital currency. And that is certainly a danger for the overall construction process.

proper European system that is strong enough from a financial and from a monetary perspective as it is to the risk of, obviously, social control and everything. So I find it very, very worrying that the ECB is sort of believing its own hype that it can be

than the Federal Reserve. It's something that the Bank of Japan thought as well with atrocious results. So I would pay a lot of attention to it. And this is another reason why European fund managers are not

falling 100% into the trap of moving all of their exposure to the European Union. That really brings up an interesting question in my mind, Daniel, because when you talk about the ECB potentially accelerating the pace of its version of FedCoin, a sovereign digital currency or a CBDC,

I personally don't think that there's a Trump card there, if you'll pardon the pun, where all of a sudden the ECB could take over as the world's global reserve currency, displacing the dollar. And ha-ha, we showed you, President Trump, we displaced the dollar as the world's reserve currency because our digital euro was superior and the whole world followed us into that. And now you're the one who's left in the dust.

I don't think that's realistic, but do I think it's realistic for European policymakers to talk themselves into the idea that that's realistic? Oh, I could see that one in a heartbeat. What do you think?

I completely agree with you. It is completely unrealistic, but it's very, very typical of the combination of arrogance and ignorance of politicians to believe their own hype and sell themselves that idea, isn't it? So I do think that that is quite a risk. And you're actually, you know, the music is already there. When you listen to what politicians are saying about

All these fiscal challenges coming from defense, from energy, from technology, from the tariff tantrum, etc. All the time, there is this sort of background noise in which they actually believe that all of this is going to be solved by a European central bank that prints its way out of trouble.

And that is obviously not going to happen. And I completely agree with you that the European Union does not have a card to go to the United States and say, ha ha, we are going to overtake the US dollar as the world reserve currency. It's not going to happen. No, it may be the case that

A lot of central banks globally are reducing their holdings of U.S. treasuries in order to purchase gold, but not reducing their holdings of U.S. treasuries in order to purchase Spanish debt.

If I put myself in Xi Jinping's shoes, I don't believe that Europe could pull that off either. But boy, what an opportunity to play that arrogance of European policymakers and say, hey, come over and help us with our de-dollarization campaign. Trust us. We're all going to put all the money into digital euros.

We don't have aspirations of creating our own BRICS digital currency. Don't let that bother you. Trust us and work with us. I could easily see Europe being played by China.

and potentially other actors in this de-dollarization campaign. Is that a realistic risk? I think it's a realistic risk. And if you see, for example, the recent visit of the prime minister of Spain to China, it's so obvious that China is skillfully

Telling the European Union leaders, oh, we are your partner. We are the solution. Come to us. We will give you this enormous market that is China if you give us your legal investor and monetary security. Of course, it's a perfect, perfect strategy. And obviously, if European politicians

just because they don't like the way that Trump works or because they want to maintain their position in a completely unsustainable Europe that is fiscally and economically decadent. Obviously, those politicians look at China as

as the solution, they will find the same problem that so many Latin American countries did. Is that yes, China is going to certainly show the path and open the door, but it's not going to give you a free lunch and certainly it's a great way of eunicing Europe, if that makes any sense.

Well, Daniel, on that note, I can't thank you enough for another terrific interview. I hope we haven't just made any profound predictions about the future of global monetary policy. I'm afraid we might have.

And before I let you go, let's just touch on what you do at Tresas. You run a fund there. So for the benefit of our institutional and accredited investors who are able to invest in hedge funds, who do they contact to get a tear sheet? And for everyone else, how do they follow your work? What's your Twitter handle and so forth?

I think it's very easy to find me. Just put just Daniel Lacalle and my Twitter handle in English is at DLacalle underscore IA. My website, DLacalle.com. And all the information on how to contact me and how to purchase my books, etc. can be found on those. There's a YouTube channel as well in English and in Spanish. And I hope you like it. I always say that it's easier to find me than to avoid me.

And for our English speaking audience, that name La Calle is spelled L-A-C-A-L-L-E, like La Calle. Patrick Ceresna and I will be back as Macro Voices continues right here at MacroVoices.com. Now back to your hosts, Eric Townsend and Patrick Ceresna.

Eric, it was great to have Daniel back on the show. Now let's get to that chart deck. Listeners, you're going to find the download link for the postgame chart deck in your Research Roundup email. If you don't have a Research Roundup email, that means you have not yet registered at Macrovoices.com. Just go to our homepage, Macrovoices.com, and click on the red button over Daniel's picture saying looking for the downloads. Okay, Eric, what are your thoughts on equities here?

Well, of course, everybody's talking about the death cross on the daily chart this week on the S&P. Death crosses are sometimes false signals, but in my experience, if they don't reverse pretty soon, within two or three sessions, they usually portend failure.

much more downside to come. So if we're going to see this reverse into a false signal, we'd have to see a whole lot more upside on the S&P happen really quickly in order to reverse this death cross into a golden cross. And so far, there's no sign of that.

I'm watching the S&P to test its prior support level from early March down around 5520 or so. I say down around, that was the lows then. Of course, it's going to be up around that level if we manage to get back there, where I'm going to be adding some size to my hedges and with much wider put spreads than I used last time.

My lower strikes will be $4,500 or lower, and I might just stick with outright puts depending on how the spreads are priced when we get there and we get back above $5,500, which is what I'm waiting for. Now, to be clear, I have absolutely no clue whether the next big move here is going to be up or down. If we had several countries come to the negotiating table, negotiate deals with the Trump administration, kind of give the signal that this

very, very aggressive negotiating strategy of President Trump's is actually working, well, maybe that could lead to a big move up and a big sigh of relief. My risk, though, is on the left tail. So that's where I'll be hedging. Well, Eric, I want to start off just by looking at where we are on a volatility basis. So on page two, I have the VIX, which is trading around the 31 handle.

And with a 31 VIX, that creates a daily implied range of the S&P of over 105 points. So the key takeaway is that daily volatility and 100 point swings in the S&P is par for the course in this kind of a market environment. Now, we had an extraordinary market bounce the last week.

And the observation to make there is that while we had about a 1300 point S&P drop from its peak to trough this year, we in a span of just a couple hours retraced 50% of that entire decline in one shot.

And so we're at a very neutral state. Overall, the big puzzle to solve is whether or not there's going to be a recession and whether it's going to impact corporate earnings. And this is why I think the earnings season that we're upon is going to be that critical, looking for guidance from these companies as to what expectations there are.

Because if we have a corporate earnings contraction and some form of a recession that becomes a reality, then the S&P 500 has plenty of room to go lower. There was a Goldman Sachs piece put out there talking about

Just if the multiples came in while earnings were contracting, then we could, for instance, add an 18 multiple for earnings that contract 10%. You could easily make an argument of an S&P under 4,000 on the downside.

So it's going to take several months to determine whether or not we're going down that path. So at this stage, I'm in the camp that this S&P 500 is going to muddle along here into this corporate earnings season and into the jobs numbers that come in in the first few days of May. And so it wouldn't be a shocker for us to see a 5,500 or 5,600 print on the upside of the market.

But in general, if this is a bear market and if there is going to be a continuation to the downside, then the upside should only be limited at this stage from these levels. So what all our listeners can take away from this is that if going into next week and the week after that the market is struggling to make any upside bullish progress previously,

to higher than the 55 or 5600 zones. Consider the market highly vulnerable for continuation patterns on the downside. Not making that call yet and we'll definitely have another episode from which we'll be able to review that. So Eric, let's move on and talk about this US dollar. What are your thoughts here?

We tested a 98 handle briefly on the Dixie this week. That's down 10 whole big handles from the high back around the 1st of April at 109.45. We're now more than 10 points below that, just holding 99.35 at recording time.

So I think it's very clear that a strong downtrend is in play and is likely to continue. And I also think that's exactly what Trump and Besant wanted. Well,

Well, Eric, you have to go back to 2023 to see a period where the U.S. dollar printed under the 100 handle. And so the fact that we broke down these levels now is really an indication of just how weak the dollar is. Now, to me, the fact that we got down here and we didn't have a reflexive market bounce, which is very typical, even in currencies,

for there to be a quick rally, let's say back to 101 or 102 from an oversold state. The fact that we aren't bouncing is showing that the dollar remains very distributed and there are a lot of sellers that keep leaning into this.

And so at this stage, every day that passes that this dollar doesn't muster up a meaningful reaction implies that there is vulnerability for this trend to continue to the downside. The bigger question is what kind of downside and what kind of time frame for that?

Well, I mean, the one thing I'm going to anchor on is if this 100 level doesn't end up holding and it doesn't become the low, the only logical place to be watching is for this to return back to the levels where we were in 2021 and early 2022. Uh,

before the bond bear market. And those were levels down near the 90 handle. And that would be a full 10% lower on the dollar. Now, that would be a trend that would take almost all the remainder of the year to happen. I don't see a dollar crash happening where we're going to be here by May or June down at the 90 level. But it certainly could put in place a trend

that will continuously see the dollar in a distribution cycle and the prevailing downtrend stays in place throughout much of the year. Will this materialize? To me, the bulls need to save the dollar here and now above the 100 handle with a solid rally. And if every day that passes here that this is not happening, it makes this highly vulnerable for a new downtrend to be the dominant one.

All right, Eric, let's touch on crude oil. Well, the market hasn't managed to close above the 13-day moving average since the 1st of April, and it's approaching that at recording time. A daily close above the 13-day moving average, which right now is at 69.92 on WTI, would signal that there may be more upside to come.

There's still considerable backwardation in the first year of the forward curve, and that's another bullish signal that once the tariff tantrum blows over, there could be plenty of room for another leg up. But I don't have a strong directional view either way on this market. Let's see what the news brings. Well, Eric, technically, I want to observe that that $65 to $66 range on crude oil was an enormous support line that was established over the last two years. And

And we decisively broke below that support line. In a technical analysis, when a major support line like that is broken, what was previously support acts as overhead resistance. Now, as crude oil rallies here and bounces off of its oversold levels,

One of the things that we're watching is whether or not that 65, 66 level acts as huge overhead resistance from which crude oil would fail and then continue to retest lows, if not even make lower lows. There's a primary downtrend in crude oil. Price action is very distributed. The bounce was very weak.

So while I think crude oil is cheap, and in fact, I actually think that there's going to be a bull phase for crude oil later this year. But right now, this trend is very, very weak. And you have to respect that this prevailing trend may stay dominant on the short term. And going into the early part of the summer, there could be still further deterioration on the downside.

All right, Eric. Now, on page six, I have that chart of gold. What a move. What are your thoughts here? Well, this rally in gold has been unrelenting, and I'm convinced that it's because investors around the world are starting to question the long-term viability of the U.S. dollar as global reserve currency and the U.S. Treasury bond as the central bank reserve asset.

However, it's important to note that we've come an awfully long way up in an awfully short amount of time. And that means that a change of sentiment around those stability issues for U.S. dollars and U.S. treasuries could bring about a very steep and very rapid downturn.

correction in gold if that sentiment changed for some reason. But absent such a change, I think there's plenty of room for more upside. As far as bringing new money onto the long side of this trade after we've already come up so far, call spreads make much more sense than outrights here if you're going to put new money to work on the long side of gold.

Well, Eric, the observation I want to make here is that even during the worst part of the decline, gold had a little bit of a liquidity air pocket where it quickly went back to retest its 50-day moving average. But the moment that selling subsided, gold rips to a fresh new high and is bought on dip. There is some very strong accumulation here and it's accelerating. The slope of the rise is turning full on parabolic here.

Now, a number of measured moves are finishing here, but during parabolic phases, this is where prices can get stupid. And therefore, I'm not ready to call a market top on something that is moving with this much momentum. The first logical target zones for a continuation pattern would be hitting $3,500 to $3,600 per

on the upside. But one of the things to just watch here is how gold behaves during dips. If we continue to see like, let's say drops 50 or a hundred dollars over a couple of days and immediately gets bought on dip,

and rallies right back up to highs. And you notice that strong accumulation remains dominant. There's obviously a lot of global central banks that are diversifying into gold, which is certainly a huge tailwind. But the question is, is that will speculators on the short term drive this into an accelerated rise? At this stage, I wouldn't get in the way of this bull situation.

And let's see where it can reach on the upside. All right, Eric, let's touch on uranium. Well, Patrick, we've seen a nice, healthy bounce off the lows on uranium issues, but now the slow stochastics on most issues are high and wavering.

So it's time for the next swing low down to begin. Will that be to yet another new lower low? Well, I think that's going to depend on the broader equity market. But there's plenty of room here just from the technical signals to say this bounces over. So now maybe it's time for the market to test new lower lows if this relentless downtrend is going to continue. Now, I remain optimistic.

uber bullish intermediate to long term but the trend is your friend and this trend is still down until proven otherwise yeah to me i keep it super simple here overall there's obviously a great fundamental story to uranium but this price action is outright distributive lower highs lower lows no follow-through on rallies the spra physical uranium which i have on page seven continues to sell at a deep discount to

the net asset value of spot uranium. There simply is no investor interest right now of putting money to work here. Now that will change. And that's the whole point of observing the charts is to try to identify that moment when a new accumulation cycle begins.

Right now, there's no sign of it. Obviously, spot prices have been far more stable than the spot physical. That should put a floor underneath this. But the puzzle to solve is when will we see something technically bullish like this thing is ready to go? Now, Eric, let's touch on copper.

Well, remember I said the thing to watch was Copper's recovery relative to the S&P to gauge whether or not we were seeing a bona fide recession signal with that recent weakness in Dr. Copper or if it was just moving in sympathy with the general panic over the tariff tantrum.

Copper has moved and remained above its early March lows, while the S&P has not. So if it stays there, if it stays above that level of about 4.63, that tends to imply that it's safe to fade that recession signal that we were seeing. But a close back below 4.63, especially if it stays below that level for a few days, would mean that the recession signal is back on and should be taken seriously.

Yeah. What an extraordinary drop we saw over the month of April where this thing wiped out of the entire gains for the year in one fluid motion. Now we've got a bounce back to the 50 day moving average, back to a 50% retracement. And this is actually a level that should arguably be, uh,

a kind of a neutral zone for copper, which is it likely doesn't have a big upside from here. And if the whole market turns over, we could see copper prices going right back down to the $4 level and retesting those levels we saw all of last year. Finally, Eric, I just wanted to, on page nine, take a quick look at the SOFR futures. This is particularly the December 2025 contract.

We've now heard Powell twice, once with the FOMC meeting minutes and the second time he just most recently did a speech.

What we continue to see is a Fed that is focused far more on inflation and being cautious rather than being accommodating. I think that this, in some degree or another, has lots of risk of being a policy error. And then when things continue to deteriorate, the market will have to quickly price in a far more dovish Fed that has to respond quickly.

To me, there's lots of room for this to go up to the 97, 97.5 level on the upside in the weeks and months to come. I continue to be buying the dip here, anticipating that at some point the market is going to have to start pricing in a more dovish Fed. The last chart I want to touch on is the T-Bonds chart.

And clearly the basis trade has put a lot of stress on bonds. So far, one observes that the bounce has been relatively weak. And to me, whether or not I take a more neutral stance or be far more bearish,

is going to have a lot to do with how fast the bonds can recover on the short term. If we see that this has started a new distribution cycle in the long bond and the prevailing price action continues to be fundamentally weak,

we could end up seeing this long bond heading back to its 2023 lows just after the bond bear market. And so this is going to be something we'll talk about in the weeks to come. Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of Big Picture Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's Research Roundup.

Well, in this week's Research Roundup, you're going to find the transcript for today's interview as well as the chart book we discussed here in the postgame, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's Research Roundup. So that does it for this week's episode. We appreciate all the feedback and support we get from our listeners, and we're always looking for suggestions on how we can make the program even better.

For those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email at researchroundupatmacrovoices.com and we will consider it for our weekly distributions. If you have not already, follow our main account on X at Macro Voices for all the most recent updates and releases. You can also follow Eric on X at

at Eric S. Townsend. That's Eric spelt with a K. And you could also follow me at Patrick Ceresna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week. ♪

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