Why Investors Can't Trust the System—and Should Trust Gold -

In a wide-ranging and candid interview on the Money Metals podcast, host Mike Maharrey sat down with Axel Merk—President and CIO of Merk Investments—to explore the deepening divide between government fiscal behavior and investor interests. 
The conversation centered on growing sovereign debt, entitlement reform avoidance, shifting macroeconomic dynamics, and the critical role of gold and silver in a volatile financial system.
(Interview Starts Around 5:46 Mark)
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<h2>Government vs. Investors: Conflicting Incentives</h2>
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Merk began by highlighting a quote he first coined over 20 years ago: <a href="https://x.com/MoneyMetals/status/1927765414605381984" rel="noopener noreferrer" target="_blank">“The interests of a government in debt are not aligned with those of investors.”</a> He elaborated that governments with massive debt burdens have every incentive to allow inflation to erode that debt’s real value. In contrast, investors aim to preserve purchasing power. Merk cited Milton Friedman’s famous observation that citizens always pay for government deficits—either through taxation or inflation.
Referencing the recently proposed “<a href="https://www.moneymetals.com/news/2025/06/12/silver-shines-debt-soars-what-every-investor-needs-to-know-004119" rel="noreferrer">Big Beautiful Bill</a>”—an actual name used for a U.S. budget reconciliation measure—Merk noted the CBO’s estimate that the bill would add $2.4 trillion to the federal deficit. He pointed out that political mechanisms like budget reconciliation allow such legislation to pass with just 51 Senate votes, sidestepping broader fiscal responsibility.
Despite public claims of fiscal conservatism from lawmakers like House Speaker Mike Johnson, Merk argued that the lack of entitlement reform shows that “business as usual” continues. He added, “If you make all these promises, you’ve got to pay for them somehow—or you’ve got to update the promises that you have made.”
<h2>No Appetite for Reform, Only Kicking the Can</h2>
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Merk recommended <a href="https://www.amazon.com/High-Cost-Good-Intentions-Entitlement/dp/1503603547" rel="noopener noreferrer" target="_blank">The High Cost of Good Intentions (2017)</a> for historical context on entitlement programs, showing how reforms rarely reverse expansionary trends. While Europe has shown that bond markets can force governments to act, the U.S. enjoys a much greater capacity to "kick the can down the road."
That said, Merk warned investors: “<a href="https://www.moneymetals.com/rigged-exposing-the-largest-financial-fraud-in-history/1944" rel="noreferrer">This game is rigged</a>. When the interests of government are not aligned with yours, it’s something to be thinking about.”
He also cautioned that governments can change the rules unexpectedly—especially when fiscal pressures mount—making long-term planning for investors even more challenging.
<h2>Why Gold and Silver Still Matter</h2>
Turning to gold and silver as investment tools, Merk described the metals as essential in addressing systemic risk, particularly amid <a href="https://www.moneymetals.com/news/2025/06/13/dollar-hits-3-year-low-heres-what-it-means-for-precious-metals-004126" rel="noreferrer">long-term inflation and global debt</a>. Merk’s firm manages over $2.3 billion in gold and gold-mining assets, offering a unique view of both the physical and speculative ends of the metals market.
He distinguished physical gold investors—whom he called “defensive”—from gold mining investors who typically seek outsized returns with higher volatility. While large miners have recently underperformed expectations, their cleaner balance sheets now reduce their leverage to rising gold prices. Merk’s firm focuses on junior miners, which he says offer better upside but come with higher risk.
Silver’s recent rally also came under discussion. Merk noted the decline in the gold-to-silver ratio, pointing to silver’s more industrial nature and sensitivity to economic momentum. He said the latest uptick likely reflects optimism around trade stabilization with China and a possible upward revision of the U.S. economic outlook.
<h2>Tariffs, Fragmentation, and Financial Plumbing</h2>
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One of the most insightful moments came when Merk described the <a href="https://www.moneymetals.com/news/2025/06/07/golds-current-consolidation-driven-by-tariffs-and-global-uncertainty-004109" rel="noreferrer">long-term consequences of tariffs and financial fragmentation</a>. He warned that policies like Trump's proposed 10% baseline tariffs don't just shift trade—they also change capital flows, leading to higher domestic financing needs and upward pressure on long-term interest rates.
Merk criticized the mainstream narrative that the U.S. dollar’s dominance is unshakable. “There doesn’t need to be an alternative,” he said. “The alternative is greater fragmentation.” He warned that the erosion of global financial integration threatens the very plumbing that supports U.S. reserve currency status.
He also referenced Germany’s moves to repatriate gold as a symptom of growing distrust in U.S. monetary stewardship and the weaponization of the dollar.
<h2>Caution, Complexity, and No Crystal Balls</h2>
Merk made clear that while he’s bullish on gold, he avoids hard price predictions. “I don’t have a crystal ball,” he said. His goal is to provide “food for thought” and challenge assumptions.
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He emphasized that the world is entering a “multipolar financial system” where many currencies—not just the dollar—<a href="https://www.moneymetals.com/news/2025/06/13/gold-overtakes-euro-as-second-largest-global-reserve-asset-004124">play strategic roles</a>. That, in turn, will have unpredictable implications for investments, currencies, and gold prices.
<h3>Final Thoughts</h3>
Axel Merk left listeners with a sobering message: long-term fiscal pressures, lack of political will, rising tariffs, and financial fragmentation will continue to fuel uncertainty. Precious metals remain one of the few reliable hedges against these structural problems.
He encouraged listeners to follow his insights via <a href="https://www.merkinvestments.com/" rel="noopener noreferrer" target="_blank">MerkInvestments.com</a> and his account on X (formerly Twitter) <a href="https://x.com/AxelMerk" rel="noopener noreferrer" target="_blank">@AxelMerk</a>, particularly during central bank meetings. “I'm a monetary policy buff,” he quipped, adding that inflation has now made his “two cents’ worth” worth at least four.

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