The Global Supply Chain Crisis And The Return To Resource Sovereignty Col Douglas Macgregor

Welcome back. I'm Jeremy Saffron. Gold is inching above $4,600 again. Silver has rebounded sharply into the mid-70s, but U.S. gasoline has climbed above $4 a gallon. Now, the Strait of Hormuz remains the central fault line in a conflict rippling across energy, shipping, and the metals market. But we just received some breaking news this hour. Iran's president just announced they are ready to end the war and seeking guarantees, according to the IRNA. Now, matching comments, President Trump just gave to the New York Post, stating that the conflict is likely to end soon, even if the U.S. leaves the Strait closed. Now, with European allies showing growing reluctance to deepen their support, a diplomatic off-ramp may be forming. Joining us to break this down, this rapidly shifting military and economic reality, of course, is Colonel Douglas McGregor. Colonel, great to have you on. Good to be with you. We've got to get to this massive breaking news right as we get to air, so we'll see, obviously, how this plays out. But Iran's president is stating they're ready to end the war, seeking guarantees, according to the IRNA. Kind of matching what the president was saying today, but he's also saying that they would step back even if the Strait remained closed. From a strategic standpoint, what does it signal to the rest of the world if Washington takes this sudden diplomatic off-ramp rather than opening the Hormuz again by force? Well, I think it's important for people in the United States and Canada to understand that the Strait of Hormuz was not closed by Iran. It was Lloyd's of London that closed the Strait. As soon as it became clear that the Strait was part of the war zone and could be subjected to missile strikes, no one would underwrite shipping from an insurance standpoint. That's the first thing. So that's what really put an end to the commercial traffic, which has dropped off about 95%, obviously. Secondly, if the owner of the shipping is not working in support of the United States or Israel, and in fact, is willing to purchase the oil in Iran, they are allowed to pass through the Strait. Now, that's already happened for a number of tankers going to Japan, Korea, as I understand it, and China, as well as India. Right now, I think India has another nine tankers waiting to move through. So the issue of access to the Strait was really about us and Israel, since we are fighting this war on behalf of Israel. So that's understandable. Now, as far as the offer of peace, what I just received myself was a five-point peace framework from China via Pakistan. The Chinese Foreign Minister held talks with the Pakistani Deputy Prime Minister and Foreign Minister in Beijing. These countries have now taken the lead. They've also sent their diplomats to Egypt and Turkey. It looks like the Turks and the Egyptians will be on board for this. And these are the five points that they've raised. Immediate cessation of hostilities, start of peace talks as soon as possible, security of non-military targets, security of shipping lanes, and primacy of the UN Charter. Now, as far as the non-military targets and shipping lanes are concerned, everybody needs to understand that in addition to taking 15 million barrels of oil offline, which is essentially what the Strait of Hormuz has experienced, we've created an enormous problem for food, fuel, feedstock, and fertilizer. If we don't open this Strait, in other words, if there is not a resumption of normal traffic very soon, you're looking at famine in vast parts of the world, Africa, the Middle East, South Asia, in the next six to 12 months. So that's very important. The other point is, of course, the desalinization plants. The desalination plants are a lifeline for the people that live in the Gulf region. There are roughly 50 of them, maybe a few more, and the Iranians have not struck them. But if we strike Iranian desalination plants, along with the oil infrastructure, which is something we said we would do if Iran did not, meet Israel's terms, which is really what we're fighting for, then the Iranians have said they would destroy all of them. And if you just go to Al-Jabail, the port on the Persian Gulf, that Saudi port has a desalination plant, and it provides 90% of the water to Riyadh, the capital of Saudi Arabia. If that plant is destroyed, you're talking about evacuating the capital of Saudi Arabia because there's no water to drink. So this is a very dangerous situation. It could cause millions to die of thirst. This war needs to end. The world recognizes that. But for some reason, we've been behaving as though it's not our concern. It is our concern. Yeah, yeah. I mean, you've warned about the geographical and tactical nightmare of trying to secure the strike before. I was reading in some news reports this morning, Defense Secretary Pete Henson and Joint Chiefs recently held a brief stating that the U.S. strikes are damaging Iranian morale, causing widespread desertions, degrading their ability to project power. How do you square that official assessment of progress with your warning that these battlefield metrics may not translate into strategic success? Well, first of all, I don't know to what extent the claims that he makes are accurate. Let's be frank. We haven't really told the truth about the level of damage inflicted on us. We know that we have effectively approached a point in time, maybe in the next 10 days to two weeks, where we will simply no longer have any missiles capable of shooting down incoming missiles. Also bear in mind that we can't shoot down hypersonic missiles anyway. So I think our position is in this war of attrition, and it's really a missile war. We're kind of a World War II force sitting offshore, trying to bombard this enormous country of 93 million people that stretches for thousands and thousands of square miles the size of Western Europe. A very dumb idea, but we've embarked on it. And we're assuming that the targets that we struck have made life strategically unendurable for the people that live there. I'm not sure that's the case. I'm always very skeptical of these claims of morale breaking. I mean, we've been through this before. You could go all the way back to World War II. We discovered that what we did did not persuade the Germans or the Japanese or anybody else to throw in the towel and give up. There were other factors that were much more important, including the arrival of ground forces. And I think the fact that President Trump has ordered 20,000 ground troops to the region is evidence for the fact that this air and missile campaign has not worked. When you say we're running short, you were talking about the missiles, ZRR, are you talking about specific interceptor systems, cruise missiles? And if that's true, I mean, how quickly does that start to constrain policy choices? Well, one would think profoundly, but thus far, I haven't seen any evidence that we're terribly concerned about the damage inflicted on the Gulf Emirates. I think we're concerned about Israel because we're rushing whatever missiles we've got left to them. Remember that we have avoided a lot of the damage. Even though we were initially attacked, we escaped serious damage and we've moved our vessels at sea hundreds of miles away, as far as 1,000 miles away in some cases. In fact, the Marines are sitting hundreds of miles away from the Gulf. And one of the challenges right now is to figure out how you would get them into the Gulf. They've got to fly in on B-22s or helicopters. So can you get close enough to do that without being sunk? Obviously, we're very worried about that. We think we're going to infiltrate the 82nd and some other elements, Ranger Regiment into the region. Okay, I hope so. But one of the things that we're up against is persistent surveillance. In other words, anything that happens in that region, anyone who moves, anyone who shows up or leaves is under constant surveillance from space-based assets, as well as terrestrial assets. We've never faced this before. We always had that advantage. Well, this advantage is conferred on Iran by China and Russia. So now you link that real-time information to strike systems that are deep inside Iran with missiles that have a range anywhere from 500 to 1,500 miles. You could suddenly hit anything that you can find. That puts the use of ground forces very much at risk. Yeah, I was going to ask you about that. I mean, who has that surveillance advantage right now and what does it actually allow them to do that changes this war? Well, it means that you have what I call the ISR strike complex. In other words, the Iranians have perfected what you saw emerge in the Ukraine conflict on the Russian side, same thing. Okay, we are sitting at point A and we can see on the satellite 400 miles away the arrival of trucks full of missiles or the arrival of troops or the arrival of foodstuffs or anything else. We can immediately attack it. So within a minute or two of confirming the target, you have a missile on the way and the missile may take anywhere from five minutes to 15 minutes, depending upon what kind of missile it is. Now, can you shoot it down? Well, you usually fire two or three interceptors to down one missile. We only produce five to seven missiles a day in the United States. These are interceptor missiles. The Chinese, for instance, produce a thousand rocket motors or missile motors every day. So you have a manufacturing base in Iran that was assembled with the help and assistance of China and you still have resupply from Chinese sources. So how do you win this attrition war? It's very difficult to do, particularly when you have to move away from the region just to survive. This is the game changer. We're the World War II force. We're organized, equipped, largely as we were during the Second World War, although the technology is much better and much more modern. So one ship is worth 10, 80 years ago or more. But the problem hasn't changed for us because what we've got now in Iran is a very different kind of force. Where have they put their investments? In missiles and drones and in surveillance. You put those together and you're discovering that is almost an impregnable defense. Now, that doesn't mean that the Iranians want to keep this up. I'm sure they would like an end to this, as would anybody with any brains. The whole world wants an end to it for the reasons I outlined at the beginning. But the question is, what about us? What is President Trump willing to accept? Because everything with President Trump is mortgage divinity. He has to walk out into the spotlight as the victor. If he can't do that, I'm not sure he'll give up. You know, it's interesting bringing it back to the markets. I mean, Jamie Dimon was on Fox this morning and he said that the markets will stay concerned here until this is over. I mean, we can see a bit of evidence with these tweets going on right now. The Iranian president markets are starting to, you know, climb, I think, oils down to $100 a barrel as we take this. With Jamie Dimon saying this morning that he's, you know, markets will stay concerned until this is over. And that is what matters, whether this is completely successful. Colonel, what does success actually look like here? Well, very quickly in response to Jamie Dimon, I think he's the master of understatement. And President Trump has said a number of things over the last several days were obviously designed to manipulate the market, to calm nerves, to reassure people that this wasn't going to last much longer. But every time he does that, the market tends to rebound. But each time the rebound is weaker. I don't think he has much slack left in that rope. And I do think there's a lot of pressure on him to put an end to this thing. So, when you say, what does victory look like? I don't think victory is attainable, not in the terms that have been articulated by President Trump, Secretary Rubio or Secretary Hegseth, because they're really talking about the destruction of Iran. Let's go back to the beginning. The hope from the very beginning was that you would have some sort of internal unrest in Iran that would work to your advantage. And it was a readiness to attack Iran in the midst of the unrest on the assumption that this would precipitate regime change. Well, that failed. The whole thing was shut down remarkably quickly. And we discovered it really wasn't what it was built to be. We've said they killed 30,000 people. That's a complete lie. Only about 3,000 were killed or injured. And these people were activated by the Mossad and the CIA. They were equipped with weapons by the Mossad. They were urged to shoot at policemen. So, the death of 3,000 demonstrators was precipitated by our interference. Now, it was shut down. And then after it was shut down, you had Mr. Netanyahu come to the United States and make it clear to President Trump that he has to honor his promises, which means you now have to help us strike Iran. I think President Trump was reluctant. So, Israel began the process on its own, and we felt obligated to join the fight. So, we moved into it. Now, we've exhausted tremendous reserves, something like 11,000 precision munitions in the first few weeks of the conflict. The expenses is outrageous. I mean, some of these costs $1.5 million or more apiece. We are in a position right now where we're trying to resupply and replenish, not just missile defense, but also precision-guided weapons and systems. And this then raises the question, all right, we failed at regime change or decapitation, whatever you want to call it. What are we doing now? The answer is we're trying to inflict tremendous pain on the Iranian people, but this is a very large state. This is not one of the weaker Sykes-Picot states created in the Arabian Peninsula in the Middle East in 1919. This is a real country with a real national identity and thousands of years of history behind it. It's not going to roll over and play dead. So, I think they figured that out. So, now they're going to try and destroy it and punish it, and you're going to add ground troops. You're going to try and send them into the Gulf to see something on the assumption that's going to be a game changer, and suddenly the Gulf opens up and everybody starts using it again. That won't happen. And if you put Marines and paratroopers in these isolated islands or on the coastline, they can be just as easily targeted and destroyed by theater ballistic missiles and, of course, drones as any other target in the region. So, I don't see a good ending. I think at some point, you've got to do what I think several people have urged President Trump to do privately and pretend, well, we've achieved victory. We've destroyed everything. This is the best we can do, and we're leaving. But that fails to address an important element here. Who's really in charge? And the answer is Israel and the lobby. They're in charge. They wanted this war. They bought it by buying the politicians in Congress and buying the White House for Trump. This is their war. They want it. And they're not going to be very pleased if suddenly Donald Trump turns around and says, well, look, I think we've done all we can do. They won't accept that. So, there are other forces at work in this process. Right, right. And you know what? You talked about something interesting there briefly. I want to pivot on how these military tactics are directly impacting the commodities market because, I mean, you recently noted that we're fighting a 21st century war of missiles and these unmanned systems using an old World War II kind of mindset. I mean, Bloomberg has reported what would be the first known combat loss of an E-3 Sentry jet after an Iranian strike on a Saudi base. If that is correct, what does it tell us about the vulnerability of our legacy military infrastructure against this persistent drone warfare? Well, we should get the message that the forces we've got right now are not prepared for this new kind of warfare. If we deployed the U.S. Army and Marines to Ukraine to fight the Russians, we would take terrible casualties. They're now reorganized and prepared to fight on a battlefield dominated by persistent surveillance and strike weapons, unmanned and manned. We're not really ready for that. We're not ready for it at sea either. So, I hope that, you know, we will find a way to end this quickly and go back and review everything. I mean, this is similar in some ways to the Russo-Japanese War that took place in 1905. If anybody had paid attention to it in the West, they would have understood this is the prelude to a future war like World War I. Trenches, barbed wire, machine guns, quick-firing artillery, and so forth. So, I hope we'll do that. But in the meantime, I don't think we have the means at our disposal to induce the kind of response from Iran that the Israelis want and that we have promised to extract from them. You know, we're seeing confirmation as well of a drone strike crippling some Russian Baltic oil ports and Iranian strikes damaging major aluminum facilities in the Gulf. Are investors making a mistake by focusing only on crude when, and you brought it up there, I mean, the broader story is diesel, jet fuel, LNG, fertilizer, aluminum metals? Well, first of all, I would say that at this point, people are going to point to the mining industry that is involved with precious metals, coal, and a number of other things, and they're going to say, well, it's going to be more expensive to extract these metals using fossil fuels. Well, that may be true in the short run, but the payoff for extracting these metals is absolutely beyond estimation. We are going to be more dependent on these precious metals. Everything from helium, which is not really a metal, but a gas, all the way to gold, silver, titanium, you name it, everything that we ever have been in the past. And for those of us that live in the North American continent, this becomes vital to our, what I would call, resource sovereignty. We can't be dependent on China or any other country in the world to provide us with refined rare earths. We have to build refineries that refine the rare earths, refine the uranium, and so forth. That's vital and more vital today than it's ever been in the history of our country, because it's a matter of self-defense and self-preservation. So I would just tell anybody out there, if you've got money, sure, you want to put it into oil, that's going to pay off for you, oil and gas, but don't walk away from precious metals, because in the long run, they are going to go through the roof. Yeah, yeah, well said. I heard your speech over at VRIC too. I mean, it was an interesting take, and you got, I mean, looking where we are right now, looking back, if we would have known what was happening, a lot of that was accurate. You know, talk to me a little bit about these strategic minerals. I mean, is the Defense Department really looking at gold, silver, these types of things to replenish this technology you're talking about? I think what you have going on right now, there's a recognition of the importance of strategic minerals. But you and I know, virtually everything we need can be found on the North American continent, from copper to titanium, to all of the various rare earths at that corner of the periodic table. The issue is building the supply chain, building the refineries and the distribution. That takes time. I, you know, I have talked myself hoarse in Washington, D.C. to members of Congress about the criticality of building refineries. I said, we've got to do it. We can't wait around. The sooner we do it, the better off we will be. I think that's beginning to sink in, but we need to allocate billions of dollars to it. So if I were advising the president, I'd say, I don't give a damn about your ego. With all due respect, Mr. President, we need to stop this stupidity immediately. We need to get back to the United States. We need to refocus our investments. We got to understand that the Department of Defense is wasting a lot of money on things we don't need. We need to deal with that. That means reductions in the defense budget. But what is left has to be correctly invested. And that brings us to the refinery. Because remember, the byproducts of a lot of these rare earths include uranium. And what do you do with the waste from the uranium? You've got to put it someplace. Who does that? The Department of Defense. We have places for that in Nevada. And Nevada, of course, is home to some of the best gold producers in the world. All of these things need to be examined carefully, repackaged, and we need to refocus investment on the national level to get where we need to be. Right now, about 90-95% of the rare earths that are refined that we use and need come from outer Mongolia. That means some Chinese bureaucrat is deciding what we will or won't get. I don't think we want to live with that. You're saying the real bottleneck is no longer finding the metal, but refining it, processing it, building that supply chain around it. We've heard a lot of Are they moving fast enough and has China won that game? Well, the game is not over. China has stolen a march on us because they started 30 years ago. When Deng Xiaoping began the whole experimental process with capitalism and focused narrowly on some areas where you had some entrepreneurial activity, that was the beginning of something much larger. The Chinese began thinking very hard about the criticality of their own resource sovereignty. The reason for that is obvious. We have the largest and most powerful navy in the world. They have been hostage to other people's navies, particularly the Royal Navy in the past. You go back to the opium wars and how the Royal Navy controlled the coast of China, opened up the rivers, and forced the Chinese to accept opium into their societies, which had a terrible deleterious effect. We need to now look at our own vulnerabilities. And that means we have to be sovereign with our own resources. So the Chinese have built this one belt, one road. Why do you do that? Because you don't want to ship across the Pacific. You don't want to have to deal with the United States Navy. So they're building this enormous infrastructure for transportation, primarily rail, also road all across Eurasia. It's going to reach all the way into Africa, all the way to Rochefort in France. And we need to think in those terms. We need to build our own transportation infrastructure, as well as the refining, because we need to also be prepared to export as well as import. We've lost the plot on a merchant marine. We should have fast sea lift that moves in and out of ports on both coasts. We need fast trains, high speed trains. If we built it properly, we could outpace the Chinese one belt, one road. Because the one belt, one road goes through numerous nations, which means as it moves, you end up paying more for transportation, you pay for security, you're negotiating agreements. We can move things from the Atlantic to the Pacific, where we speak one language, we have one law, and we don't have to deal with those other intervening problems. But again, getting America to think strategically in those terms at home has been enormously difficult because everything's focused on what people see as profitable interventionism. The American people don't profit from it, but I could take you all over the Washington area, all the way around to all the big neighborhoods, and I could show you magnificent multimillion dollar homes of people who are part of the defense industries, who are part of the congressional complex, that has profited from all of these terrible interventions. So it's never been about do we win or lose? It's about how much do we spend, and where does the money go? That's wrong. That has to end. Does that also help explain why places like Venezuela, Maduro, not just politically, but as a part of a larger scramble for secure resource access closer to home? I mean, Panama, for instance, trying to get China out. I mean, is that working into this thesis? Yeah, I think so, except that we are treating China as this unambiguous opponent of everything that we want to do. That's not necessarily true. The Chinese and the Russians, for that matter, all want to do business with us. We obsess over political structures. So we look at Venezuela. We say, well, we don't like Venezuela because it's not sufficiently liberal and democratic. Well, this has gotten a little tiresome, especially since our own democratic structures are not in the best of condition, and a lot of Americans question just how legitimate and credible they are. We've got to get out of this business of intervening in other people's countries on that pretext, when in reality, what we're trying to do is steal resources. Right now, we have the President of the United States who's very proud of the fact that we're stealing petroleum from Venezuela. I don't think that's a good thing at all. I think we should do business with everybody. Now, if we don't like illegal drugs, if we don't like illegal human trafficking, and I certainly am violently opposed to it, defend your borders. Stop it. Are we doing that? The answer is no, not really. We haven't militarized our borders. We haven't brought the Coast Guard back from the South China Sea and the Persian Gulf to the United States, where it belongs. In other words, we've got to get serious about enforcing our own laws here at home. If we do those things, we can do business with everybody. Ultimately, that was always America's great virtue. We did business with everybody. On that point that you're bringing up, we are also seeing a rapid shift in how global trade is operating. China just acknowledged its vessels are transiting the strait, and Pakistan is reportedly looking to reflag ships to maintain access. Are we watching the accelerated formation of a parallel global shipping and financial kind of architecture that bypasses the West or is trying to because of this? Of course. You cannot see what's happening today as divorced from this entire BRICS movement. The BRICS movement is an attempt to get out from under our oppressive financial system. We are doing what we're doing in large part because we think we're defending the petrodollar. In reality, we're driving everybody away from it, which is why the Iranians have very cleverly said, buy your oil and you won, and we'll do business with you. They too now want to do away with the petrodollar. The petrodollar has allowed us to enrich ourselves shamelessly beyond the point of reason. But you got to go all the way back to coming off the gold standard. When we came off the gold standard, we eventually discovered we could print as much currency as we wanted, which meant that we didn't have to tax Americans when it came to going to war. War was this abstract event that didn't really touch anybody's lives. All of this is about to end. I think the de-dollarization is unstoppable, and I'm not advocating it. I was very happy with the status quo in many respects, but we've got to be frank. We've abused people. We've abused countries to the point where we're telling them what crops to grow, what not to build, where to export, where not to export. We've been pulling people to be oppressive and on one side, oppose anyone we don't like for any length of time. All of this sanctioned business has gotten us down this road. All of this needs to go away. But getting us to behave as a normal country, as a normal nation, as a great power that is willing to accept the participation of other great powers, is willing to respect other great powers' legitimate national security interests, that's not easy in Washington. With the American people, it's not difficult at all. They're not interested in this, but they don't have much say in Washington. Yeah. That leads us perfectly into, I guess, the metals market. We're seeing strong bids today, gold back up above $4,600, silvers rebounding. Are we looking at a classic fear trade, or is this more of what you're talking about, that deeper, sovereign shift towards hard assets? I don't know if it was you. I listened to Grundlager, whom I respect a great deal, and he talked about the bond market, the vulnerabilities there. I also listened to Luke Groman. I think he's a very fine analyst. I listened to Alastair McLeod because he's one of the first to really point out the problems that we've got with gold and the emergence of very likely gold-backed currency in the BRICS nations. We're headed into a terrible storm. I don't know how else to put it. I think that, too, is just over the horizon. What we're doing in the Middle East is probably going to accelerate that storm. I don't know how we're going to manage it. I don't know if we suddenly wake up and discover that we're no longer using dollars in the United States. We're using some other new currency that replaces it. We're on a very dangerous road, let me be blunt. That's why I said that what Jamie Dimond has warned about is accurate. He's just understating it. It's closer and more dangerous than he suggests. For investors trying to separate signal from noise, which we try to every day, what is that one thing they should watch most closely right now? Is it shipping volume through the hormones? Is it insurance rates? Is it diesel? Is it jet fuel? Or is it signs of Well, jet fuel right now, Singapore jet fuel is up to $231 a barrel. That should be ominous. What's that going to do to international travel? Look, I think you have to look at multiple indicators. Single factor analysis is always dangerous. But I think you've heard the right people talk about the right things. What about the bond market? What's going to happen there? It's average is what 3.8%. But the 30-year bond, and I think the 10-year are up over 4%. And the 30-year is closing in on something higher. I don't have the figures in front of me, but I would look very carefully what goes on in the bond market. We went through a crisis when Liz Truss was Prime Minister with the gilt market in London. And people actually thought that the British economy was simply going to collapse and with it, the British state. It was a very near run disaster. I think we have to look for something like that in the United States and Western Europe. But at the same time, going back to what I said originally, and this is going to sound simplistic, but I think this is true. Whatever you do, invest in anything that comes out of the ground. Food, if you grow it, it's going to be a lifesaver. The world is not going have enough food. We know that now. The fertilizer market is in serious trouble. The Russians can't compensate for it. And I don't think anybody, but perhaps the Chinese, have stockpiles of fertilizer. One of the lessons that we should learn from the Strait of Hormuz and shutting off all of this oil is that you've got to stockpile fertilizer, not just oil, also fertilizer. And again, we're back to rare earths. You've got to stockpile it, that's fine. But where's the refinery? Where's the supply chain? Who's going to own that? How do we do it? I'm not suggesting it should be nationalized. I don't suggest that at all. But we have to help firms and corporations out there see clearly into the future now. But to do that, we have to come to strategic reality as a nation. We aren't there. People are still in this bubble of fantasy that we are what we were militarily in 1991. We aren't. We're not even close. Before I let you go, just on a personal note, you're in Washington, you know the congressmen, you've been talking to them, you've been lobbying for this type of stuff. Do you find that where we are right now, are they listening more closely, realizing that this should have been done earlier, or are we just not there yet? We're not there yet. The few people who listen, there are a few, I won't name them, but they're there, are not enough. And I don't think we're going to move in a fundamentally new direction until the bottom falls out of the market. And I think that's coming. Mark Faber says so, and I'm a big Mark Faber fan, and he's been pointing to this too as well. Yeah, Mark is great. And Alastair MacLeod, taking notes, we've got to reach out to Alastair, have him back on the show soon. All right. I want to appreciate, thanks for coming on. I mean, your final message to investors, kind of watch the bond market, stay anchored in real assets, especially metals and things in the ground. You got it. Yeah. All right. Colonel Douglas McGregor, thanks for joining us here on Kitco News today. I appreciate it. Lots happening. Hopefully we get into some offering. Thank you. Thank you. Bye-bye. All right. And to our viewers, we want to hear your thoughts on the conversation. Leave a comment below. Make sure to hit the like button, subscribe to the channel so you never miss an update for the latest market coverage and spot prices. Head over to Kitco.com. I'm Jeremy Stafford. Thanks for watching.