New World Order Plan Advances as UAE Drops Bombshell, Oil and Gold to SURGE: Hanke

Key Concepts

• Optimum Pumping Rate Model: An economic framework for resource extraction, suggesting that if real prices are expected to decline or property rights become insecure, producers should accelerate extraction.
• Monetary Phenomenon: The principle that inflation is primarily driven by growth in the money supply rather than interest rates.
• Broad Money Supply: The total amount of money in circulation, largely driven by commercial bank lending (approx. 80% of U.S. broad money).
• Secular Bull Market: A long-term trend of rising prices in a specific asset class (e.g., gold).
• Price Elasticity of Demand: The sensitivity of consumer demand to price changes; in the oil market, demand is currently "sticky" (inelastic).

1. The UAE’s Departure from OPEC

Professor Steve Hanke identifies three primary drivers for the UAE’s decision to leave OPEC:

• Resource Economics: The UAE believes real oil prices will decline in the future. According to Hanke’s "optimum pumping rate" model, it is more profitable to deplete resources faster when future prices are expected to be lower.
• Geopolitical Insecurity: The conflict involving the U.S., Israel, and Iran has created significant instability in the Gulf. The threat of Iran closing the Strait of Hormuz or targeting oil facilities has increased the "discount rate" for future oil revenues, making current production more valuable than future production.
• Internal Friction: Long-standing animosity between the UAE and Saudi Arabia has reached a breaking point.

2. Geopolitical Analysis and the "New World Order"

Hanke argues that the U.S. is "clueless" regarding the unintended consequences of its foreign policy.

• The Iran Conflict: Hanke asserts that Iran is effectively winning the conflict, positioning itself to control the Strait of Hormuz and exert influence over the Gulf.
• Global Power Shifts: He suggests that Russia benefits from the current supply chain disruptions, while China is the primary long-term winner, as it leads the BRICS nations and the Global South in pivoting away from U.S. influence.
• The Dollar’s Status: Despite "de-dollarization" rhetoric, Hanke maintains that the U.S. dollar remains the "king" of global currencies. He notes that historical precedents show it is extremely difficult to displace a dominant global currency, and current data shows the dollar is used more today than five years ago.

3. Inflation and Monetary Policy

Hanke emphasizes that the U.S. is facing a persistent inflation problem driven by the money supply, not interest rates.

• Commercial Bank Role: Because commercial banks create 80% of broad money through lending, and their recent earnings reports show strong capital reserves, they have the "firepower" to continue expanding the money supply.
• Fed Policy: Hanke expects the Federal Reserve to remain steady in the short term. He advocates for a more aggressive approach to shrinking the Fed’s balance sheet, suggesting that assets should be moved to a congressional "sinking fund" rather than the current slow-burn reduction method, which he estimates would take 10 years to normalize.

4. Commodities and Gold

• Oil: Hanke advises being "long" on oil. He notes that the market is currently living off inventory drawdowns (11–12 million barrels/day) while demand destruction remains low due to price inelasticity. This imbalance will likely lead to significant price spikes.
• Gold: He maintains a bullish outlook, reiterating his target of $6,000–$7,000 per ounce. While the price has consolidated recently, he views this as a healthy correction within a secular bull market. He notes that China’s renewed interest in buying gold is a significant market factor.

Notable Quotes

• "Inflation is always and everywhere a monetary phenomenon." — Professor Steve Hanke
• "The U.S. is a huge loser in the thing from a geopolitical point of view." — On the current shift in the Middle East.
• "There’s always one king at any point in time... it takes a lot to knock a king off the throne." — On the dominance of the U.S. dollar.
• "Buy gold, wear diamonds." — Hanke’s personal motto for his students.

Synthesis

The video presents a sobering view of the current economic and geopolitical landscape. Professor Hanke argues that the U.S. is failing to grasp the economic consequences of its military engagements, which have inadvertently incentivized Gulf states to abandon OPEC and accelerate oil production. He warns that inflation will remain a persistent threat due to the unchecked growth of the broad money supply, and he maintains that gold remains a critical asset in a world where the U.S. dollar, while still dominant, faces a shifting global order.