Episode summary
Tariffs & Protectionism: Investing Needs a New Set of Rules | Luke Gromen Explains
The Meb Faber Show
· · 52 min · Hosts: Meb Faber · Guests: Luke Gromen
Summary
Luke Gromen argues that the U.S. has moved away from the post–Cold War “Washington consensus” and toward what he calls Hamiltonian economics: higher tariffs, protection of domestic industry, reshoring, and a neutral reserve asset. In his view, this is not a slogan but a structural policy shift that makes the old playbook of free trade, offshoring, and Treasury-centric global finance increasingly obsolete.
He says that regime change has major portfolio implications. If the U.S. needs more domestic production, then inflation, nominal wages, and real assets should benefit, while long-duration Treasuries become “certificates of confiscation” on a real basis. Luke argues that gold should be a core holding because the government cannot repay its debt in nominal terms without either much lower real rates or a major productivity boom, and he thinks the former is more plausible. He suggests 5% to 10% gold as a minimum starting point, with more appropriate for some investors.
Beyond gold, Luke sees opportunity in electrical infrastructure, industrials, and selected non-U.S. equities, especially markets tied to manufacturing capacity. He is also constructive on AI as a technological breakthrough, but says it may intensify fiscal stress by borrowing heavily while eroding the tax base. In his telling, the market is already playing by a new set of rules, and investors need to adapt.
Key takeaways
- Luke Gromen says Hamiltonian economics means higher tariffs, reshoring, and a neutral reserve asset, and he thinks that policy shift is already underway.
- He argues long-term Treasuries are bad real-return assets in a world of persistent deficits and secularly lower real rates.
- Luke says gold should be a 5% to 10% starting allocation, with 25% a reasonable benchmark for investors seeking durability across inflation and deflation regimes.
- He favors electrical infrastructure and industrials, citing flat U.S. grid generation since 2004 as a sign that domestic capex has room to run.
- Luke thinks AI is revolutionary but fiscally dangerous because it borrows capital while weakening the tax base tied to white-collar employment.
Notable quotes
“The stupid Washington consensus is what Vice President J.D. Vance referred to the financializing of the U.S. economy”
“Hamiltonian economics are high tariffs protect protection of domestic industry and a neutral reserve asset”
“The United States Treasury bond can no longer be the world's reserve asset under this, all right”
“Gold is where you want to be for your duration, not long-term bonds”
“I think 5 to 10% everyone should have in physical gold, I think, number one”
How the episode opens
Tell us what the stupid Washington consensus is. — The stupid Washington consensus is what Vice President J.D. Vance referred to the financializing of the U.S. economy. It's as big or bigger than the Berlin Wall coming down in '90 and everybody's big as Nixon closing the gold window in '71. 120% that the GDP, multiple dumb wars.
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Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
What is up, everybody? Summertime almost over. Not so much here in LA, maybe in Cleveland. Today, we got another awesome episode. Today's guest is Luke Gromen, founder of the macro research firm which I've been reading for years, Forest for the Trees or FFTT for short. Luke is one of the sharpest voices out there on dollar, gold, Treasury, how the plumbing of the global monetary system actually works. Luke, welcome to the show.
Thanks for having me here, Meb. It's great to be here. I'm excited to talk to you. — I wanted to kick off with a fun question. Tell us what the stupid Washington consensus is. — The stupid Washington consensus is what J.D. Vance, uh, Vice President J.D. Vance referred to the financializing of the U.S. economy after the fall of the Berlin Wall.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tariffs and protectionism
- hamiltonian economics
- reserve asset and treasury
- gold allocation
- ai and taxes
Companies and tickers mentioned
- OpenAI
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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