October 25, 2023 • 53 mins
In this episode, Jeff Deist joins to discuss economics, policy, MMT, and practical steps that we can take to make our nation more free and wealthy. For more information on Monetary Metals, visit https://goldyield.monetary-metals.com/heresyfinanciallp
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Episode Transcript
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Speaker 1 (00:00):
What's up, everybody.
Speaker 2 (00:00):
Welcome to financial Heresy, where we talk about how money
works so that you can make more, keep more, and
give more. Today, I've got a fantastic guest on the show.
His name is Jeff dist Jeff is the former president
of the Mesas Institute. He's a writer, he's a public speaker.
We have a fantastic conversation here about economics and politics
(00:22):
and growth, and he is currently with the with monetary
metals and so really excited for this conversation here and
without further ado, let's dive in. All right, Well, thank
you so much Jeff for joining me today. Really excited
for this conversation. I've been following you for a long
time now and so I'm really excited to be able
(00:43):
to pick your brain on some of these topics in here.
Here's some of the insights that you've been able to
build along the way.
Speaker 1 (00:50):
So thank you, thank you, thank you for having me.
Speaker 2 (00:54):
Let's start off for those of anybody who is not
familiar with a brief outline line of your story and
how you got where you are right now.
Speaker 1 (01:05):
Well, in the nineties I had a friend going to
UNLV where Murray Rothbard and Hans Happa taught, and so
through him I was introduced to Austrian economics and developed
an interest in money and interest rates and issues surrounding money, inflationism,
how we finance government, how government finances all kinds of
(01:28):
bad things it does. Happa likes to say that the
market produces goods, governments and central banks produce bads, but
nonetheless they produce these things. And so really I've been
interested in economics strictly from a lay perspective. I'm not
an economist really since the nineties, so I would say
I'm a reasonably well read layman in econ and I
(01:52):
have obviously interests in the broader cultural and political program
of what we'd like to see as a better or
freer society.
Speaker 2 (02:00):
Mmm. I like that. I've heard you talk about before
how how wealth is accumulated, and I really like the
way that you framed it. But you know a lot
of you know, modern economics, which we'll get into kind
of the m MT talk in a little bit, but
the kind of it seems like the concept, uh is,
(02:24):
is that we we have the ability, through monetary policy
or fiscal policy, just basically through policy making, to decide
what wealth there is and then decide how to distribute it.
And you've talked about kind of a different frame that
wealth is built and accumulated over time and kind of
(02:45):
passed down even things like knowledge. So can you talk
about that that that capital accumulation over time and how
that process works contrary to you know, the view that
policy just decides.
Speaker 1 (02:56):
All of that. Well, that that's such a broad question.
There are broad and narrow definitions of capital. We can
talk about things like human capital and cultural capital, and
you know, the knowledge and wisdom and know how and
life lessons and understanding of human nature that hopefully we're
passing down generation after generation. But there's the narrower Economists
(03:18):
talk about capital in the sense of, you know, wealth
used to produce income. So we can really view capital
in two different ways. But I think most of modern
economics is not only doing no good, it's doing a
lot of bad in the sense that we have flipped
our fundamental understanding on its head, which is that a
(03:42):
healthy economy is based on consumption rather than production. So
you know, you can go back and talk about mark
or you can talk about Canes, you can talk about
neoclassicals or Austrians, or you know, any kind of school
or brands are thinking in economics that you want to
talk about. And then there's the political overlay. But at
the end of the day, any economy has to produce,
(04:02):
it has to produce goods and services, and so it's
from that production that we all have the ability to
demand other things. Right, if you and I don't get
up in the morning and work for a living and
produce some income, we won't have any demand as consumers.
Now we might wish for things, I mean, our desires
are unlimited. It's our ability to actually produce and purchase
(04:25):
things which is finite. And so economies have to produce.
And somehow it's absolutely bizarre. It's during the twentieth century
is losing sight of that. And so we've developed this
idea that fiscal and monetary policy I hate both those terms,
but will use them in the normal way that they're used,
That economies can be engineered, that they can be commanded,
(04:49):
that we can have policy tweaks on things like money
and interest rates, the regulatory structure of the tax burden,
whatever it might be, and that we can sort of
fine tune things. Well, it turns out that really all
we can do is destroy capital and destroy production by
doing that, and that we at best governments and central
(05:10):
mix can get out of the way and set the
conditions for human beings to go do what they do. So,
you know, I worry a lot about economics because economics
is a social science. Unlike the natural sciences, economics is
not dealing with molecules or atoms, or gravity or mathematical equations.
It's dealing with these strange, stubborn, crazy emotional creatures called humans.
(05:34):
And how is it eight billion of them, seven billion
of them get up every day in the world and
interact with one another. So that's a decidedly social science
and in my opinion, not fit for modeling and not
fit for aggregates and data. It's a social science and
that it's supposed to help us understand human relationships in
(05:57):
the world. And I don't think economics does that today.
I think it obscures things. I think it forces us
into aggregates like GDP and CPI and all these other
meaningless ideas. And so when we lose sight of what
economics is supposed to be as a discipline or as
(06:17):
a field studying human or interaction, and then when you know,
we've start to view economies as things that can be
commanded or controlled, we really get into a position where
we're flying blind. And I think the economics profession today
is flying blind. I think central bankers are flying blind.
(06:37):
I think politicians are flying blind. And we've got a
lot of hope. We've got a lot of hopium in
the West. We're rich, and so we'll just always be
rich and it doesn't really matter what we do, and
incentives don't matter. And we can command things like green energy,
we can command things like a living wage, we can
(06:58):
command things like income equality, we can command things like
prosperity on the third world. And none of these things
are true. So we're living in this opium time and uh,
you know, I've got a couple of teenagers and they,
you know, their future and their material well being done there.
(07:18):
That's that's my number one concern.
Speaker 2 (07:22):
Now, do you think it's it's difficult for me to
uh to play the devil's advocate here, but I'm going
to try. Do you think that the idea is you
know that that most people agree that if you have
policies that are bad enough, you can destroy you can
destroy wealth. And so the idea would be Hey, we
(07:44):
are doing things incorrectly right here. You think we should
go one way, Let's say modern monetary theorists suggests we
should go another way, and the debate is on which
one of those will produce the Well, we'll we'll create
the foundation that will help produce the most manwealth. For instance,
like you mentioned, like the living wage thing, if we
(08:05):
just make it a law that the minimum wage is
fifty thousand dollars per year, and just that the downstream
effects of that, while there is a cost to that
will will be will be, those costs will be offset
by the net benefits.
Speaker 1 (08:23):
Well, I would say, not only do we not agree
on systems or approaches, I'm not so sure we agree
on goals. I think there are plenty of people in
the progressive left who would say, no, no, no, A
wealthier society in total is not the goal. The goal
is a fairer society where the existing wealth is distributed
(08:43):
more evenly, and we would actually accept less total wealth
in exchange for more parody in how to get point right?
So you know, at some point it's awfully hard to
imagine a political compromise or an economic program that we're
going to work out with people who just fundamentally see
(09:05):
the world so differently. And that's why I'm a huge
advocate of any sort of political decentralization, of moving away
from central banks and central governments, allowing more regional or
local control over economics matters. I might not get my
wish there, but nonetheless, you know, so I'm not so
sure that there's a way to, let's say, persuade MMTS
(09:32):
at this point. I'm more interested in separation and persuasion
because look, the broad strokes of a libertarian political program,
the broad strokes of a laissez faire economic program have
been laid out for over one hundred years, and with
the digital era, there's no longer you know this idea
(09:55):
that well, people just haven't heard these ideas or they
haven't been exposed to it. I mean, you can basically
be exposed to any kind of political or economic thinking
for free at your fingertips on your phone today if
you care to take the time. So I think we
have to understand that to an extent here, we're moving
beyond persuasion. The the irony of the digital information age
(10:19):
is it hasn't caused people to become more open mind.
It's caused them to dig in and and and dig
into their to their priors. We might say, so, I'm
not confident that our time, and when I say I
mean like minded people, that our time is well spent
trying to convince m mters of the insanity of their perspective.
(10:43):
I think it's better to acknowledge that they're just wired differently.
They believe things which which we fundamentally disagree with, and
try to go about building things, you know, on our
own where we can. I think that idea of kind
of decentralization bottom up, you know, or even just you
(11:03):
do you, I do me, parallel societies. I think.
Speaker 2 (11:09):
We'll touch on that a couple of times. So at
the rest of this conversation, the first place I'd like
to dive into that a little bit more is the
idea of let's say, either secession or national divorce. It
seems like in the last year or so, I've noticed
a few times where that conversation gets brought up, you know,
on a you know, by a major politician or a
(11:32):
person who has a large audience, and it seems like
there's always a huge backlash against that, when, in my opinion,
I look at that and think, well, that means everybody
gets what they want. Like you, you get to try
out what you want. I get to try out what
I want. What do you think the root cause of
that backlash is? And do you think that we will
(11:54):
end up getting there either by choice or through just
the current system breaking?
Speaker 1 (12:00):
Oh gosh, it's so hard to say. On the one hand,
we don't want the Balkanization of the West or of
America because of the potential for violence that would come
with that. But on the other side, we don't want
to be vanquished by progressives. And progressives tend to not
want to give up any control over any area. They
(12:22):
view their program as inevitable, as part of a deterministic
arc of human history, the wig theory, we might say.
And so when you start to say, look, progressives, you
could have everything you want right here and right now,
but only in certain states and then let these other
states be their way, they tend to say no to
that bargain. Now. But could a greater degree of more
(12:43):
aggressive federalism alleviate some of these things we're feeling, And
I'll speak to America in particular. I think the answer
is yes. I think we saw during COVID, a lot
of soft secession happening, people voting with their feet. Obviously,
places like Florida and Phoenix and Dallas, Fort Worth and
Austin just absolutely boomed during COVID. A lot of places
(13:04):
like New York and New Jersey and certain cities in
California hemorrhaged residents during that same period. So, regardless of
what people say, we like to watch what they do,
for one, but more importantly, you know, at some point,
I think we just have to say, the country's too big,
it's two and wielded to have let's say, one Supreme
(13:25):
Court decision of five justices making rules that three hundred
and thirty million people have to live by concerning abortion
or concerning guns. You know, maybe we could have different
rules for guns in Manhattan than we do in the
middle of nowhere in Alaska. You know, there's is you know,
kind of a I don't mean to be trite, but
(13:47):
there's an example of where federalism just makes sense to
most people. So I view federalism the kind of aggressive
federalism that really the original Costitution I think was designed
for with a ninth and tenth Amendment as a path,
I'm not sure that we can sell that, but it's
(14:08):
better than any other idea I have at the moment.
Let me put you that way.
Speaker 2 (14:14):
Yeah, yeah, that makes sense. So can you can you
explain just very very briefly, just you know, basically that
idea of federalism versus and I don't even know if
I'm making a right comparison here libertarianism versus anarchical capitalism. Like,
what what you mean when you say federalism.
Speaker 1 (14:36):
Well, to me, federalism simply contemplates devolving power away from
the central government in any system and increasing authority or
power more locally or regionally. That doesn't mean it would
always provide a better answer necessarily, but we could look
at Switzerland as a great example of an explicitly federalist system.
(14:59):
We're so much is designed not at the federal level,
not even at the cantonal level, which is the equivalent
of our US states, but the commune level, the communal level,
which is the equivalent of our cities. And here in
the US our tax were intends to run about eighty
percent federal, maybe twenty percent state, And well in Switzerland
it's flipped, so you have more of a say over
(15:22):
presumably the local happenings or local affairs, especially if you
tend to if you're in a smaller commune or something.
In Switzerland, down to even questions of immigration, local communal
votes can have an effect on whether someone's allowed to
become a Swiss citizen, for example, or a Swiss resident,
whereas in the US and most western countries, immigration, which
(15:44):
is a really thorny question, is entirely at the national level.
So I think Switzerland and its constitution. If you go
to the Swiss government's website, which is of course in
four languages, five languages, it's got some really interesting language
about the principle of subsidiarity and how the Swiss view
this is a way of de escalating social problems, and
(16:08):
I think we could learn a lot from that. But
you know, federalism is simply to me working within our
current federal system where we have the three branches of government,
YadA YadA, and saying, hey, look, Article one, section eight
of the Constitution grants Congress really pretty limited powers, enumerate
(16:31):
in powers, and basically anything not listed under Article one,
section eight. In my opinion, Congress is not supposed to
be legislating about. Now, Okay, that you know, virtually everything
they legislate is wildly beyond their Article one section eight powers.
But nonetheless you can use that as a as a
guiding north star and say, okay, we've got Article one,
(16:53):
section eight, how does that work with the ninth and
tenth amendments and g whiz. A lot more ought to
be done at the stage or even local level. And
I think that's that there's a lot of promise there,
because again I don't I don't want to vanquish progressives.
You know, progressives exist, they exist in large numbers, and
I don't necessarily just mean that in the left or
(17:15):
right idea of the term progressive. I mean more on
the idea that we have to constantly be perfecting humans
so that they can serve the state better. That you know,
I don't I don't really care to vanquish progressives. And
I understand that subsidiarity or federalism is imperfect in the
sense that you might be that non progressive person stuck
(17:37):
in a really progressive district, let's say, really progressive part
of the country, let's say the San Francisco Bay Area,
and before Jeff's idea of federalism came along, or aggressive federalism.
You know, more things were decided in Washington, d C.
And now that some of those things are decided in
Sacramento or even San Francisco City Hall, and you know,
(17:57):
so I feel even worse off. Yes, there are going
to be casualties of federalism, but overall, I think it
is a workable approach within the framework of national, state
and local government we have, within the framework of the
constitution we have. So it's not scary to people. It's
you know, it takes us away from this idea that
(18:18):
we're you know, having a civil war, a cold civil war.
Takes us away from this idea of scary secession in
the civil war and all the things that that conjus up.
So you know, better, not perfect, I think is how
we out of view federalism.
Speaker 2 (18:32):
And it exists within the current system, So that makes
that makes sense. Okay, Now you mentioned an issue that
seems like it is becoming extremely contentious recently, which is
which is immigration. And uh, you know, different administrations have,
you know, handled it different ways. It seems like immigration
(18:53):
right now, illegal immigration is probably higher than it's been
in h in a while. So this is something that
I think there's even it seems like big disagreement on
in like libertarian circles. You know, this idea of open
(19:14):
borders versus versus closed borders. What are your thoughts on that,
and how do you know, like property rights and public property,
how do you deal with that.
Speaker 1 (19:29):
Yeah, it's a very tough question because there's been so
many layers added to the onion over the years. You know,
it's a very different environment than nineteen hundred when people
would come here almost penniless, with no ability to return
necessarily and no real welfare state to speak of, and
(19:51):
you know, really wide open parts of the country for
homesteading or whatever it might be, or for growth. So yeah,
it is authority question. It's made thornier by the fact
that we don't have, in my opinion, strong property rights
to the United States, We have a welfare state, we
have these other complicating factors. But I really think that
there's a neat and simple and elegant approach to it,
(20:14):
which is simply sponsorship, which is to say that immigrants
either on their own have to obtain a bond by
saving up enough money or whatever to purchase such a bond,
or through sponsorship. That could be anything from family in
the US to an organization like Catholic charities. Any number
of sponsors in America could simply fit the bill for
(20:36):
their bond, and that bond would guarantee or trigger against
any criminal or welfare activity by the immigrant, let's say,
for the first ten years of his or her time
in the United States, and then also extinguish or put
off any citizenship or voting rights for extended period, so
that the immigrant could effectively prove that he or she
(21:00):
had assimilated, that he or she was not a criminal
or welfare burden on the United States. And this would
eliminate a lot of the national control uh you know,
I n ass and all that, and simply you know,
I mean, a bond simply means that there's someone here
(21:22):
inviting them, willing to vouch. That's the difference between you know,
goods and services, when when we advocate for free market
trade and goods coming into the United States, by definition
someone's ordered them, you know, and goods don't have volition
to go do things once they're here, unlike humans. So
(21:43):
you know, this sponsorship idea of I think is the
most humane and sensible and workable compromise we might have
in the short term, the idea of bonding and sponsoring immigrants.
But yeah, I think it's going to be you know,
what we've seen in Israel over the past couple weeks
has probably done some injury to the open borders narrative here.
(22:06):
And you know, I think the nation state, for all
of it's good and bad, plenty of bad there. I
think the nation state, the idea of a sovereign nation state,
is going to be more stubborn and more enduring than
the Francis Fukuyamas thought it was. I mean, if you
told Woodrow Wilson over one hundred years ago now that
(22:26):
the nation state would still be the central organizing principle
for most of the world by twenty twenty three, I
think he would have been surprised and shocked, probably unhappy.
But so the fact that, you know, a lot of
states are drawn along artificial borders, like what we've done
in Iraq in the Middle East is a prime example
(22:49):
of that. So nations and states are not contiguous. But
I do think that there is a stubborn human tendency
to group. We can call that a nation for lack
of a better term, where that's racial, linguistic cultural, ethno religious,
whatever it might be, and that these attachments are not
so simply done away with with some sort of globalist project,
(23:12):
and that if we're going to be good praxeologists, or
if we're going to have you know, hopefully a fewer
wars and conflicts, fewer mass migrations causing problems, all that
that we ought to you know, understand human nature and
accept it for what it is and work within it.
So I personally am not an open borders advocate. I
(23:35):
don't in my opinion, and there's differences, you know, to
even within my own firm, Monitary Metals on this, and
you know where I used to work at the Mesa's Institute.
There are certainly differences of opinion there. But I don't
believe that open borders is a principle. I think it's
a policy, and I think that policy depends. I think
(23:58):
the right to leave a place, in other words, to
not be a slave or to be falsely imprisoned, is
different than the right to enter a place. And so
I do not fall into the open border's crowd, but
I certainly understand the sentiment, and so the the the
sponsorship thing is my stab at an approach.
Speaker 2 (24:23):
I like that, and a lot of the things that
you're talking about are kind of you know, from the
perspective of, uh, there's you know, in my mind, maybe
some ideal that we that is hypothetically possible, but looking
at the world realistically, there's a very very small chance
we could ever actually approach that. So given where we
(24:44):
are currently in our current reality, here's a solution that
I think would move us in the right direction. And
it's actually a solution that is is doable with with
that kind of with that kind of you know, frame
of reference. Looking at something like fiat money, it seems
like sometimes there's nothing that that can be can be done.
(25:06):
It's like the dollar is so entrenched around the world
that it almost seems like, you know, any any solution
or suggestion to try and move in the right direction
is you know, just as has low of likelihood. Is
something that we would say, okay, return to a you know,
one hundred percent gold standard tomorrow or something like that.
(25:29):
So getting into the kind of this idea of of
of money, can you talk a little bit about you know,
we have you know, the the you know, debate about
currency versus money. It's just government money versus market money.
What are the differences between those two and kind of
(25:50):
how did we get to where we are today with
this terrible money entrench in our system that we can't
escape from.
Speaker 3 (25:56):
Well, it's a it's a sad tale, you know, but
part of the reason we got there in America is
that we've had it so good for so long that
the average American hasn't had to think.
Speaker 1 (26:09):
Much about money. Right, the US dollar was a pretty
strong performer, to put it mildly, and our status is
the world's reserve currency, as you know, has allowed us
to export a lot of inflation. And it turns out
that when you go to Walmart and flip flops or
six bucks, you know, that's pretty nice. That makes Americans
(26:30):
feel wealthier, and in fact, we are wealthier as a
result of the dollar is the world's reserve currency. The
problem is that we've been sleepwalking for so long that
the troubles, the cracks are starting to show in the foundation,
and we don't even really know what money is conceptually.
I think as a society we've lost sight of that.
We now view money as a creation of government. It's
(26:52):
a political tool. It's a carrot and a stick. Sometimes
it's literally bombs and tanks and plays. Sometimes it's literally
welfare in the form of foreign aid. So that's the
care and the stick. And we've completely lost sight of
the idea that money originally arose as the most saleable
(27:13):
commodity in an economy, with that convenient from salt to seashells,
to gold to silver, and then ultimately to fiat, maybe
some day to bitcoin. So the idea of what money is,
I think, has been largely lost on Western audiences. More importantly,
(27:33):
or as importantly, I should say, money, credit, and interest rates,
three very separate and distinct things have sort of become
glombed together in people's minds. Again, interest rates are a
policy tool, something to be set by central banks. You know,
the difference between money and debt's what's actual money versus
(27:55):
what's a credit instrument. Well, a dollar wasn't Originally money
was a note that you were able to redeem for money.
It was the coupon that you could go get real money. Goal.
But then eventually the dollar, the paper dollar, became the
thing unto itself, and that was when in people's minds,
in our conception, the idea of commodity money was really severed.
(28:19):
And you know, now that's at least, you know, since
the nineteen thirties, so almost one hundred years now, and
then things accelerated with Bretton Woods, things accelerated in nineteen
seventy one with Richard Nixon. So now we've all just
gotten used to the dollar as this political tool. And so,
as you said, it's awfully hard to get away from that,
(28:41):
and the rest of the world might wish to get
away for that. People are geopolitical enemies, so to speak, China, Russia,
the bricks. However you want to look at it. In
the long run, Iran, they might all benefit very much
from seeing the US dollar knocked up. However, in the
short run, they got lots of dollars themselves, or they
(29:04):
have lots of treasury bills themselves. So it's a very strange,
almost pregnant situation where, you know, we've never really seen
the world's reserve currency, at least not a Fiat one crash.
The Spanish managed to produce too much sober for a period,
(29:24):
and so that's kind of the historical example. But for
the most part, we don't know what a sovereign, what
a global currency crisis looks like we know what happens
when the Deutsche mark flames out in Wymer, Germany. We
know what happens when the Argentine peso goes south in
the late nineties. We know what's happened in Venezuela in
(29:46):
just the recent the past five years or so. You know,
we understand what currents hyper what devaluation or hyper inflation
looks like at the national level where we can isolate
it and observe it visa these other currencies, visavise trying
to bring imports into those countries. Heck, even Turkey right
(30:07):
now is really in a bad place with their currency
relative to the Euro and the dollar. But what we
don't really know, and what is above my pay grade,
is what happens when the world's reserve currency melts down.
And I can only imagine it melts down relative to
actual goods and services oil, food, commodities, gold, et cetera.
(30:30):
And that's that's a scary day. And so I'd like
to think that we, as rational people would work today
to try to prevent that from happening, and we would
take steps today to try to gain some control over
our monetary system. But it doesn't look like it doesn't
(30:52):
look like Congress is ever going to stop spending. It
doesn't look like the Fed and the Treasury in combination
are ever going to stop printing. Why you use that
euphemistically electronically in producing and increasing the amount of dollars
circulation M two. The empty money spot was actually going
(31:12):
down there for the first time in about forty years.
It's gone back up. You know. Interest rates have shot
up enormously since that forty year basic fall for eighty
two to twenty twenty two, and so now we find
ourselves in the very uncharted territory of having the safest
collateral of all the US Treasury bond actually becoming a
(31:37):
risky investment because if you hold treasuries issued at three
percent and now they're paying five, you're badly underwater on
your holdings. A lot of small banks for funding that out.
So it really is just a crazy time because there's
so many forces at work that are at odds with
each other. I don't think the US dollar crash anytime soon.
(32:02):
I think, if anything, tremors in the global economy still
lead to what's perceived as a flight to safety, which
is still the US dollar relative to other assets and
you know, for the moment, I think people holding dollars
are probably wise and there may be some bargains to
(32:23):
be had if a real crash comes. A lot of
people got very wealthy during the Great Depression because instead
of being debtors, they had cash. And let me just say,
as an aside to your listeners, I strongly recommend to
the extent you're able to have one thousand, five twenty
thousand dollars in physical cash. You know, look, I'm no
(32:44):
fan of the to be a dollar, but paper money hidden,
you know, spaced around your home, so that if there
were ever a bank holiday, a bank shutdown, some kind
of national emergency, you know, another COVID, a terrorist events
are things that could prevent you from getting access to
your dollars, and the digital payment systems might fail. I
(33:08):
think having some cash on hand to go deal with
the rest of the world in the in the immediate
short term is a great idea.
Speaker 2 (33:15):
Yeah, yeah, that makes sense, especially considering money is pretty
much all digital. Even something as simple as a cyber attack,
which you know, not not simple, but it could render
even temporarily your digital money inaccessible, So that certainly makes sense.
There's I believe This is a quote from Mesus and
I could be butchering this, but it's something to the
(33:38):
effect of that, over long enough time horizon, every government
only exists at the consent of the governed. And so
a correct me, I'm the head if I'm wrong. But
but b do you think that that sentiment also applies
to money, That even money imposed on a system through
you know, declaration by law, over a long enough time horizon,
(34:03):
it becomes market money. I mean, if you look at
what's happening in Lebanon right now, one of the worst
rates of inflation. They try and get rid of the pounds,
and they get try and get dollars. So do you
think that sentiment somewhat applies And I or did I
completely butcher it?
Speaker 1 (34:19):
No, Misas did say that talking about governments are as
liberal as illiberal over time as their citizens will accept.
And I think that's true. And you know, we like
to joke about that in America. Oh you know, as
long as you have your social media and your NFL
football and your Budweise, your Americans are so you know,
they'll never rise up and wise up. And you know
(34:44):
then no, I mean that that to me is ridiculous.
There's nothing wrong with that. You know, if people are
materially comfortable, we don't all have to be these hyper
political animals spending all of our time thinking about monetary
policy or something like that. I mean, people have mortgages,
they have kids, they have school, they have health problems.
Speaker 2 (35:05):
You know.
Speaker 1 (35:06):
I think sometimes people in our camp tend to be
a little dismissive towards average folks. I mean, the dollars
works pretty darn well for average folks up until the
last last averages COVID and all the all the stimulus
that set inflation to a hyperdrive. But you know, the
dollars work pretty well. And so I think Mesi's was
(35:28):
largely correct. I think it's human nature to go along
with something as long as it's not too onerous. A
revolution or a war is generally something that only pretty
desperate people will engage in, if history is our guide,
and so I think we should expect that again. And
that that that probably goes to Brent Johnson's dollar milkshake
(35:51):
theory and the idea that the US dollar is not
going to likely is not going to be knocked off
its perch any time.
Speaker 2 (35:58):
To speaking of competitors to the dollar from the standpoint of,
you know, something that would be viewed as a more
sound alternative. Usually there's two camps, you know, bitcoin versus gold.
One of the it's okay, so this is I guess
I'm asking your opinion on this. It's sometimes tatted as
(36:19):
a feature. Sometimes tatted is like a you know, it'll
be the last nail on the coffin. Is the limited
supply eventually gets, you know, the pure scarcity gets to
a point where you really can't have debt in a
pure bitcoin monetary system because the limited limited supply really
you can't have, you know, a system of credit and
(36:42):
interest rates on top of that. Can you can you
talk about your you know, opinion on gold versus bitcoin
and what what the what the the benefit if there
is any benefit or utility to having a credit system,
uh built on top of my.
Speaker 1 (37:01):
Well, I think credit is something that naturally arises in
the marketplace, and so it's human. It's for human for
credit to be issued, and so we shouldn't think credit
is per se bad. What's bad about credit today is
that the amount of credit available and the rate at
which one has to borrow, both of those are tinkered
(37:23):
with by governments and central banks, as opposed to simply
reflecting the marketplace. What I mean by reflecting the marketplace
is that we should have savers and borrowers, and the
more people save money, the more money is available to lend,
and we would expect the interest rate to fall and
vice versa. Right, interest rates should be an exchange rato
that should reflect the time preference of borrowers and savers. Instead,
(37:47):
we have interest rates which are again effectively policy tools,
not entirely but somewhat set by central banks, targeted by
central banks. So I think that's a real problem. You know,
the ultimately finite amount of bitcoin, which makes it the
hardest money in that sense, in terms of its stock
(38:10):
to flow ratio, ultimately differs from gold. Gold can continue
to be produced even when gold shoots up in price
and the economics workout for minors. It takes almost superhuman
levels of mining effort to increase the gold supply by
let's say two percent in any given calendar year. It's
(38:30):
really hard. So gold is very hard too in terms
of its stock to flow ratio. You know, one thing
Rothbart said is we don't care about the money supply
per se prices will adjust. What we care about is
government monkey around with the money supply, and I think
that's true. Keith Wiener, who's our founder at Monetary Metals,
(38:51):
is a big critic of bitcoin, among other reasons, in
that sense that how do you create a credit and
financial system off of an asset that is fixed in
a mouth. I guess the short answer is, well, you
can hypothecate it digitally. You can slice up. When we
get to twenty one million, you know, you can slice
it up as much as you want. And also, you know,
(39:16):
gold has gold has the transportability issue. You know, gold
has its its own challenges. Central banks basically sort of
you know, overtook the gold standard and the private gold
standard turned it into a governmental gold standard. So there
are critiques of both. I'm I'm I straddle both camps
(39:41):
because I want I want. I think gold will continue
to have a moneyness. I think it will continue to
act as a financial asset because it has for thousands
of years, and until proven otherwise, I'm not going to
bet against its many thousand year track record. I want
bitcoin to succeed because, uh, the idea of resting government,
(40:04):
resting money away from government and from any centralized issuer.
I think is a is an exceedingly noble political project,
and uh, one that that I want to support. So
bitcoiners don't like that I'm a gold guy, but nonetheless
(40:25):
I am.
Speaker 2 (40:27):
Yeah, yeah, that that makes a lot of sense. One
of the one of the critiques that is commonly brought
against gold is that it's you know, it's a yellow rock,
it's a brick. It does nothing. It just sits there,
doesn't produce anything. And so I'd like to hear your
thoughts on that, because well, number one, monetary metals is
(40:48):
you know, obviously changing that I want to I want
to hear kind of your your your thoughts and your
explanation on that. But number two, when you look at
something like real yields have been rising, uh, you know,
treasury rates have been going up for the last two
years now while the inflation rate CPI has been dropping.
(41:08):
So real rates have been rising, and gold has not
done what you would have typically expected it to do.
You know, everybody says, hey, really rates rise. You know,
gold's gonna fall because it's it doesn't produce a yield.
And so what there is, you know, I guess, is
this is a couple of questions wrapped up in one.
But there's a monetary premium to gold, for sure. It's
(41:28):
you know, it's worth a lot more than just its
industrial use use value right now. But number two, historically
credit has always existed and gold was always money. So
you can't really say that gold has no yield because
it always has in the past. I mean, just like
the rock in your hand doesn't, but the way that
it's used, you can. You can turn it into a
(41:52):
producing asset.
Speaker 1 (41:54):
Well, you could say the same thing about a piece
of paper money. You know, it just sits there. Gold
is shining, it just sits there. A piece of paper
just sits there. I heard an interesting podcast a couple
of months ago with Caitlyn Long from Custodia Bank out
in Wyoming. She's a big bitcointerer, a lot of you
probably know her name, and a guy named Tom Luongo
who's a really interesting thinker that I've gotten to start
(42:14):
reading the last couple of years. And Caitlin made the
comment that once we lost gold backing for currency, you know,
completely in nineteen seventy one, in the case of the
United States, where even foreign governments can no longer redeem
their paper notes for gold. She said gold lost any use.
You know, at that point the whole point of gold
is to act as a tether on debt, and once
(42:36):
you don't have that anymore, what's the point of gold?
And by that she meant, you know, it ought to
be now reduced to basically its industrial or jewelry uses.
But yet I would argue it hasn't. In the fifty
years since nineteen seventy one, fifty two years now, since
nineteen seventy one, gold has maintained a price per ounce
(42:56):
in dollars, which I would argue is well above it's
purely for industrial or jewelry uses. So that tells me
that for fifty years since gold has been irredeemable, there's
still a financial or monetary premium placed on its value.
So I think that is very very interesting, especially as
(43:17):
I mentioned, you know, a couple of thousand years prior
to that, it was money money, So I think gold
does retain some money. Thisss And look, there is something
like thirteen trillion dollars worth of market cap physical gold,
and it's laying around, it's a shiny yellow lump all
over the world, and not only just laying there people
(43:38):
are paying to ensure and store it. So you know
we've got all these you know, we've got people just
desperate for finance and capital right now. It's a very
tough environment for startups. It's a very tough environment for
lending in general. As you know, people are paying eight
points on mortgages. People are paying ten percent on car loans,
(43:59):
which is just absolutely crazy. So there's a credit crunch
which I still can't quite put, you know, wrap my
arms around that, because we've done produced nothing but money
and credit since eight on hyperdrive. I mean, it was,
why did the FEDS balance sheet go from far less
(44:19):
than a trillion to over nine trillion, and yet somehow
we have a credit crunch. Look, I realized that fed's
balance sheet is mostly reserves. Their reserves were not let out, okay,
blah blah blah. But nonetheless, how does our FED going
to hyperdrive? We still have this credit crunch? You think
you think we would have credit dropping from heaven and
you know your local Cadillact deal would be coming by.
(44:40):
You say, Jeff, here's a point oh one percent Cadillac,
But no, a Cadillac's ten percent. I don't understand that completely.
But nonetheless, there's thirteen trillion dollars a goal out there.
Why don't we use it? Why don't we put it
to use? It could collateralize anything from giant insurance companies,
(45:00):
it could. It could serve as collateral for all kinds
of loans. It could. It could, you know, without moving
any of it, without any transaction costs, you know, just
simply by lawyers moving paper around. You could pledge gold
to all kinds of projects to back them up. You
could use gold for insurance and reinsurance purposes and monetary models.
We use it for basically for inventory and companies that
(45:25):
produce gold, you know, refiners, mining companies, jewelry companies, industrial uses.
So there is there are uses that gold can be
put to, and I think that all flows from it's
it's moneiness. It still holds a degree of moneyness fifty
years on from nineteen seventy one. So that's that, to me,
(45:48):
is an interesting project. Let's use gold to finance production,
actual production of goods and services. Companies need money, they
go out and borrow money, they issue, you know, they
go out and get commercial credit if they can at
a pretty high rate right now, or they issue a
bond if they can at a pretty high rate, or
(46:09):
they sell equity if they can at a pretty onerous
evaluation relative to the issuing company. You know, So we've
got this thirteen trillion dollars worth of gold that's just
totally overlooked. It's just sitting there. If thirteen trillion dollars
worth of cash we're sitting somewhere, people would be tapping
(46:29):
into it. Yeah, they'd be borrowing it, they'd be pledging it,
they'd be using it. And yet somehow gold escapes this analysis.
So we're you know, I hope that some of that
thirteen trillion be put to use.
Speaker 2 (46:44):
Well, I really, I really like the work that Monetary
Metals is doing in this regard. You know, just number one,
I'm a customer at number two. I'm an investor in
the company as well, and the company has sponsored my
YouTube channel, The Passed as well.
Speaker 1 (46:59):
So I'm, you know, all on board.
Speaker 2 (47:03):
The The idea that I talk about sometimes is kind
of like a little bit of what we were talking
about earlier, kind of like that those parallel systems where
it's like, you know, hey, here's what I think the
ideal should be, but here's one practical step that we
could actually take and for me, one part of that
is kind of like putting yourself on your own sound
money standard. So it's like, yeah, it'd be great if
(47:26):
we could convince the Federal Reserve or the government to
shut down the Federal Reserve and just have you know,
a money that's purely decided by the market. But since
that's not really in our power to make that happen,
what I can do is, you know, personally, you know,
(47:46):
use products or services and act in a way where
I'm kind of emulating that, you know, a sound money
standard for myself. One of those products is you know,
our companies helping people do that. As monetary metals, can
you explain, like the from the individual like customer standpoint,
what it is that they're able to do that's so
different than just like buying gold that you're paying somebody
(48:10):
else to vault.
Speaker 1 (48:12):
Well, yes, you might take a company that uses or
producers gold. Let's say a jewelry manufacturer. They might need
a couple million dollars worth of gold in ounces to
make some jewelry and sell it so they can go
out and spend their working capital. They can tie up
a few million dollars in cash and buy a bunch
(48:32):
of gold. Well, that has two downsides. One is that
they're cash that they might be using for rent, or
payroll or all kinds of things is tied up in
the inventory. And number two, while they hold that few
million dollars worth of gold and they're producing jewelry and
selling it, the price of gold might be going like this.
So if they bought a two million dollars worth of gold,
(48:54):
and if that stays even, they will sell that as
jewelry for three million dollars. But all of a sudden,
that two million dollars worth of gold drops down to
one point five million dollars worth of gold. All of
a sudden, the money they make has been you know,
has been impacted over the period of time it takes
them to produce the jewelry. So what we're able to
(49:15):
do is a mass of physical metals and provide it
to our third party customers and in exchange for a
certain number of ounces paid back at the end of
generally a one year lease for example, and so they
know exactly what they're going to have to pay back.
The fluctuating price of gold doesn't matter to them because
(49:35):
they're using it and then selling it at market rates
the amount you know, the one ounce piece of jewelry,
let's say, plus the premium the markup for their jewelry,
you know, as the as the price of gold fluctuates,
they're selling it at market conditions, replacing R one outs
at then market condition, so they know what their cost
for that inventory is going to be fixed for a year.
(49:57):
So that provides them with the ability to have that
certainty and do not have to head using futures contracts
against fluctuations in the price of gold. So that's in
a nutshell, the model for leasing gold. We also do
gold bond, which is lending gold. So that would be
a much more long term project for let's say a
mine or a refiner. We might lend them several thousand
(50:21):
or tens of thousands of ounces over a three four
five year period, and so that's just a bond. Instead
of issuing a bond for ten million dollars, they issue
a bond for x thousand ounces of gold. But nonetheless
it is capital available to them throughout the lifetime of
the bond that they pay back in installments, just like
(50:42):
you pay back a mortgage. So it's an interesting concept.
We're definitely growing the number of deals that we're doing rapidly,
and we hope that we hope that we're going to
make a difference in the market and make a name
for this company.
Speaker 2 (51:01):
Well, I think it's I think it's such a such
a fantastic idea. I mean, like you talked about it,
it eliminates the volatility and the uncertainty and the complication
by being able to denominate in gold. It also, you
know when you talk about when you talk about win win,
I guess win win win scenarios from the person who
(51:21):
has you know, one hundred ounces of gold that I'm
paying to have it stored in a vault. So it's
actually you know, the it's got a negative yield on it.
Being able to take a part of that and put
it to work. Not only is it actually just you know,
it's it's being used productively in society to do things
(51:45):
that are actually you know, creating more wealth, economic growth.
But also I get to grow my ounces and I
don't have to worry about you know, what the what
the price is. It's not like I'm getting you know, dollars, uh,
you know, it's not denominated in dollars where I have
to worry about.
Speaker 1 (52:01):
Hey, is that enough?
Speaker 3 (52:02):
You know?
Speaker 2 (52:02):
If the price of gold is changing, it's like, no,
the actual ounces are are growing because that's that's what
it's denominated and paid in. And so I think it's
I think it's revolutionary and I'm really excited to see
where it goes. And it also it's I love it
when kind of the philosophical uh mindset behind behind something matches,
(52:28):
matches what it's doing. And I know yourself and and
Keith and uh, the the general ethos behind the company
is something that I can stand behind other than just
what the what the company is doing with its products
and services. So really excited to see to see what
happens here. And thank you so much for joining me today.
(52:51):
This was a really really fun conversation I love talking
about We talked on a ton of different issues here, but.
Speaker 1 (52:59):
But it was good converse.
Speaker 2 (53:00):
So thanks for joining me.
Speaker 1 (53:01):
Yeah, thank you, Joe.
Speaker 2 (53:03):
I'll have that linked below. And then for anybody who
wants to get more and and follow you more, I
know you're pretty active on Twitter. Is there any other
place where you'd like to send people if they want more?
Speaker 1 (53:16):
Now, you can find me on Twitter and occasionally at
the Minetary Metals website, selfware on the Monetary Metals YouTube page.
Speaker 2 (53:23):
Perfect all right, Well, thanks so much and we'll talk
to you next time. Thanks,
What's up, everybody.
Speaker 2 (00:00):
Welcome to financial Heresy, where we talk about how money
works so that you can make more, keep more, and
give more. Today, I've got a fantastic guest on the show.
His name is Jeff dist Jeff is the former president
of the Mesas Institute. He's a writer, he's a public speaker.
We have a fantastic conversation here about economics and politics
(00:22):
and growth, and he is currently with the with monetary
metals and so really excited for this conversation here and
without further ado, let's dive in. All right, Well, thank
you so much Jeff for joining me today. Really excited
for this conversation. I've been following you for a long
time now and so I'm really excited to be able
(00:43):
to pick your brain on some of these topics in here.
Here's some of the insights that you've been able to
build along the way.
Speaker 1 (00:50):
So thank you, thank you, thank you for having me.
Speaker 2 (00:54):
Let's start off for those of anybody who is not
familiar with a brief outline line of your story and
how you got where you are right now.
Speaker 1 (01:05):
Well, in the nineties I had a friend going to
UNLV where Murray Rothbard and Hans Happa taught, and so
through him I was introduced to Austrian economics and developed
an interest in money and interest rates and issues surrounding money, inflationism,
how we finance government, how government finances all kinds of
(01:28):
bad things it does. Happa likes to say that the
market produces goods, governments and central banks produce bads, but
nonetheless they produce these things. And so really I've been
interested in economics strictly from a lay perspective. I'm not
an economist really since the nineties, so I would say
I'm a reasonably well read layman in econ and I
(01:52):
have obviously interests in the broader cultural and political program
of what we'd like to see as a better or
freer society.
Speaker 2 (02:00):
Mmm. I like that. I've heard you talk about before
how how wealth is accumulated, and I really like the
way that you framed it. But you know a lot
of you know, modern economics, which we'll get into kind
of the m MT talk in a little bit, but
the kind of it seems like the concept, uh is,
(02:24):
is that we we have the ability, through monetary policy
or fiscal policy, just basically through policy making, to decide
what wealth there is and then decide how to distribute it.
And you've talked about kind of a different frame that
wealth is built and accumulated over time and kind of
(02:45):
passed down even things like knowledge. So can you talk
about that that that capital accumulation over time and how
that process works contrary to you know, the view that
policy just decides.
Speaker 1 (02:56):
All of that. Well, that that's such a broad question.
There are broad and narrow definitions of capital. We can
talk about things like human capital and cultural capital, and
you know, the knowledge and wisdom and know how and
life lessons and understanding of human nature that hopefully we're
passing down generation after generation. But there's the narrower Economists
(03:18):
talk about capital in the sense of, you know, wealth
used to produce income. So we can really view capital
in two different ways. But I think most of modern
economics is not only doing no good, it's doing a
lot of bad in the sense that we have flipped
our fundamental understanding on its head, which is that a
(03:42):
healthy economy is based on consumption rather than production. So
you know, you can go back and talk about mark
or you can talk about Canes, you can talk about
neoclassicals or Austrians, or you know, any kind of school
or brands are thinking in economics that you want to
talk about. And then there's the political overlay. But at
the end of the day, any economy has to produce,
(04:02):
it has to produce goods and services, and so it's
from that production that we all have the ability to
demand other things. Right, if you and I don't get
up in the morning and work for a living and
produce some income, we won't have any demand as consumers.
Now we might wish for things, I mean, our desires
are unlimited. It's our ability to actually produce and purchase
(04:25):
things which is finite. And so economies have to produce.
And somehow it's absolutely bizarre. It's during the twentieth century
is losing sight of that. And so we've developed this
idea that fiscal and monetary policy I hate both those terms,
but will use them in the normal way that they're used,
That economies can be engineered, that they can be commanded,
(04:49):
that we can have policy tweaks on things like money
and interest rates, the regulatory structure of the tax burden,
whatever it might be, and that we can sort of
fine tune things. Well, it turns out that really all
we can do is destroy capital and destroy production by
doing that, and that we at best governments and central
(05:10):
mix can get out of the way and set the
conditions for human beings to go do what they do. So,
you know, I worry a lot about economics because economics
is a social science. Unlike the natural sciences, economics is
not dealing with molecules or atoms, or gravity or mathematical equations.
It's dealing with these strange, stubborn, crazy emotional creatures called humans.
(05:34):
And how is it eight billion of them, seven billion
of them get up every day in the world and
interact with one another. So that's a decidedly social science
and in my opinion, not fit for modeling and not
fit for aggregates and data. It's a social science and
that it's supposed to help us understand human relationships in
(05:57):
the world. And I don't think economics does that today.
I think it obscures things. I think it forces us
into aggregates like GDP and CPI and all these other
meaningless ideas. And so when we lose sight of what
economics is supposed to be as a discipline or as
(06:17):
a field studying human or interaction, and then when you know,
we've start to view economies as things that can be
commanded or controlled, we really get into a position where
we're flying blind. And I think the economics profession today
is flying blind. I think central bankers are flying blind.
(06:37):
I think politicians are flying blind. And we've got a
lot of hope. We've got a lot of hopium in
the West. We're rich, and so we'll just always be
rich and it doesn't really matter what we do, and
incentives don't matter. And we can command things like green energy,
we can command things like a living wage, we can
(06:58):
command things like income equality, we can command things like
prosperity on the third world. And none of these things
are true. So we're living in this opium time and uh,
you know, I've got a couple of teenagers and they,
you know, their future and their material well being done there.
(07:18):
That's that's my number one concern.
Speaker 2 (07:22):
Now, do you think it's it's difficult for me to
uh to play the devil's advocate here, but I'm going
to try. Do you think that the idea is you
know that that most people agree that if you have
policies that are bad enough, you can destroy you can
destroy wealth. And so the idea would be Hey, we
(07:44):
are doing things incorrectly right here. You think we should
go one way, Let's say modern monetary theorists suggests we
should go another way, and the debate is on which
one of those will produce the Well, we'll we'll create
the foundation that will help produce the most manwealth. For instance,
like you mentioned, like the living wage thing, if we
(08:05):
just make it a law that the minimum wage is
fifty thousand dollars per year, and just that the downstream
effects of that, while there is a cost to that
will will be will be, those costs will be offset
by the net benefits.
Speaker 1 (08:23):
Well, I would say, not only do we not agree
on systems or approaches, I'm not so sure we agree
on goals. I think there are plenty of people in
the progressive left who would say, no, no, no, A
wealthier society in total is not the goal. The goal
is a fairer society where the existing wealth is distributed
(08:43):
more evenly, and we would actually accept less total wealth
in exchange for more parody in how to get point right?
So you know, at some point it's awfully hard to
imagine a political compromise or an economic program that we're
going to work out with people who just fundamentally see
(09:05):
the world so differently. And that's why I'm a huge
advocate of any sort of political decentralization, of moving away
from central banks and central governments, allowing more regional or
local control over economics matters. I might not get my
wish there, but nonetheless, you know, so I'm not so
sure that there's a way to, let's say, persuade MMTS
(09:32):
at this point. I'm more interested in separation and persuasion
because look, the broad strokes of a libertarian political program,
the broad strokes of a laissez faire economic program have
been laid out for over one hundred years, and with
the digital era, there's no longer you know this idea
(09:55):
that well, people just haven't heard these ideas or they
haven't been exposed to it. I mean, you can basically
be exposed to any kind of political or economic thinking
for free at your fingertips on your phone today if
you care to take the time. So I think we
have to understand that to an extent here, we're moving
beyond persuasion. The the irony of the digital information age
(10:19):
is it hasn't caused people to become more open mind.
It's caused them to dig in and and and dig
into their to their priors. We might say, so, I'm
not confident that our time, and when I say I
mean like minded people, that our time is well spent
trying to convince m mters of the insanity of their perspective.
(10:43):
I think it's better to acknowledge that they're just wired differently.
They believe things which which we fundamentally disagree with, and
try to go about building things, you know, on our
own where we can. I think that idea of kind
of decentralization bottom up, you know, or even just you
(11:03):
do you, I do me, parallel societies. I think.
Speaker 2 (11:09):
We'll touch on that a couple of times. So at
the rest of this conversation, the first place I'd like
to dive into that a little bit more is the
idea of let's say, either secession or national divorce. It
seems like in the last year or so, I've noticed
a few times where that conversation gets brought up, you know,
on a you know, by a major politician or a
(11:32):
person who has a large audience, and it seems like
there's always a huge backlash against that, when, in my opinion,
I look at that and think, well, that means everybody
gets what they want. Like you, you get to try
out what you want. I get to try out what
I want. What do you think the root cause of
that backlash is? And do you think that we will
(11:54):
end up getting there either by choice or through just
the current system breaking?
Speaker 1 (12:00):
Oh gosh, it's so hard to say. On the one hand,
we don't want the Balkanization of the West or of
America because of the potential for violence that would come
with that. But on the other side, we don't want
to be vanquished by progressives. And progressives tend to not
want to give up any control over any area. They
(12:22):
view their program as inevitable, as part of a deterministic
arc of human history, the wig theory, we might say.
And so when you start to say, look, progressives, you
could have everything you want right here and right now,
but only in certain states and then let these other
states be their way, they tend to say no to
that bargain. Now. But could a greater degree of more
(12:43):
aggressive federalism alleviate some of these things we're feeling, And
I'll speak to America in particular. I think the answer
is yes. I think we saw during COVID, a lot
of soft secession happening, people voting with their feet. Obviously,
places like Florida and Phoenix and Dallas, Fort Worth and
Austin just absolutely boomed during COVID. A lot of places
(13:04):
like New York and New Jersey and certain cities in
California hemorrhaged residents during that same period. So, regardless of
what people say, we like to watch what they do,
for one, but more importantly, you know, at some point,
I think we just have to say, the country's too big,
it's two and wielded to have let's say, one Supreme
(13:25):
Court decision of five justices making rules that three hundred
and thirty million people have to live by concerning abortion
or concerning guns. You know, maybe we could have different
rules for guns in Manhattan than we do in the
middle of nowhere in Alaska. You know, there's is you know,
kind of a I don't mean to be trite, but
(13:47):
there's an example of where federalism just makes sense to
most people. So I view federalism the kind of aggressive
federalism that really the original Costitution I think was designed
for with a ninth and tenth Amendment as a path,
I'm not sure that we can sell that, but it's
(14:08):
better than any other idea I have at the moment.
Let me put you that way.
Speaker 2 (14:14):
Yeah, yeah, that makes sense. So can you can you
explain just very very briefly, just you know, basically that
idea of federalism versus and I don't even know if
I'm making a right comparison here libertarianism versus anarchical capitalism. Like,
what what you mean when you say federalism.
Speaker 1 (14:36):
Well, to me, federalism simply contemplates devolving power away from
the central government in any system and increasing authority or
power more locally or regionally. That doesn't mean it would
always provide a better answer necessarily, but we could look
at Switzerland as a great example of an explicitly federalist system.
(14:59):
We're so much is designed not at the federal level,
not even at the cantonal level, which is the equivalent
of our US states, but the commune level, the communal level,
which is the equivalent of our cities. And here in
the US our tax were intends to run about eighty
percent federal, maybe twenty percent state, And well in Switzerland
it's flipped, so you have more of a say over
(15:22):
presumably the local happenings or local affairs, especially if you
tend to if you're in a smaller commune or something.
In Switzerland, down to even questions of immigration, local communal
votes can have an effect on whether someone's allowed to
become a Swiss citizen, for example, or a Swiss resident,
whereas in the US and most western countries, immigration, which
(15:44):
is a really thorny question, is entirely at the national level.
So I think Switzerland and its constitution. If you go
to the Swiss government's website, which is of course in
four languages, five languages, it's got some really interesting language
about the principle of subsidiarity and how the Swiss view
this is a way of de escalating social problems, and
(16:08):
I think we could learn a lot from that. But
you know, federalism is simply to me working within our
current federal system where we have the three branches of government,
YadA YadA, and saying, hey, look, Article one, section eight
of the Constitution grants Congress really pretty limited powers, enumerate
(16:31):
in powers, and basically anything not listed under Article one,
section eight. In my opinion, Congress is not supposed to
be legislating about. Now, Okay, that you know, virtually everything
they legislate is wildly beyond their Article one section eight powers.
But nonetheless you can use that as a as a
guiding north star and say, okay, we've got Article one,
(16:53):
section eight, how does that work with the ninth and
tenth amendments and g whiz. A lot more ought to
be done at the stage or even local level. And
I think that's that there's a lot of promise there,
because again I don't I don't want to vanquish progressives.
You know, progressives exist, they exist in large numbers, and
I don't necessarily just mean that in the left or
(17:15):
right idea of the term progressive. I mean more on
the idea that we have to constantly be perfecting humans
so that they can serve the state better. That you know,
I don't I don't really care to vanquish progressives. And
I understand that subsidiarity or federalism is imperfect in the
sense that you might be that non progressive person stuck
(17:37):
in a really progressive district, let's say, really progressive part
of the country, let's say the San Francisco Bay Area,
and before Jeff's idea of federalism came along, or aggressive federalism.
You know, more things were decided in Washington, d C.
And now that some of those things are decided in
Sacramento or even San Francisco City Hall, and you know,
(17:57):
so I feel even worse off. Yes, there are going
to be casualties of federalism, but overall, I think it
is a workable approach within the framework of national, state
and local government we have, within the framework of the
constitution we have. So it's not scary to people. It's
you know, it takes us away from this idea that
(18:18):
we're you know, having a civil war, a cold civil war.
Takes us away from this idea of scary secession in
the civil war and all the things that that conjus up.
So you know, better, not perfect, I think is how
we out of view federalism.
Speaker 2 (18:32):
And it exists within the current system, So that makes
that makes sense. Okay, Now you mentioned an issue that
seems like it is becoming extremely contentious recently, which is
which is immigration. And uh, you know, different administrations have,
you know, handled it different ways. It seems like immigration
(18:53):
right now, illegal immigration is probably higher than it's been
in h in a while. So this is something that
I think there's even it seems like big disagreement on
in like libertarian circles. You know, this idea of open
(19:14):
borders versus versus closed borders. What are your thoughts on that,
and how do you know, like property rights and public property,
how do you deal with that.
Speaker 1 (19:29):
Yeah, it's a very tough question because there's been so
many layers added to the onion over the years. You know,
it's a very different environment than nineteen hundred when people
would come here almost penniless, with no ability to return
necessarily and no real welfare state to speak of, and
(19:51):
you know, really wide open parts of the country for
homesteading or whatever it might be, or for growth. So yeah,
it is authority question. It's made thornier by the fact
that we don't have, in my opinion, strong property rights
to the United States, We have a welfare state, we
have these other complicating factors. But I really think that
there's a neat and simple and elegant approach to it,
(20:14):
which is simply sponsorship, which is to say that immigrants
either on their own have to obtain a bond by
saving up enough money or whatever to purchase such a bond,
or through sponsorship. That could be anything from family in
the US to an organization like Catholic charities. Any number
of sponsors in America could simply fit the bill for
(20:36):
their bond, and that bond would guarantee or trigger against
any criminal or welfare activity by the immigrant, let's say,
for the first ten years of his or her time
in the United States, and then also extinguish or put
off any citizenship or voting rights for extended period, so
that the immigrant could effectively prove that he or she
(21:00):
had assimilated, that he or she was not a criminal
or welfare burden on the United States. And this would
eliminate a lot of the national control uh you know,
I n ass and all that, and simply you know,
I mean, a bond simply means that there's someone here
(21:22):
inviting them, willing to vouch. That's the difference between you know,
goods and services, when when we advocate for free market
trade and goods coming into the United States, by definition
someone's ordered them, you know, and goods don't have volition
to go do things once they're here, unlike humans. So
(21:43):
you know, this sponsorship idea of I think is the
most humane and sensible and workable compromise we might have
in the short term, the idea of bonding and sponsoring immigrants.
But yeah, I think it's going to be you know,
what we've seen in Israel over the past couple weeks
has probably done some injury to the open borders narrative here.
(22:06):
And you know, I think the nation state, for all
of it's good and bad, plenty of bad there. I
think the nation state, the idea of a sovereign nation state,
is going to be more stubborn and more enduring than
the Francis Fukuyamas thought it was. I mean, if you
told Woodrow Wilson over one hundred years ago now that
(22:26):
the nation state would still be the central organizing principle
for most of the world by twenty twenty three, I
think he would have been surprised and shocked, probably unhappy.
But so the fact that, you know, a lot of
states are drawn along artificial borders, like what we've done
in Iraq in the Middle East is a prime example
(22:49):
of that. So nations and states are not contiguous. But
I do think that there is a stubborn human tendency
to group. We can call that a nation for lack
of a better term, where that's racial, linguistic cultural, ethno religious,
whatever it might be, and that these attachments are not
so simply done away with with some sort of globalist project,
(23:12):
and that if we're going to be good praxeologists, or
if we're going to have you know, hopefully a fewer
wars and conflicts, fewer mass migrations causing problems, all that
that we ought to you know, understand human nature and
accept it for what it is and work within it.
So I personally am not an open borders advocate. I
(23:35):
don't in my opinion, and there's differences, you know, to
even within my own firm, Monitary Metals on this, and
you know where I used to work at the Mesa's Institute.
There are certainly differences of opinion there. But I don't
believe that open borders is a principle. I think it's
a policy, and I think that policy depends. I think
(23:58):
the right to leave a place, in other words, to
not be a slave or to be falsely imprisoned, is
different than the right to enter a place. And so
I do not fall into the open border's crowd, but
I certainly understand the sentiment, and so the the the
sponsorship thing is my stab at an approach.
Speaker 2 (24:23):
I like that, and a lot of the things that
you're talking about are kind of you know, from the
perspective of, uh, there's you know, in my mind, maybe
some ideal that we that is hypothetically possible, but looking
at the world realistically, there's a very very small chance
we could ever actually approach that. So given where we
(24:44):
are currently in our current reality, here's a solution that
I think would move us in the right direction. And
it's actually a solution that is is doable with with
that kind of with that kind of you know, frame
of reference. Looking at something like fiat money, it seems
like sometimes there's nothing that that can be can be done.
(25:06):
It's like the dollar is so entrenched around the world
that it almost seems like, you know, any any solution
or suggestion to try and move in the right direction
is you know, just as has low of likelihood. Is
something that we would say, okay, return to a you know,
one hundred percent gold standard tomorrow or something like that.
(25:29):
So getting into the kind of this idea of of
of money, can you talk a little bit about you know,
we have you know, the the you know, debate about
currency versus money. It's just government money versus market money.
What are the differences between those two and kind of
(25:50):
how did we get to where we are today with
this terrible money entrench in our system that we can't
escape from.
Speaker 3 (25:56):
Well, it's a it's a sad tale, you know, but
part of the reason we got there in America is
that we've had it so good for so long that
the average American hasn't had to think.
Speaker 1 (26:09):
Much about money. Right, the US dollar was a pretty
strong performer, to put it mildly, and our status is
the world's reserve currency, as you know, has allowed us
to export a lot of inflation. And it turns out
that when you go to Walmart and flip flops or
six bucks, you know, that's pretty nice. That makes Americans
(26:30):
feel wealthier, and in fact, we are wealthier as a
result of the dollar is the world's reserve currency. The
problem is that we've been sleepwalking for so long that
the troubles, the cracks are starting to show in the foundation,
and we don't even really know what money is conceptually.
I think as a society we've lost sight of that.
We now view money as a creation of government. It's
(26:52):
a political tool. It's a carrot and a stick. Sometimes
it's literally bombs and tanks and plays. Sometimes it's literally
welfare in the form of foreign aid. So that's the
care and the stick. And we've completely lost sight of
the idea that money originally arose as the most saleable
(27:13):
commodity in an economy, with that convenient from salt to seashells,
to gold to silver, and then ultimately to fiat, maybe
some day to bitcoin. So the idea of what money is,
I think, has been largely lost on Western audiences. More importantly,
(27:33):
or as importantly, I should say, money, credit, and interest rates,
three very separate and distinct things have sort of become
glombed together in people's minds. Again, interest rates are a
policy tool, something to be set by central banks. You know,
the difference between money and debt's what's actual money versus
(27:55):
what's a credit instrument. Well, a dollar wasn't Originally money
was a note that you were able to redeem for money.
It was the coupon that you could go get real money. Goal.
But then eventually the dollar, the paper dollar, became the
thing unto itself, and that was when in people's minds,
in our conception, the idea of commodity money was really severed.
(28:19):
And you know, now that's at least, you know, since
the nineteen thirties, so almost one hundred years now, and
then things accelerated with Bretton Woods, things accelerated in nineteen
seventy one with Richard Nixon. So now we've all just
gotten used to the dollar as this political tool. And so,
as you said, it's awfully hard to get away from that,
(28:41):
and the rest of the world might wish to get
away for that. People are geopolitical enemies, so to speak, China, Russia,
the bricks. However you want to look at it. In
the long run, Iran, they might all benefit very much
from seeing the US dollar knocked up. However, in the
short run, they got lots of dollars themselves, or they
(29:04):
have lots of treasury bills themselves. So it's a very strange,
almost pregnant situation where, you know, we've never really seen
the world's reserve currency, at least not a Fiat one crash.
The Spanish managed to produce too much sober for a period,
(29:24):
and so that's kind of the historical example. But for
the most part, we don't know what a sovereign, what
a global currency crisis looks like we know what happens
when the Deutsche mark flames out in Wymer, Germany. We
know what happens when the Argentine peso goes south in
the late nineties. We know what's happened in Venezuela in
(29:46):
just the recent the past five years or so. You know,
we understand what currents hyper what devaluation or hyper inflation
looks like at the national level where we can isolate
it and observe it visa these other currencies, visavise trying
to bring imports into those countries. Heck, even Turkey right
(30:07):
now is really in a bad place with their currency
relative to the Euro and the dollar. But what we
don't really know, and what is above my pay grade,
is what happens when the world's reserve currency melts down.
And I can only imagine it melts down relative to
actual goods and services oil, food, commodities, gold, et cetera.
(30:30):
And that's that's a scary day. And so I'd like
to think that we, as rational people would work today
to try to prevent that from happening, and we would
take steps today to try to gain some control over
our monetary system. But it doesn't look like it doesn't
(30:52):
look like Congress is ever going to stop spending. It
doesn't look like the Fed and the Treasury in combination
are ever going to stop printing. Why you use that
euphemistically electronically in producing and increasing the amount of dollars
circulation M two. The empty money spot was actually going
(31:12):
down there for the first time in about forty years.
It's gone back up. You know. Interest rates have shot
up enormously since that forty year basic fall for eighty
two to twenty twenty two, and so now we find
ourselves in the very uncharted territory of having the safest
collateral of all the US Treasury bond actually becoming a
(31:37):
risky investment because if you hold treasuries issued at three
percent and now they're paying five, you're badly underwater on
your holdings. A lot of small banks for funding that out.
So it really is just a crazy time because there's
so many forces at work that are at odds with
each other. I don't think the US dollar crash anytime soon.
(32:02):
I think, if anything, tremors in the global economy still
lead to what's perceived as a flight to safety, which
is still the US dollar relative to other assets and
you know, for the moment, I think people holding dollars
are probably wise and there may be some bargains to
(32:23):
be had if a real crash comes. A lot of
people got very wealthy during the Great Depression because instead
of being debtors, they had cash. And let me just say,
as an aside to your listeners, I strongly recommend to
the extent you're able to have one thousand, five twenty
thousand dollars in physical cash. You know, look, I'm no
(32:44):
fan of the to be a dollar, but paper money hidden,
you know, spaced around your home, so that if there
were ever a bank holiday, a bank shutdown, some kind
of national emergency, you know, another COVID, a terrorist events
are things that could prevent you from getting access to
your dollars, and the digital payment systems might fail. I
(33:08):
think having some cash on hand to go deal with
the rest of the world in the in the immediate
short term is a great idea.
Speaker 2 (33:15):
Yeah, yeah, that makes sense, especially considering money is pretty
much all digital. Even something as simple as a cyber attack,
which you know, not not simple, but it could render
even temporarily your digital money inaccessible, So that certainly makes sense.
There's I believe This is a quote from Mesus and
I could be butchering this, but it's something to the
(33:38):
effect of that, over long enough time horizon, every government
only exists at the consent of the governed. And so
a correct me, I'm the head if I'm wrong. But
but b do you think that that sentiment also applies
to money, That even money imposed on a system through
you know, declaration by law, over a long enough time horizon,
(34:03):
it becomes market money. I mean, if you look at
what's happening in Lebanon right now, one of the worst
rates of inflation. They try and get rid of the pounds,
and they get try and get dollars. So do you
think that sentiment somewhat applies And I or did I
completely butcher it?
Speaker 1 (34:19):
No, Misas did say that talking about governments are as
liberal as illiberal over time as their citizens will accept.
And I think that's true. And you know, we like
to joke about that in America. Oh you know, as
long as you have your social media and your NFL
football and your Budweise, your Americans are so you know,
they'll never rise up and wise up. And you know
(34:44):
then no, I mean that that to me is ridiculous.
There's nothing wrong with that. You know, if people are
materially comfortable, we don't all have to be these hyper
political animals spending all of our time thinking about monetary
policy or something like that. I mean, people have mortgages,
they have kids, they have school, they have health problems.
Speaker 2 (35:05):
You know.
Speaker 1 (35:06):
I think sometimes people in our camp tend to be
a little dismissive towards average folks. I mean, the dollars
works pretty darn well for average folks up until the
last last averages COVID and all the all the stimulus
that set inflation to a hyperdrive. But you know, the
dollars work pretty well. And so I think Mesi's was
(35:28):
largely correct. I think it's human nature to go along
with something as long as it's not too onerous. A
revolution or a war is generally something that only pretty
desperate people will engage in, if history is our guide,
and so I think we should expect that again. And
that that that probably goes to Brent Johnson's dollar milkshake
(35:51):
theory and the idea that the US dollar is not
going to likely is not going to be knocked off
its perch any time.
Speaker 2 (35:58):
To speaking of competitors to the dollar from the standpoint of,
you know, something that would be viewed as a more
sound alternative. Usually there's two camps, you know, bitcoin versus gold.
One of the it's okay, so this is I guess
I'm asking your opinion on this. It's sometimes tatted as
(36:19):
a feature. Sometimes tatted is like a you know, it'll
be the last nail on the coffin. Is the limited
supply eventually gets, you know, the pure scarcity gets to
a point where you really can't have debt in a
pure bitcoin monetary system because the limited limited supply really
you can't have, you know, a system of credit and
(36:42):
interest rates on top of that. Can you can you
talk about your you know, opinion on gold versus bitcoin
and what what the what the the benefit if there
is any benefit or utility to having a credit system,
uh built on top of my.
Speaker 1 (37:01):
Well, I think credit is something that naturally arises in
the marketplace, and so it's human. It's for human for
credit to be issued, and so we shouldn't think credit
is per se bad. What's bad about credit today is
that the amount of credit available and the rate at
which one has to borrow, both of those are tinkered
(37:23):
with by governments and central banks, as opposed to simply
reflecting the marketplace. What I mean by reflecting the marketplace
is that we should have savers and borrowers, and the
more people save money, the more money is available to lend,
and we would expect the interest rate to fall and
vice versa. Right, interest rates should be an exchange rato
that should reflect the time preference of borrowers and savers. Instead,
(37:47):
we have interest rates which are again effectively policy tools,
not entirely but somewhat set by central banks, targeted by
central banks. So I think that's a real problem. You know,
the ultimately finite amount of bitcoin, which makes it the
hardest money in that sense, in terms of its stock
(38:10):
to flow ratio, ultimately differs from gold. Gold can continue
to be produced even when gold shoots up in price
and the economics workout for minors. It takes almost superhuman
levels of mining effort to increase the gold supply by
let's say two percent in any given calendar year. It's
(38:30):
really hard. So gold is very hard too in terms
of its stock to flow ratio. You know, one thing
Rothbart said is we don't care about the money supply
per se prices will adjust. What we care about is
government monkey around with the money supply, and I think
that's true. Keith Wiener, who's our founder at Monetary Metals,
(38:51):
is a big critic of bitcoin, among other reasons, in
that sense that how do you create a credit and
financial system off of an asset that is fixed in
a mouth. I guess the short answer is, well, you
can hypothecate it digitally. You can slice up. When we
get to twenty one million, you know, you can slice
it up as much as you want. And also, you know,
(39:16):
gold has gold has the transportability issue. You know, gold
has its its own challenges. Central banks basically sort of
you know, overtook the gold standard and the private gold
standard turned it into a governmental gold standard. So there
are critiques of both. I'm I'm I straddle both camps
(39:41):
because I want I want. I think gold will continue
to have a moneyness. I think it will continue to
act as a financial asset because it has for thousands
of years, and until proven otherwise, I'm not going to
bet against its many thousand year track record. I want
bitcoin to succeed because, uh, the idea of resting government,
(40:04):
resting money away from government and from any centralized issuer.
I think is a is an exceedingly noble political project,
and uh, one that that I want to support. So
bitcoiners don't like that I'm a gold guy, but nonetheless
(40:25):
I am.
Speaker 2 (40:27):
Yeah, yeah, that that makes a lot of sense. One
of the one of the critiques that is commonly brought
against gold is that it's you know, it's a yellow rock,
it's a brick. It does nothing. It just sits there,
doesn't produce anything. And so I'd like to hear your
thoughts on that, because well, number one, monetary metals is
(40:48):
you know, obviously changing that I want to I want
to hear kind of your your your thoughts and your
explanation on that. But number two, when you look at
something like real yields have been rising, uh, you know,
treasury rates have been going up for the last two
years now while the inflation rate CPI has been dropping.
(41:08):
So real rates have been rising, and gold has not
done what you would have typically expected it to do.
You know, everybody says, hey, really rates rise. You know,
gold's gonna fall because it's it doesn't produce a yield.
And so what there is, you know, I guess, is
this is a couple of questions wrapped up in one.
But there's a monetary premium to gold, for sure. It's
(41:28):
you know, it's worth a lot more than just its
industrial use use value right now. But number two, historically
credit has always existed and gold was always money. So
you can't really say that gold has no yield because
it always has in the past. I mean, just like
the rock in your hand doesn't, but the way that
it's used, you can. You can turn it into a
(41:52):
producing asset.
Speaker 1 (41:54):
Well, you could say the same thing about a piece
of paper money. You know, it just sits there. Gold
is shining, it just sits there. A piece of paper
just sits there. I heard an interesting podcast a couple
of months ago with Caitlyn Long from Custodia Bank out
in Wyoming. She's a big bitcointerer, a lot of you
probably know her name, and a guy named Tom Luongo
who's a really interesting thinker that I've gotten to start
(42:14):
reading the last couple of years. And Caitlin made the
comment that once we lost gold backing for currency, you know,
completely in nineteen seventy one, in the case of the
United States, where even foreign governments can no longer redeem
their paper notes for gold. She said gold lost any use.
You know, at that point the whole point of gold
is to act as a tether on debt, and once
(42:36):
you don't have that anymore, what's the point of gold?
And by that she meant, you know, it ought to
be now reduced to basically its industrial or jewelry uses.
But yet I would argue it hasn't. In the fifty
years since nineteen seventy one, fifty two years now, since
nineteen seventy one, gold has maintained a price per ounce
(42:56):
in dollars, which I would argue is well above it's
purely for industrial or jewelry uses. So that tells me
that for fifty years since gold has been irredeemable, there's
still a financial or monetary premium placed on its value.
So I think that is very very interesting, especially as
(43:17):
I mentioned, you know, a couple of thousand years prior
to that, it was money money, So I think gold
does retain some money. Thisss And look, there is something
like thirteen trillion dollars worth of market cap physical gold,
and it's laying around, it's a shiny yellow lump all
over the world, and not only just laying there people
(43:38):
are paying to ensure and store it. So you know
we've got all these you know, we've got people just
desperate for finance and capital right now. It's a very
tough environment for startups. It's a very tough environment for
lending in general. As you know, people are paying eight
points on mortgages. People are paying ten percent on car loans,
(43:59):
which is just absolutely crazy. So there's a credit crunch
which I still can't quite put, you know, wrap my
arms around that, because we've done produced nothing but money
and credit since eight on hyperdrive. I mean, it was,
why did the FEDS balance sheet go from far less
(44:19):
than a trillion to over nine trillion, and yet somehow
we have a credit crunch. Look, I realized that fed's
balance sheet is mostly reserves. Their reserves were not let out, okay,
blah blah blah. But nonetheless, how does our FED going
to hyperdrive? We still have this credit crunch? You think
you think we would have credit dropping from heaven and
you know your local Cadillact deal would be coming by.
(44:40):
You say, Jeff, here's a point oh one percent Cadillac,
But no, a Cadillac's ten percent. I don't understand that completely.
But nonetheless, there's thirteen trillion dollars a goal out there.
Why don't we use it? Why don't we put it
to use? It could collateralize anything from giant insurance companies,
(45:00):
it could. It could serve as collateral for all kinds
of loans. It could. It could, you know, without moving
any of it, without any transaction costs, you know, just
simply by lawyers moving paper around. You could pledge gold
to all kinds of projects to back them up. You
could use gold for insurance and reinsurance purposes and monetary models.
We use it for basically for inventory and companies that
(45:25):
produce gold, you know, refiners, mining companies, jewelry companies, industrial uses.
So there is there are uses that gold can be
put to, and I think that all flows from it's
it's moneiness. It still holds a degree of moneyness fifty
years on from nineteen seventy one. So that's that, to me,
(45:48):
is an interesting project. Let's use gold to finance production,
actual production of goods and services. Companies need money, they
go out and borrow money, they issue, you know, they
go out and get commercial credit if they can at
a pretty high rate right now, or they issue a
bond if they can at a pretty high rate, or
(46:09):
they sell equity if they can at a pretty onerous
evaluation relative to the issuing company. You know, So we've
got this thirteen trillion dollars worth of gold that's just
totally overlooked. It's just sitting there. If thirteen trillion dollars
worth of cash we're sitting somewhere, people would be tapping
(46:29):
into it. Yeah, they'd be borrowing it, they'd be pledging it,
they'd be using it. And yet somehow gold escapes this analysis.
So we're you know, I hope that some of that
thirteen trillion be put to use.
Speaker 2 (46:44):
Well, I really, I really like the work that Monetary
Metals is doing in this regard. You know, just number one,
I'm a customer at number two. I'm an investor in
the company as well, and the company has sponsored my
YouTube channel, The Passed as well.
Speaker 1 (46:59):
So I'm, you know, all on board.
Speaker 2 (47:03):
The The idea that I talk about sometimes is kind
of like a little bit of what we were talking
about earlier, kind of like that those parallel systems where
it's like, you know, hey, here's what I think the
ideal should be, but here's one practical step that we
could actually take and for me, one part of that
is kind of like putting yourself on your own sound
money standard. So it's like, yeah, it'd be great if
(47:26):
we could convince the Federal Reserve or the government to
shut down the Federal Reserve and just have you know,
a money that's purely decided by the market. But since
that's not really in our power to make that happen,
what I can do is, you know, personally, you know,
(47:46):
use products or services and act in a way where
I'm kind of emulating that, you know, a sound money
standard for myself. One of those products is you know,
our companies helping people do that. As monetary metals, can
you explain, like the from the individual like customer standpoint,
what it is that they're able to do that's so
different than just like buying gold that you're paying somebody
(48:10):
else to vault.
Speaker 1 (48:12):
Well, yes, you might take a company that uses or
producers gold. Let's say a jewelry manufacturer. They might need
a couple million dollars worth of gold in ounces to
make some jewelry and sell it so they can go
out and spend their working capital. They can tie up
a few million dollars in cash and buy a bunch
(48:32):
of gold. Well, that has two downsides. One is that
they're cash that they might be using for rent, or
payroll or all kinds of things is tied up in
the inventory. And number two, while they hold that few
million dollars worth of gold and they're producing jewelry and
selling it, the price of gold might be going like this.
So if they bought a two million dollars worth of gold,
(48:54):
and if that stays even, they will sell that as
jewelry for three million dollars. But all of a sudden,
that two million dollars worth of gold drops down to
one point five million dollars worth of gold. All of
a sudden, the money they make has been you know,
has been impacted over the period of time it takes
them to produce the jewelry. So what we're able to
(49:15):
do is a mass of physical metals and provide it
to our third party customers and in exchange for a
certain number of ounces paid back at the end of
generally a one year lease for example, and so they
know exactly what they're going to have to pay back.
The fluctuating price of gold doesn't matter to them because
(49:35):
they're using it and then selling it at market rates
the amount you know, the one ounce piece of jewelry,
let's say, plus the premium the markup for their jewelry,
you know, as the as the price of gold fluctuates,
they're selling it at market conditions, replacing R one outs
at then market condition, so they know what their cost
for that inventory is going to be fixed for a year.
(49:57):
So that provides them with the ability to have that
certainty and do not have to head using futures contracts
against fluctuations in the price of gold. So that's in
a nutshell, the model for leasing gold. We also do
gold bond, which is lending gold. So that would be
a much more long term project for let's say a
mine or a refiner. We might lend them several thousand
(50:21):
or tens of thousands of ounces over a three four
five year period, and so that's just a bond. Instead
of issuing a bond for ten million dollars, they issue
a bond for x thousand ounces of gold. But nonetheless
it is capital available to them throughout the lifetime of
the bond that they pay back in installments, just like
(50:42):
you pay back a mortgage. So it's an interesting concept.
We're definitely growing the number of deals that we're doing rapidly,
and we hope that we hope that we're going to
make a difference in the market and make a name
for this company.
Speaker 2 (51:01):
Well, I think it's I think it's such a such
a fantastic idea. I mean, like you talked about it,
it eliminates the volatility and the uncertainty and the complication
by being able to denominate in gold. It also, you
know when you talk about when you talk about win win,
I guess win win win scenarios from the person who
(51:21):
has you know, one hundred ounces of gold that I'm
paying to have it stored in a vault. So it's
actually you know, the it's got a negative yield on it.
Being able to take a part of that and put
it to work. Not only is it actually just you know,
it's it's being used productively in society to do things
(51:45):
that are actually you know, creating more wealth, economic growth.
But also I get to grow my ounces and I
don't have to worry about you know, what the what
the price is. It's not like I'm getting you know, dollars, uh,
you know, it's not denominated in dollars where I have
to worry about.
Speaker 1 (52:01):
Hey, is that enough?
Speaker 3 (52:02):
You know?
Speaker 2 (52:02):
If the price of gold is changing, it's like, no,
the actual ounces are are growing because that's that's what
it's denominated and paid in. And so I think it's
I think it's revolutionary and I'm really excited to see
where it goes. And it also it's I love it
when kind of the philosophical uh mindset behind behind something matches,
(52:28):
matches what it's doing. And I know yourself and and
Keith and uh, the the general ethos behind the company
is something that I can stand behind other than just
what the what the company is doing with its products
and services. So really excited to see to see what
happens here. And thank you so much for joining me today.
(52:51):
This was a really really fun conversation I love talking
about We talked on a ton of different issues here, but.
Speaker 1 (52:59):
But it was good converse.
Speaker 2 (53:00):
So thanks for joining me.
Speaker 1 (53:01):
Yeah, thank you, Joe.
Speaker 2 (53:03):
I'll have that linked below. And then for anybody who
wants to get more and and follow you more, I
know you're pretty active on Twitter. Is there any other
place where you'd like to send people if they want more?
Speaker 1 (53:16):
Now, you can find me on Twitter and occasionally at
the Minetary Metals website, selfware on the Monetary Metals YouTube page.
Speaker 2 (53:23):
Perfect all right, Well, thanks so much and we'll talk
to you next time. Thanks,
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