March 3, 2026 • 52 mins
There was a time less than 100 years ago when you could exchange your paper currency at the bank for actual gold. Gave folks a sense of stability, it did. Depending on your view, we either ruined or built our economies when money became just paper.
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Speaker 1 (00:01):
Welcome to Stuff you should know, a production of iHeartRadio.
Speaker 2 (00:11):
Hey, and welcome to the podcast. I'm Josh and there's
Chuck and it's just us here today to explain something
that every person in the world should know about, the
gold stand. I have an intro. I have an intro
hold on oh goud, Chuck. Yes, have you ever gone
(00:32):
to a bank and traded a dollar in for actual gold?
Speaker 1 (00:40):
No, I've never even seen gold in person. That wasn't like,
you know, on whatever, a ring or something.
Speaker 2 (00:47):
Sure, and that is a huge use for gold.
Speaker 1 (00:50):
I've never seen nuggets or bars ingots.
Speaker 2 (00:54):
I haven't either. I have never even seen a gold coin.
Now that I think.
Speaker 1 (00:58):
About it, I don't think I have either.
Speaker 2 (01:00):
But there was a point in time where you could
see gold anytime you wanted, if you went to your
bank and you took a certain amount of dollars or
pounds or francs or pesos, because countries all over the
world were on what's known as the gold standard. And
just a quick broad stroke explanation I guess is that
(01:22):
on a gold standard, every single one of your dollars
or pesos or francs or Deutsche marks are redeemable for gold,
which means that you have to have an equal amount
of gold in your country in safes and vaults to
cover every single dollar or paso or Deutsche mark or
(01:44):
frank out there. You can't just keep printing money. You
can only print as much money as can cover the
amount of gold that you have.
Speaker 1 (01:52):
Yeah, which is you know, it's sort of a public
safeguard to say, hey, your dollar, your pay paper money,
or your coins are worth something because it's worth this
much of this other thing that we've also agreed is
worth money exactly.
Speaker 2 (02:10):
And so for you, if you're walking around in a
country that's on the gold standard, you can go trade
your dollars in for gold, your paper currency in for gold. Right.
It also gives you a lot of stability and understanding
that when you wake up in the morning, what you
bought for one dollar yesterday, you're going to be able
to buy for one dollar today. Prices don't fluctuate very
(02:32):
much on the gold standard, and then on more of
a macro level, if you're a country and you're importing
tons of stuff, that means your currency is going out.
You're using your currency to buy these imports, and when
a bunch of your currency is out there, you need
it back home, so you have to use some of
that gold to buy your currency back. So the upshot
(02:55):
of all of this is the gold Standard is very
different from the type of currency that we have today,
and I feel like we should maybe explain a little
more eventually about how they're different.
Speaker 1 (03:06):
Yeah, for sure. I mean we've been back and forth
between the gold Standard and the other, which we call
fiat currency, which is a Latin term, and that you know,
fiat currency basically is what we're working with now because
the gold Standard is basically dead. But that's where you can,
you know, where you have more you know, monetary policy
(03:27):
guiding the markets and stuff like that, rather than like, no,
it's like it's tied to gold like kind of end
of story. Yeah, there are people that love and you know,
we're going to talk about sort of the benefits and
the arguments for and against. But people that are into
the gold Standard as an idea, they're kind of out
of luck, but they're still around. They're called gold bugs.
(03:48):
They've been called that since Edgar alland Post's story that's
where it came from, about the search for buried treasure.
But you know, it's still a fight in some circles
from people who are like way into the gold standard.
Speaker 2 (04:00):
Yeah, and there's I mean, they have a lot of
good points. But the problem is is that that train
has left the station in it and it's coming back,
not coming back. So why gold? Right? There's alsort. You
could pay your currency to wheat, right, and you could
take your dollar bill and go into the bank and
they'll give you like a bushel of wheat in return. Right,
(04:21):
why gold in particular?
Speaker 1 (04:24):
Well, yeah, I said that, you know, that's something that
they all agreed was worth something, And that's kind of
the deal. Like something's only worth something if everyone agrees
that it's worth something, right, But you can't, you know,
you've got to pick something that makes sense. And gold
has always made a lot of sense for a lot
of reasons. It is, it's scarce, but not like rare rare.
(04:46):
It's rare enough to be precious, but not so rare
that like you know, it's impossible to find. So you've
got to have enough of it, but not too much
of the thing. It's also you can divide it up
into small things, you can melt it down, you can
make it into stuff, making it into coins, you know,
is certainly valuable. It's valuable, it's resistant to being corroded
(05:09):
and like rusted, it's durable. So all that stuff makes
it just sort of a valuable thing to trade.
Speaker 2 (05:16):
Yeah, and you said it's durable. Like most of the
gold that's ever been mined in the history of humanity
is still around because you can change it from one
form to another, say like from a necklace into a
gold coin. But there's still that same amount of gold
on earth. And I guess as of twenty twenty five,
I think the World Gold Council says that two hundred
(05:38):
and nineteen thousand, eight hundred and ninety tons of gold
have been mined throughout history, and about two thirds of
those have been mined since nineteen fifty alone.
Speaker 1 (05:49):
Right, And most of that is still around, Like you said,
it's still out there, which kind of proves that gold
was a pretty good pick that and silver, I mean,
silver was we'll talk about the fact that gold and
silver kind of went back and forth over the years.
There's just a lot more silver, so silver has just
been worthless, right.
Speaker 2 (06:08):
But it's still worthwhile. And in fact, if we're going
to start to go back a little bit in history,
the very first, I guess currency that the United States
came up with, and the history for Great Britain tracks
very similarly. But in the US they said, we're going
(06:28):
to use gold and silver for coinage, and they had
to set an amount how much silver do you need
to buy you know, one unit of gold because they
are related to one another, you're using both for currency.
So they said, you know what, fifteen pieces of silver
grains I think is equal to one grain of gold.
Speaker 1 (06:51):
Yeah, so like a fifteen to one ratio. But they
realized right away that like if they're going to start
setting this like thesetios in these sort of units as
being you know, kind of blocked in, it's just going
to create a lot of trouble over time, like especially
when the amount of gold and silver increases in deep well,
(07:11):
I guess not so much decrease, but you know, like
when there's a gold rush or when like they find
a new vein of silver somewhere that changes the amount
of gold and silver in the world. But they still
had locked into that fifteen to one ratio. It's not
like they kept changing it over and over. So I
think kind of right away people were like, oh wait
a minute, this is all a little bit artificial in
(07:33):
a way.
Speaker 2 (07:34):
Yeah, And that's something that goldbugs have trouble with is that,
you know, it doesn't really matter how you know, honest
a gold standard keeps the government, it's still all artificial.
There's still manipulation that can happen. And yeah, when a
bunch of gold comes on the market, gold becomes less valuable.
(07:54):
If a bunch of silver comes on the market, relative
to gold, silver becomes less valuable. And one of the
problems with using a commodity to back your currency is
that sometimes the value of the commodity can rise beyond
the face value of the currency. So if you have
a ten dollars gold piece and the price of gold
actually puts that one ounce at twenty dollars, you're not
(08:18):
going to go spend that ten bucks. You're going to
melt that thing down or sell it to somebody for
twenty dollars. Yeah, So that's a there's problems here with
money that actually means something in the world.
Speaker 1 (08:31):
Yeah, for sure. And that happened. And when that happened
kind of the first time, I guess for the United States,
people started doing that. They started melting gold coins or
keeping them in hoarding gold coins and they started trading
and using silver as currency. So all of a sudden
we were like, wait a minute. We thought we were
on a gold sale or we're heading toward a gold standard,
(08:52):
and now we're kind of on a de facto silver
standard because that's what people are using.
Speaker 2 (08:56):
Yeah, so the government was like, well, let's just make
the sixteen to one, and it brought everything a little
bit more into parody. Then there was the Minor forty
nine or gold rush in California, and then there was
also another gold rush in Australia about the same time.
So the market price for gold went down again because
the supply increased, which basically made the US government throw
(09:18):
their hands up in the air and say, we give up.
We're going to go watch football.
Speaker 1 (09:23):
Yeah, they're kind of football, I guess. Over across the pond.
Isaac Newton finished out his long, storied career as the
Master of the Mint.
Speaker 2 (09:34):
Mm hm.
Speaker 1 (09:35):
He did a lot of other stuff obviously before that,
but he worked as the Master of the Mint at
the end of his life until his death, and he
was all about gold. Was like he encouraged overvaluing it
and said we should really just set gold as the
gold standard for England and they adopted that in what
like eighteen nineteen.
Speaker 2 (09:54):
Yeah, so I think they were the first country on
an actual gold standard, and then it kind of spread
around Europe from there because they're like, this is actually
pretty good, pretty good idea because you don't need necessarily
a central bank, you don't have to have somebody figuring
out what lever to pole or whatever. The gold actually
kind of naturally flows from one place to another to
(10:15):
basically keep this homeostasis, this balance throughout the world among
all the countries that are on the gold standard, right. Yeah,
So the thing is is humans are humans. You can
mess up anything that is, even something that naturally flows
from one place to another. We can basically put our
foot in it and screw it up. And that was
(10:37):
the case usually, as we'll see throughout history, that's usually
the case when war comes along, and that happened in
the United States with the Civil War. And we've talked
many times about this about how before the Civil War
there was like eight thousand different types of currency in
use in the United States, like your general store intel
might have its own currency that you could use. And
(11:00):
as the Civil War came along, that all changed very quickly.
Speaker 1 (11:04):
Yeah, that was I remember we took that feels like
very many years ago. We were talking about that in
a few episodes. It was kind of the hot topic
for us for a while.
Speaker 2 (11:14):
It was so hot.
Speaker 1 (11:15):
We were talking about all those different currencies, like one
town might have a currency and then two miles down
the road, the next town might have their own currency,
which you know within that town as long as everyone again,
if everyone agrees what something is worth, it's working out, okay.
But that's a mess if you're trying to be a country,
which we despite the Civil War, we were trying to
be a country. And so the Civil War starts and
(11:41):
the federal government was like hey, like you know, Josh
Clark will say one day, wars are expensive, and so
they issued war bonds. I think about half a five
hundred billion dollars in war bonds. War bonds are what
you buy to basically, you know, or you sell as
a government and people buy to kind of finance the
world and saying, a loan you money to go fight
(12:01):
this war. Because that bond is ensured, I know for
a fact that eventually I'm going to get repaid with
interest for lending you that money to fight this war. Right,
So it's like it's super safe on the investor side,
but it's just a long term payout.
Speaker 2 (12:17):
Yeah. The thing is is when they issued those as
far as I know, they weren't backed with gold, and
then they weren't even further. They just started issuing straight
up paper currency that had it wasn't pegged to gold
or silver backed up by any of it. It was
the first fiat currency in the United States, and like
you said, is just basically the government saying this has value.
(12:38):
Because we say it has value. You can use this
to buy stuff, you can use this to pay your taxes.
It is currency even though it's not backed by anything.
And the reason they did that is because it was
so expensive. They literally had to print money say it
was it had worth and instead of using it to
pay their debts, to basically fight this war. And so
(13:01):
the market the United States, well the United States just
became flooded with all this paper currency. So the paper
currency plus all the goldback currency just became less and
less valuable. And I think the inflation that came about
after the Civil War, because inflation happens when the value
(13:23):
of your currency is weak because there's too much of
it like out there. Yeah, it was like twenty five
percent during the Civil War. And just for a reference,
in twenty twenty two, at the peak of the most
recent inflation in June, it was at nine percent and
that was pretty uncomfortable. I can't imagine twenty five percent.
Speaker 1 (13:45):
No, we were in a pretty bad way. And this
was also a time when the country started dabbling in
national debt and saying like, hey, like, as a country,
we can go into deep debt. Yeah, and like, let's
see if anybody really cares it. Went this is these
are pretty staggering numbers. The national debt in eighteen sixty
was sixty five million. Six years later it was two
(14:06):
point seven six billion dollars. And this is when gold
standard or what are they called gold bugs started saying, hey,
I think you've just proved our point, Like you printed
all this money the Fiat currency, and we're in real
trouble now.
Speaker 2 (14:22):
Yeah, And so Lincoln says, hold on, hold on, and
he rolls up his sleeves a little bit and gets
to work, spits in his hand, rubs them together, picks
up an ax for no reason, just to kind of
look tough.
Speaker 1 (14:34):
Yeah.
Speaker 2 (14:34):
Sure, there works, and he says, we're going to take
all of those, all of the bills out there, all
the dollars on the market, and just take them back
and start destroying them. Yeah, and by doing that, we're
going to actually lower the supply of dollars, which increases
their value. Right, And so problem solved. That's going to
(14:55):
fight inflation because the dollar is stronger again because there's
less dollars on there. And on just a basic economic
basis of supply and demand, it makes sense. But what
the government didn't realize all the way back in the
eighteen sixties is that it takes a little more finesse
than that to not just screw up the economy like
(15:16):
a pendulum from one problem to the opposite problem.
Speaker 1 (15:19):
Yeah, Like, can you imagine being a citizen in the
United States back then, in those early days when they're
just trying to figure this stuff out, and you know,
I bet a lot of people didn't have a real
understanding of this, But if you did, could you imagine
just seeing your country be like, hey, let's print a
bunch of paper and say it's really valuable, right, and
then when they got in trouble, be like, hey, let's
(15:41):
burn all that stuff that we printed and said was valuable.
Speaker 2 (15:44):
Yeah, Like they would just come up behind, like congressmen
would come up behind people counting their money and just
yank it out of their hands and run off and
you couldn't do anything about it.
Speaker 1 (15:55):
Yeah, paper football, So that was a real hot item
at the time.
Speaker 2 (15:58):
So, okay, a bunch of bills, a bunch of money
just gets taken back, burned, destroyed, taken off of the market.
It's just not there anymore, and the value of the
dollar strengthens. The problem is because the dollar is more
is worth more than it was before, and seems like
(16:18):
it's just going to keep going up in value. People
are like, well, I'm going to hang on to my
dollar because it's going to increase in value, so I'll
be able to buy more later. The problem is in
the current term that means that people aren't out buying stuff.
And if you're making say pre industrial televisions, which were
just boxes that you know, like somebody with a puppet
(16:40):
could get in and make a little show, but they
call them TVs back then, if you're making those and
people are not spending money on the pre industrial televisions,
your profits are going to start to go down, you
have less reason to produce more and more of those,
which means you need less workers, which means you start
laying people off, which means those workers have less wages
(17:02):
to spend money on. And the whole thing becomes this
self feeding cycle that just gets worse and worse and worse.
And we call them recessions, and when they're really bad,
we call them depressions. And that happened from the government
soaking up all of those bills after the Civil War,
and it caused what's called the Long Depression from eighteen
seventy three to eighteen seventy nine.
Speaker 1 (17:24):
Yeah, and some say it almost went to like nineteen hundred,
like eighteen ninety seven before we were fully out of that.
And it was a real, like I think it was
a real wake up call early on to the United
States of like, hey, you can't There's got to be
a better way than just printing a bunch of money
when you think you need it, like kind of artificially
manipulating the value of the dollar like that is only
(17:48):
going to lead to trouble. So, boy, that's a great
first act, I think I think so too. Back in
form after vacation yeah.
Speaker 2 (17:58):
Yeah, I feel pretty good.
Speaker 1 (18:00):
Okay, you're feeling good.
Speaker 2 (18:01):
Yeah, and you're doing great. You're looking sharp.
Speaker 1 (18:03):
Man, I appreciate it. So let's take a break. We'll
come back and we'll talk about the Golden Age. We
love our golden ages. The golden age of the gold
standard right after.
Speaker 2 (18:11):
This, so the United States just basically just stepping in
(18:44):
it and then stepping out of it and stepping in
another pile of it. Yeah, in the eighteen seventies, this is.
Speaker 1 (18:50):
Not talking about gold either, right, No, no.
Speaker 2 (18:52):
No, I couldn't come up with something that wasn't just
absolutely gross. So yeah, I'll keep moving on. But this
was the time when the world was globalizing for kind
of the first time, and so other countries are taking
note of this and they're like, yeah, this gold standard
might be a good thing. And like you said, it
kicked off a golden age from eighteen seventy one to
(19:14):
basically through war about to World War One. It was
a golden age for gold. There's no other way to
put it. I didn't want to say that, but there's
no other way to put it.
Speaker 1 (19:25):
Yeah, It's like what forty something years where everyone was
sort of agreeing that the gold standard was the place
to be because there was debate like after the mess,
you know, post Civil War, of like what we're even
allowed to do as a country, and like can the
government even print money? Like that? The Supreme Court came
(19:45):
along in eighteen seventy one. They said, yes, they can
print money. Maybe they need to, you know, we need
to rethink our process, but the government printing money is okay.
Speaker 2 (19:57):
Yeah, it's kind of it's legal. Yeah. Yeah, So that
I was settled, but that still didn't mean like that
the government should do that. There was still this question
should we keep going this way as supported by the
Greenback Party, who were like, yes, this actually makes a
lot of sense. Or there are other groups like the
silver movement, the gold bugs were out there who were like, no,
we need a commodity backed currency, right. Apparently the Wizard
(20:22):
of Oz and I'm sure we've mentioned this before, but
it was supposed to be an allegory for this debate
over whether to go with the Greenbacks and World City,
go with the gold standard, the yellow brick road, or
to go with the Ruby standard. Which were the slippers.
Speaker 1 (20:44):
Right or the were wheat like you suggested that would
be the scarecrow exactly.
Speaker 2 (20:50):
Yeah, So all of those scarecrow rubies, gold, the greenbacks,
all of those were part of this national bait. And
finally it was settled in nineteen hundred when William McKinley
was made president. He said, it's gold. We're just going
with gold. And even more than that, you cannot print
(21:11):
a dollar beyond the amount of gold. We have to
back it up.
Speaker 1 (21:16):
Yeah, that was that was key to that whole declaration.
He was a pro gold candidate, pro gold standard, and
like you said, in nineteen hundred twenty one, he was like,
we got to have some real teeth behind this. I
can't just say it as president and make it so.
So they passed the Gold Standard Act of nineteen hundred,
and that had some language in there that said exactly
(21:38):
that is, hey, that circulation, it's got to be tied
to gold. We can't print one dollar more than we
have in equal amounts of gold. And that was it.
You know, that was the classic gold standard period. It
meant that nations were trading with one another on equal
ground and it was dependent on sending like physical gold
(22:00):
one another. If you were producing more and exporting more,
then you had a lot of gold, you know, stockpiled
in your country. If you had a trade deficit, you
had a lot less gold, and it was everyone kind
of knew what that meant, and it worked for a
long time.
Speaker 2 (22:16):
It did work. I mean, there were dozens of nations
all on the gold standard at the same time, so
you knew how much you were going to get paid
for your shipmen of pre industrial televisions overseas, right, because
there were bonkers for them in Portugal. But the reason
why you knew is because there was such stability among
(22:37):
your currency and international currency pegged to gold, that when
you ship that shipment out, by the time it arrived
it was the same price. Yes, with fiat currency, the
price of stuff can fluctuate so much over a day
or a week that when you sent a shipment out,
(22:57):
if you hadn't already settled the contract, which you proba
probably did, but by the time it arrived, you might
be making way less than you were going to when
you shipped it out. That's not really what happened during
the classic Golden age of the gold standard. It was
all much more stable than that.
Speaker 1 (23:13):
That's right. But like you said, we pegged the end
of that to basically World War One, because, as you
mentioned earlier, wars are really expensive. They're going to spike
your national debt if you get involved in one. And
in Europe and World War One, they were like, this
war's really really expensive, and our supply of gold is
being constrained, so we have to we have to leave it.
(23:37):
So the international gold standard dissolved basically mostly worldwide except
for the US and UK. We stayed on that gold standard.
And because of that, for a while, the British pound
and the US dollar were basically the global reserve currencies
because you know, they had gold to back them, so
(23:57):
they were the gold standard, the dollar in the pound.
Speaker 2 (24:01):
Yeah, because it's not I mean, it's not figurative when
you're saying like you had to use your gold to
buy back your currency if you were in a trade deficit, right,
you actually had to ship gold to the country you
were buying your dollars or your pounds back from.
Speaker 1 (24:15):
Yeah.
Speaker 2 (24:16):
So with the US and the UK having currencies pegged
to gold and then be being the global reserve currency,
you could just ship currency overseas, which is so much
easier than shipping gold, right, So that was each lighter,
it is super light. So the US and England both
ended up with like the vast majority of the world's gold,
(24:37):
because you know, you could take a dollar, you could
take a pound to the US of the UK and
say give me some gold for this, and those those notes,
those the paper dollars were good as gold essentially, which
is I'm pretty sure where that came from.
Speaker 1 (24:52):
Yeah, I mean that's funny. The gold standard and good
as gold, like a lot of these terms like literally
come from these weird monetary policies.
Speaker 2 (24:59):
Yeah, yeah, William McKinley.
Speaker 1 (25:03):
Yeah, old gold back. So things were going along okay
after that, and then the nineteen twenty nine stock market
crash came and banks started failing all over the world
and everyone you know those you know, when stuff like
this happens, there's it seems like it used to happen more,
(25:25):
but there can be a real panic, and people start
converting their dollars and their pounds to gold because they
were like, we know, gold is worth something I don't
want to have like this this paper currency on hand.
That's like clearly losing value very quickly.
Speaker 2 (25:39):
Right, if I weigh a day, I might get less
gold than I will if I cash my bank account
into today. And remember earlier, I said, like, how this
is all. It all kind of self regulates, it all
moves naturally from one place to another. But still humans
can screw things up just because we're human. This is
how we screwed it up. There were a banking can
(26:00):
after banking panics, where people just made runs on banks
and said give me all my money and the bank
would be like, we don't have it. They would shell
out all their money and end up closing. And there
were like ten thousand bank closures in the early nineteen
thirties in the United States alone between nineteen thirty and
nineteen thirty two because people would run in and like
just take all their money out, and so banks were failing.
(26:23):
This was before the FDIIC. So if you had a
bunch of money and the bank like closed forever before
you could cash it in, you were broke. Like that
money was worthless, right, And that caused even more people
to make runs on banks, which created this huge, terrible
ripple effect. And so the UK and the US were
(26:43):
both faced with this challenge like what do you do.
Do you stay on the gold standard or do you
go off the gold standard? And the UK was.
Speaker 1 (26:51):
Up first, Yeah, they abandoned the gold standard in nineteen
thirty one. Apparently there's a story that their central banker
named Monte Hugh Norman at the time, suffered a nervous
breakdown because he was you know, it's kind of up
to him to make that final call. And can you
imagine the pressure to be in charge of like a
(27:13):
kind of a worldwide economy, almost right, and how important
these decisions are.
Speaker 2 (27:18):
So ask your question, no, no, I cannot imagine that
kind of.
Speaker 1 (27:23):
Pressure it either. So the pounds value, of course, immediately
drops even further than it already was. So people that
were had lost faith in the paper money were saying, like,
see there, like good thing. We traded in our pounds
for gold and America and of course everywhere around the
world is seeing this happen, so everyone else is losing confidence.
(27:43):
And this is when you know, further runs on banks happened.
And we had a president, a lame duck named Herbert Hoover,
who was leaving office in nineteen thirty three and told
incoming FDR he was like, hey, you know, we're in
real trouble here. The reason we have gold is because
can't trust governments. And FDR was like you know what,
(28:04):
I think I've got this. So he went in office
and he said, I'm going to I'm going to fix
this crisis for good.
Speaker 2 (28:12):
One of Yeah, one of the first things he did was,
I think the day after he was inaugurated, he declared
a four day banking holiday, so all the banks closed
right for four days so there couldn't be any runs
on banks. And I was watching this. There's this dude
who's a YouTuber named the Casual Historian, and he bills
(28:33):
himself as a Conservatorian, which I take to be in
a combination of a conservative and a vegetarian right probably,
But he was explaining that this actually didn't do much
in real terms, like the banks that were about to
fail before the banking holiday still failed afterwards. But as
far as the public was concerned, it was a huge
(28:55):
signal for essentially the first time that the government was
going to step in. Because there's one thing that you
cannot argue against with the gold standard is because you're constrained,
you cannot print more money than you have gold to
back it. There is nothing you can do in an
economic crisis except sit there and watch it happen. You
(29:16):
can't do anything there's no leverage for you to pull
the pull the country out of it. The only way
that you can pull your country out of a recession
or a depression is by printing more money and actually
devaluing the money that people are hoarding. So it's you're
basically saying, you got all this money that you're stashed
away because it's so valuable. Well, guess what, It's not
(29:38):
so valuable anymore, so you might as well get out
there and spend it.
Speaker 1 (29:42):
Yeah, for sure. And you know, we were in big
trouble obviously in the nineteen thirties, you know, you mentioned
earlier sort of that cycle that happens when companies are
producing less and fewer customers and not hiring people or
firing people. And in nineteen thirty three, the unemployment of
the United States was twenty five percent.
Speaker 2 (30:02):
That's so crazy.
Speaker 1 (30:04):
I know, it's staggering. And I think worldwide, almost one
in three people were out of work in nineteen thirty two,
So it wasn't just the United States like that many
people being out at work at once, And that's the
thing that I always you know, thankfully it hasn't happened yet,
but with the AI conversations and people. I've had conversations
with people in my sphere.
Speaker 2 (30:25):
Are you sure? They were people and not box.
Speaker 1 (30:28):
They think it's such a great thing. And I was like,
you know, I'm not even arguing the merits of arts
or not and things like that, But I said, I
just worry about what would happen if like twenty percent
of the workforce was laid off in the span of
like a year or so because of AI. It's like,
that's what I worry about. And we haven't seen that yet, thankfully,
but I guess we'll see.
Speaker 2 (30:46):
Yeah, you, me and I were talking about the same thing,
and she brought up a really great question, which is
like one of the things that a lot of the
AI proponents say is like, eventually you were going to
create this utopia where like no one has to work
and everybody's right. And her question is like, if that's
your goal, why don't we take some of that wealth
and just start now before I act? Right, do we
(31:07):
have to wait for AI to do that? We can
do it now? I thought, yes, rather clever. I stood
up and clapped right.
Speaker 1 (31:15):
She's like, that's weird. Here, we're in our living room.
She left the room, all right, So things are bad.
They had that banking holiday. Congress passes what's called the
Emergency Banking Act at the time, which basically, like you said,
allowed them to, in an emergency issue, just start printing money. Basically,
(31:36):
that's not back to the gold standard, but we had
that gold standard because the gold Standard Act of nineteen hundred,
so they had to create this Banking Act, I guess
to work around that.
Speaker 2 (31:47):
Right, Yeah, They basically said, Okay, this is just emergency measures,
and we're just printing this money to give to banks
to keep them from going under. So the government is
signaling all over the place, we're stepping in. We're going
to make sure that this that like, we're going to
do something about this for the first time. I think
that was my point before I got off on the
(32:09):
tangent for a little while a minute ago. But the
government is signaling all over the place that they're going
to back up banks so you don't have to run
and get all of your money out and just keep
making this whole thing worse. So that was like a
first step. But the problem is is there was still
plenty of gold out there that people were hoarding. They
were like, yeah, that's great, thanks a lot, but I'm
not taking this goal back to the bank right now
(32:31):
because I don't have any confidence in the banking system.
So the government figured out how to deal with this.
They said, well, you know what, we will put you
in jail for ten years and find you the modern
equivalent of two hundred and fifty thousand dollars. If you
don't give us your gold, we'll give you the equal
amount of paper dollars back, but you can't legally own
(32:56):
gold anymore.
Speaker 1 (32:58):
Yeah, and that was it. That was I mean, I
think it was about a month after they sort of
restored that public confidence with the Emergency Banking Act, like
FDR was moving very quickly and said all right, we're
suspending the gold standard officially. And then the next year
was that Gold Reserve Act of nineteen thirty four that
you were talking about, where they were like, yeah, you can't.
(33:19):
I mean, you can keep your rings and if you
got like collectible coins and stuff, we're not coming after those. Yeah,
but you can't have bars of gold and a safe
in your house anymore.
Speaker 2 (33:28):
Yeah. And Jimmy the Greek was like, whow right close.
So yeah, so now you had to have you had
to use paper currency, so this was the shift in
the United States, and this had already happened in other countries,
like you said, especially in Europe after World War One,
and the gold standard was dead. And one of the
(33:52):
things that demonstrated the death of the gold standard was
economists generally today say that the US being able to
print money and basically kickstar inflation to pull us out
of the deflationary spiral aka the depression. That's basically ninety
percent of the reason that the US got out of
(34:13):
the Great Depression. It was leaving the gold standard being
able to print money. Because if you can just print
money and take money off the market and put more
money on the market when you need it, you can
adjust the economy enough to get it out of crises
one way or the other. And that that's actually the
better way of doing it. And so the gold standard
(34:35):
never came back again.
Speaker 1 (34:37):
That's right. And so that could be the end of
our show, but that would be weird because we haven't
had our second ad break yet. So we're gonna do that,
and we're going to come back and just say see
you later and read a listener mail, right, because the
gold standard's gone forever, gone forever, all right, we'll be
right back. Okay, we're back here for Act three, which
(35:25):
means this time for listener mail. Because a gold standard
is dead.
Speaker 2 (35:28):
This is where the golden gun goes off.
Speaker 1 (35:30):
That's right, because no, the gold standard is not dead.
It actually had another sort of brief not even stint,
like it kind of had a maybe not a Golden Age,
but maybe a heyday when the Bretton Woods Agreement came around,
which was a U in a United Nations agreement that
came around in nineteen forty four in Brettonwood's New Hampshire
(35:52):
that had a whole brand new system that was really
kind of like that original gold standard, with forty four
country signed on along with the US that said, all right,
the US dollar now is pegged to gold at thirty
five dollars an ounce, and everybody else that's signing on
is tying their currency to our dollar.
Speaker 2 (36:13):
Right, so there's a fixed rate, like there's fifteen pesos
for one dollar and one dollar equals this much gold.
So it's essentially the world going back on a gold standard.
They just figured out a good way around it to
make it much easier, right. Yeah, and again, just like
the first time, if everybody's playing by the rules. Then
(36:34):
this keeps you from monkeying with interest rates to make
your exports more attractive. It prevents trade wars, it does
all sorts of calm, peaceful stuff. But the problem is
there's just and this is the same problem today. There
just wasn't enough gold in the world to cover the
increasing expense of modern life.
Speaker 1 (36:55):
Yeah, for sure. And they had put things in place
because you know, they were a little smarter than time around.
They were like, all right, we'll create the International Monetary Fund,
We'll create the World Bank. So that means that there's
their official worldwide bodies kind of coordinating this monetary policy
between all the countries to make sure that no one's
doing hinky stuff. And it took a long time. This
(37:16):
wasn't like, you know, they reached this agreement in nineteen
forty four and by nineteen forty five it was all
set in stone. I think it didn't actually take effective
fourteen years later in nineteen fifty eight. By the nineteen sixties,
like shortly thereafter, the US was was spending like a
like a drunk ten year old military spending was in
(37:37):
foreign aid. We're all just like ramping up spending on imports,
foreign investment. There are a lot of dollars from the
United States and worldwide circulation. And even though we held
a lot of the world's gold reserves, like seventy five
percent at the time, like you said, we still didn't
have enough gold to cover all that kind of money.
Speaker 2 (37:55):
No, and this is the I mean, this is what
keeps governments honest. There is a possibility of a worst
case scenario where all of the people holding those dollars
can all come back at once and say, hey, we
want this, we want our goal. We're turning in our currency,
give us our gold. And you know it's bad enough
when you're talking about citizens making runs on banks. If
(38:17):
you're talking about entire foreign governments bringing all of their
cash reserves to you and saying we want gold, you
got a really big problem. And finally, in nineteen seventy one,
Nixon admitted, like, we don't have enough gold to cover
the currency out there. Sorry, guys, you can't turn that
in for gold anymore. Sorry, and just kind of backed
(38:39):
out of the room.
Speaker 1 (38:40):
Yeah, he backed out of the room. And it was
it was a big deal because this isn't the kind
of thing that we could we had pegged our dollar
to like worldwide value, so we couldn't just say that
by ourselves. In nineteen seventy three, the Monetary Fund they
went off the gold standard. They basically kind of came
(39:02):
along for the ride, yeah, and said, all right, everybody
should kind of go to this fiat currency system, and
like that was the true real end of the gold standard,
and like there's this that ship is so far out
of the harbor now, there's no way they could go back.
Speaker 2 (39:16):
To it now. And it eventually kind of became a
fringe right wing position for some reason. They just kind
of adopted it. But that doesn't mean all of the
right wing agrees with it. In fact, Milton Friedman, who's
a right wing conservative economist hero, he was even like,
that's a terrible idea to go back on it. He
(39:37):
wrote a paper, and I think nineteen ninety or co
wrote one that basically demonstrated just how bad of an
idea it would be. But there's still plenty of people
who are like, no, gold is where I want to
put my faith in. One of the reasons why it's
still around is because people believe that if there's a
social collapse right afterward, people will still accept gold. They
(40:02):
won't accept dollars or pounds or euros, but they'll take
gold in return. So that's one reason a lot of
people still have faith in goals and investment. There's other
people who are like, gold's always going to become more
and more valuable because there's a finite amount of it, right,
And that actually is the same thing for bitcoin. There's
(40:24):
a finite amount of bitcoins, which means that over time
it's going to become more and more valuable. It's going
to buy more and more stuff, which makes it a
deflationary currency, which actually makes it dangerous because that means
people are more likely to buy in HORD bitcoins or
buy in HORD gold because eventually it's going to become
more valuable, and that's how you go into a recession.
Speaker 1 (40:46):
Yeah. I've never I'm just you know, me and economics
and money. I'm just a big dummy with all that.
So cryptocurrency is something that even though we've podcasted on it,
I just it's not like I'm saying like I don't
try cryptocurrency. I just I don't understand it and I
have no interest in understanding it.
Speaker 2 (41:04):
Yeah. Yeah, although it does seem to have gained a
lot of legitimacy, especially Yeah coin sure, but I mean
it's a wild ride, like it was at like sixteen
thousand earlier this year, early like last year, and now
it's at like sixty one, and sixty one is down
from ninety something a month or two ago. Like maybe
(41:25):
it's a long term thing, but that's not something you
want to I mean, you would have to be so
insane to trade that stuff on a daily basis.
Speaker 1 (41:33):
I don't have the stomach for I'm just that's not
who I am either. You know, I want to I
want to sit around and you and I want to
sit around listen to elevator music, not track the currency cryptocurrency.
Speaker 2 (41:44):
No, but for some people that is quite thrilling.
Speaker 1 (41:47):
Oh I bet it is. Have fun with that if
that's your thing for Larry David. Right, So, like we said,
I think an act one that you know, there are
still people that argue for the gold standard and people
that aregue against it, even though that ship is sailed,
and there are you know, some pretty good arguments each way.
If you're for the gold Standard, you know you can say,
(42:10):
like hey, that's going to definitely put a lid on
this crazy government spending that we have had going on,
and it'll stabilize the money supply. We've seen it do
that literally, so you know, that's a pretty decent like
they got a lot of data to back those claims
up for sure.
Speaker 2 (42:28):
Yeah, one of them is it's just basically throwing shade
at how out of control government spending gets when the
government is allowed to literally just print money when it
wants to. One of those things that you'll see a
lot is that the purchasing power of the dollar has
declined by more than eighty five percent since the US
(42:50):
left the gold standard in nineteen seventy one. And the
reason why is because the government just keeps printing money
anytime it likes, which causes inflation. Well, that's purposeful, like
a fiat currency is an inflationary currency as opposed to
a deflationary currency like gold. They want inflation to happen
because inflation you can keep on top of. It's deflation
(43:12):
that's really hard to come out of. So yeah, it's
not really a problem if you can buy less with
a dollar than you did before because you're adjusting for inflation.
It's not a problem as long as your wages are
keeping up with it. The problem is is wages haven't
kept up with it, and so people are being paid
the same amount as before and are able to buy
less because they have less money. Even though the cost
(43:35):
of living has increased their wages are wages haven't gone
up commensurate to it.
Speaker 1 (43:41):
Yeah, for sure. And if you want to talk about
like you know, we're talking about printing money and a
spike in the cash supply, here's a pretty staggering statistic.
The supply of money in nineteen seventy, this is what
they call the M two money supply, which is all
the cash, all the money and checking accounts, all the
travelers checks, was about six hundred billion dollars in nineteen seventy,
(44:02):
the year before I was born. In August of last year,
it was twenty two trillion dollars, which is an increase
of three thousand, five hundred and sixty six percent over
whatever fifty four years, and twenty percent of that was
created in twenty twenty.
Speaker 2 (44:23):
Yeah, just that year.
Speaker 1 (44:25):
Yeah.
Speaker 2 (44:26):
Yeah, So there's this, I mean, there's clear evidence that
like the government will just print money as much as
it can whenever it wants to. Part of the problem
is is that also increases the national debt because for
money out there, if you can print money, make new money,
you can spend that new money if you're the organization
that is creating the money. So the national debt increased
(44:48):
tremendously too over that same time period from nineteen seventy
to twenty twenty five.
Speaker 1 (44:55):
Yeah, it could increase nine thousand percent. It was three
hund undred ninety eight billion back then and now it
is over thirty six trillion dollars, and it's a number
that is just hard to even comprehend. That seemingly nobody,
well not nobody, but the right people aren't concerned enough.
Speaker 2 (45:14):
About So gold bugs are like, see, if you let
the government print money, they're going to print money and
they're going to spend more money. The gold standard keeps
them from being able to do that.
Speaker 1 (45:24):
And of story, that's right. But there are anti goldbugs.
There are people who prefer fiat currency and the ability
for the government to step in and throw levers and
control monetary policy through debate and decision making. And that's
one of the big arguments. It's like, hey, we need
to be able to make these decisions sort of on
(45:47):
the fly and move quickly to save ourselves in times
of doubt and in times of economic stress, and they
can also combat a lot of those a lot of
that data too. They can also say, well, yeah, but
you really should look at these numbers instead.
Speaker 2 (46:02):
Yeah. So goldbugs always say that that there's stability in
gold currency, right, But the problem is is that if
you look at the gold markets, they fluctuate tremendously, so
that's actually kind of out the window. Another one, this
one I couldn't find an answer to that. I can't
wrap my head around those. And the total value of
(46:24):
all the gold in the world is thirty six trillion dollars,
which is eye popping, but.
Speaker 1 (46:29):
That's the debt. But yeah, exactly ironically.
Speaker 2 (46:33):
But if you took the entire global economy and valued that,
that's more like one hundred and twenty six trillion dollars.
So if the world went on a gold standard again,
how would you shrink one hundred and twenty six trillion
dollars into thirty six trillion? That right there, that's what
we've been saying. The ship has left the harbor, that
train has left the station. It's just there's again, there's
(46:56):
not enough gold to cover the value of everything in
the world.
Speaker 1 (47:00):
Yeah, for sure. Another big sort of argument that people
against the gold standard point too, is like, hey, look
at our stock market. People aren't putting their money in
their mattress anymore and making runs on banks. They're shifting
that money. They're cash dollars into the stock market, and
those dollars have grown and grown and grown. I mean,
there are always dips in the stock markets, and even
(47:23):
you know, there have been some very bad days in
a row with the stock market, and you know, the
crash of two thousand and eight and the dot com
bubble and all that stuff always affects the stock market,
but it's proven to be a pretty stable thing over time.
Speaker 2 (47:39):
It has. And in fact, if you there's this comparison
I found I can't remember where I found it, but
if you took five thousand dollars in nineteen seventy one
to celebrate the birth of Chuck, Yeah, and you said,
I'm going to go buy five thousand dollars worth of gold,
It's going to be a great present for Chuck. I'm
also going to bring a little I'm a little frank incense.
(48:01):
It is going to get biblical in the year. The
gold actually would have increased about seventy five hundred percent.
And this is gold prices are so all over the place.
This is probably already out of date. But I think
in the end of twenty twenty five, you would have
had three hundred and seventy nine thousand, five hundred dollars
(48:22):
worth of gold from that five thousand dollars worth of
gold you bought in nineteen seventy one. So that makes
it seem like, okay, great, gold's a good investment. What
happens if you invested it in the stock.
Speaker 1 (48:32):
Market, Well, if you had had that same five grand
after my birth and put it in the S and
P five hundred, you would have made two hundred and
seventy one thousand, five hundred dollars. So the gold standard
wins in that case. But that is if you were
just taking those dividends, if you're taking the money that
you're making from the stocks and saying like, all right,
that's that's my income or whatever. If you had kept
(48:55):
reinvesting all that from the five grand, it would be
one point one eight five million plus what five hundred bucks. Yeah,
So that's a return of almost twenty four thousand percent
rather than seventy five hundred percent.
Speaker 2 (49:11):
Right, And even if you're like, okay, we'll wait a minute,
adjusting for inflation, how much is that? So I looked
it up. I went on our beloved west Egg, and
something that costs five thousand dollars in nineteen seventy one
would cost you forty thousand dollars today. So even after
you bought that five thousand dollars thing, you'd still have
one point one million and change left over. So it
(49:33):
would be much better to invest it in the market.
As volatile as it is, as unpredictable as it is,
as as easy as it is to lose your shirt
over the course of time, the ability to unleash the
stock market that having a fiat currency and being able
to print money creates is a it's a better return
on investment.
Speaker 1 (49:53):
Yeah, I'm surprised I got through this one.
Speaker 2 (49:56):
You did great.
Speaker 1 (49:58):
Well, you did great.
Speaker 2 (49:58):
You did great.
Speaker 1 (50:00):
Who wrote the original article here? Who is this?
Speaker 2 (50:02):
That was Olivia Joint She did great.
Speaker 1 (50:03):
Yeah, she did great too. And you did a lot
of great supplemental research. Everyone's doing great, everybody.
Speaker 2 (50:08):
It was just great up in here. We should also
say we probably got a lot of stuff frong. We
probably walked past a lot of stuff. This is such
a detailed nuance discussion that people who are like monetary
policy walks this is one of their favorite things to do,
is to point out all of these nitpicky little things
based on mind boggling economics that are really hard to describe.
(50:30):
We just glanced over the surface of this, but I think, yeah,
probably we got more right than you'd think.
Speaker 1 (50:37):
Yeah, it's tough to tackle something like this because there
are people that know a gazillion times and more about
this kind of thing than we do.
Speaker 2 (50:43):
Yep, and Chuck just said tackle, so he unlocked listener mail.
Speaker 1 (50:49):
I'm going to call this this was from our crowd's episode,
and this is a classroom hack, a question hack from
a I think a teacher. Hey, guys, love the episode
about Yeah, I'm a middle school teacher and crowds are
my standard environment. Your comments about being afraid to ask
a question in class really spoke to me because a
big part of my job is navigating the power of
(51:10):
language with crowds in my students. There's a simple teacher
hack that is most effective and easiest, the easiest change
I've ever made to my communication with students and Aaron
from New Brunswick, Canada. I will go ahead and say that,
like anyone speaking in front of a crowd where you
like source questions, I think this is a pretty good
way to go. And here it is. Instead of saying
(51:31):
does anyone have any questions? What I say instead is
what questions do you have? There must be questions. It
really works a completely different response from the students. Guys.
The assumption that questions are expected always prompts at least
one kid to get the courage, which opens up the
gates for everyone else who is too apprehensive. Thanks for
(51:52):
being my first podcast in twenty twelve and for continuing
to bring joy and relaxation to a tire but satisfied teacher.
Peace and love and again that is from Aaron with
an E from New Brunswick, Canada.
Speaker 2 (52:03):
Thanks Aaron, Peace and love back to you too, and
thanks for teaching.
Speaker 1 (52:07):
It's a good hack.
Speaker 2 (52:08):
It's a great hack. Questions who's got them? I know
there's some? Don't lie right, and then just get more
aggressive right huh huh, give me a question?
Speaker 1 (52:19):
Yeah that works.
Speaker 2 (52:20):
If you want to be like Aaron and send us
a great email and say peace and love that's awesome.
You can send it off again via email to the
email address stuff podcast at iHeartRadio dot com.
Speaker 1 (52:35):
Stuff you Should Know is a production of iHeartRadio. For
more podcasts my heart Radio, visit the iHeartRadio app, Apple Podcasts,
or wherever you listen to your favorite shows.
Welcome to Stuff you should know, a production of iHeartRadio.
Speaker 2 (00:11):
Hey, and welcome to the podcast. I'm Josh and there's
Chuck and it's just us here today to explain something
that every person in the world should know about, the
gold stand. I have an intro. I have an intro
hold on oh goud, Chuck. Yes, have you ever gone
(00:32):
to a bank and traded a dollar in for actual gold?
Speaker 1 (00:40):
No, I've never even seen gold in person. That wasn't like,
you know, on whatever, a ring or something.
Speaker 2 (00:47):
Sure, and that is a huge use for gold.
Speaker 1 (00:50):
I've never seen nuggets or bars ingots.
Speaker 2 (00:54):
I haven't either. I have never even seen a gold coin.
Now that I think.
Speaker 1 (00:58):
About it, I don't think I have either.
Speaker 2 (01:00):
But there was a point in time where you could
see gold anytime you wanted, if you went to your
bank and you took a certain amount of dollars or
pounds or francs or pesos, because countries all over the
world were on what's known as the gold standard. And
just a quick broad stroke explanation I guess is that
(01:22):
on a gold standard, every single one of your dollars
or pesos or francs or Deutsche marks are redeemable for gold,
which means that you have to have an equal amount
of gold in your country in safes and vaults to
cover every single dollar or paso or Deutsche mark or
(01:44):
frank out there. You can't just keep printing money. You
can only print as much money as can cover the
amount of gold that you have.
Speaker 1 (01:52):
Yeah, which is you know, it's sort of a public
safeguard to say, hey, your dollar, your pay paper money,
or your coins are worth something because it's worth this
much of this other thing that we've also agreed is
worth money exactly.
Speaker 2 (02:10):
And so for you, if you're walking around in a
country that's on the gold standard, you can go trade
your dollars in for gold, your paper currency in for gold. Right.
It also gives you a lot of stability and understanding
that when you wake up in the morning, what you
bought for one dollar yesterday, you're going to be able
to buy for one dollar today. Prices don't fluctuate very
(02:32):
much on the gold standard, and then on more of
a macro level, if you're a country and you're importing
tons of stuff, that means your currency is going out.
You're using your currency to buy these imports, and when
a bunch of your currency is out there, you need
it back home, so you have to use some of
that gold to buy your currency back. So the upshot
(02:55):
of all of this is the gold Standard is very
different from the type of currency that we have today,
and I feel like we should maybe explain a little
more eventually about how they're different.
Speaker 1 (03:06):
Yeah, for sure. I mean we've been back and forth
between the gold Standard and the other, which we call
fiat currency, which is a Latin term, and that you know,
fiat currency basically is what we're working with now because
the gold Standard is basically dead. But that's where you can,
you know, where you have more you know, monetary policy
(03:27):
guiding the markets and stuff like that, rather than like, no,
it's like it's tied to gold like kind of end
of story. Yeah, there are people that love and you know,
we're going to talk about sort of the benefits and
the arguments for and against. But people that are into
the gold Standard as an idea, they're kind of out
of luck, but they're still around. They're called gold bugs.
(03:48):
They've been called that since Edgar alland Post's story that's
where it came from, about the search for buried treasure.
But you know, it's still a fight in some circles
from people who are like way into the gold standard.
Speaker 2 (04:00):
Yeah, and there's I mean, they have a lot of
good points. But the problem is is that that train
has left the station in it and it's coming back,
not coming back. So why gold? Right? There's alsort. You
could pay your currency to wheat, right, and you could
take your dollar bill and go into the bank and
they'll give you like a bushel of wheat in return. Right,
(04:21):
why gold in particular?
Speaker 1 (04:24):
Well, yeah, I said that, you know, that's something that
they all agreed was worth something, And that's kind of
the deal. Like something's only worth something if everyone agrees
that it's worth something, right, But you can't, you know,
you've got to pick something that makes sense. And gold
has always made a lot of sense for a lot
of reasons. It is, it's scarce, but not like rare rare.
(04:46):
It's rare enough to be precious, but not so rare
that like you know, it's impossible to find. So you've
got to have enough of it, but not too much
of the thing. It's also you can divide it up
into small things, you can melt it down, you can
make it into stuff, making it into coins, you know,
is certainly valuable. It's valuable, it's resistant to being corroded
(05:09):
and like rusted, it's durable. So all that stuff makes
it just sort of a valuable thing to trade.
Speaker 2 (05:16):
Yeah, and you said it's durable. Like most of the
gold that's ever been mined in the history of humanity
is still around because you can change it from one
form to another, say like from a necklace into a
gold coin. But there's still that same amount of gold
on earth. And I guess as of twenty twenty five,
I think the World Gold Council says that two hundred
(05:38):
and nineteen thousand, eight hundred and ninety tons of gold
have been mined throughout history, and about two thirds of
those have been mined since nineteen fifty alone.
Speaker 1 (05:49):
Right, And most of that is still around, Like you said,
it's still out there, which kind of proves that gold
was a pretty good pick that and silver, I mean,
silver was we'll talk about the fact that gold and
silver kind of went back and forth over the years.
There's just a lot more silver, so silver has just
been worthless, right.
Speaker 2 (06:08):
But it's still worthwhile. And in fact, if we're going
to start to go back a little bit in history,
the very first, I guess currency that the United States
came up with, and the history for Great Britain tracks
very similarly. But in the US they said, we're going
(06:28):
to use gold and silver for coinage, and they had
to set an amount how much silver do you need
to buy you know, one unit of gold because they
are related to one another, you're using both for currency.
So they said, you know what, fifteen pieces of silver
grains I think is equal to one grain of gold.
Speaker 1 (06:51):
Yeah, so like a fifteen to one ratio. But they
realized right away that like if they're going to start
setting this like thesetios in these sort of units as
being you know, kind of blocked in, it's just going
to create a lot of trouble over time, like especially
when the amount of gold and silver increases in deep well,
(07:11):
I guess not so much decrease, but you know, like
when there's a gold rush or when like they find
a new vein of silver somewhere that changes the amount
of gold and silver in the world. But they still
had locked into that fifteen to one ratio. It's not
like they kept changing it over and over. So I
think kind of right away people were like, oh wait
a minute, this is all a little bit artificial in
(07:33):
a way.
Speaker 2 (07:34):
Yeah, And that's something that goldbugs have trouble with is that,
you know, it doesn't really matter how you know, honest
a gold standard keeps the government, it's still all artificial.
There's still manipulation that can happen. And yeah, when a
bunch of gold comes on the market, gold becomes less valuable.
(07:54):
If a bunch of silver comes on the market, relative
to gold, silver becomes less valuable. And one of the
problems with using a commodity to back your currency is
that sometimes the value of the commodity can rise beyond
the face value of the currency. So if you have
a ten dollars gold piece and the price of gold
actually puts that one ounce at twenty dollars, you're not
(08:18):
going to go spend that ten bucks. You're going to
melt that thing down or sell it to somebody for
twenty dollars. Yeah, So that's a there's problems here with
money that actually means something in the world.
Speaker 1 (08:31):
Yeah, for sure. And that happened. And when that happened
kind of the first time, I guess for the United States,
people started doing that. They started melting gold coins or
keeping them in hoarding gold coins and they started trading
and using silver as currency. So all of a sudden
we were like, wait a minute. We thought we were
on a gold sale or we're heading toward a gold standard,
(08:52):
and now we're kind of on a de facto silver
standard because that's what people are using.
Speaker 2 (08:56):
Yeah, so the government was like, well, let's just make
the sixteen to one, and it brought everything a little
bit more into parody. Then there was the Minor forty
nine or gold rush in California, and then there was
also another gold rush in Australia about the same time.
So the market price for gold went down again because
the supply increased, which basically made the US government throw
(09:18):
their hands up in the air and say, we give up.
We're going to go watch football.
Speaker 1 (09:23):
Yeah, they're kind of football, I guess. Over across the pond.
Isaac Newton finished out his long, storied career as the
Master of the Mint.
Speaker 2 (09:34):
Mm hm.
Speaker 1 (09:35):
He did a lot of other stuff obviously before that,
but he worked as the Master of the Mint at
the end of his life until his death, and he
was all about gold. Was like he encouraged overvaluing it
and said we should really just set gold as the
gold standard for England and they adopted that in what
like eighteen nineteen.
Speaker 2 (09:54):
Yeah, so I think they were the first country on
an actual gold standard, and then it kind of spread
around Europe from there because they're like, this is actually
pretty good, pretty good idea because you don't need necessarily
a central bank, you don't have to have somebody figuring
out what lever to pole or whatever. The gold actually
kind of naturally flows from one place to another to
(10:15):
basically keep this homeostasis, this balance throughout the world among
all the countries that are on the gold standard, right. Yeah,
So the thing is is humans are humans. You can
mess up anything that is, even something that naturally flows
from one place to another. We can basically put our
foot in it and screw it up. And that was
(10:37):
the case usually, as we'll see throughout history, that's usually
the case when war comes along, and that happened in
the United States with the Civil War. And we've talked
many times about this about how before the Civil War
there was like eight thousand different types of currency in
use in the United States, like your general store intel
might have its own currency that you could use. And
(11:00):
as the Civil War came along, that all changed very quickly.
Speaker 1 (11:04):
Yeah, that was I remember we took that feels like
very many years ago. We were talking about that in
a few episodes. It was kind of the hot topic
for us for a while.
Speaker 2 (11:14):
It was so hot.
Speaker 1 (11:15):
We were talking about all those different currencies, like one
town might have a currency and then two miles down
the road, the next town might have their own currency,
which you know within that town as long as everyone again,
if everyone agrees what something is worth, it's working out, okay.
But that's a mess if you're trying to be a country,
which we despite the Civil War, we were trying to
be a country. And so the Civil War starts and
(11:41):
the federal government was like hey, like you know, Josh
Clark will say one day, wars are expensive, and so
they issued war bonds. I think about half a five
hundred billion dollars in war bonds. War bonds are what
you buy to basically, you know, or you sell as
a government and people buy to kind of finance the
world and saying, a loan you money to go fight
(12:01):
this war. Because that bond is ensured, I know for
a fact that eventually I'm going to get repaid with
interest for lending you that money to fight this war. Right,
So it's like it's super safe on the investor side,
but it's just a long term payout.
Speaker 2 (12:17):
Yeah. The thing is is when they issued those as
far as I know, they weren't backed with gold, and
then they weren't even further. They just started issuing straight
up paper currency that had it wasn't pegged to gold
or silver backed up by any of it. It was
the first fiat currency in the United States, and like
you said, is just basically the government saying this has value.
(12:38):
Because we say it has value. You can use this
to buy stuff, you can use this to pay your taxes.
It is currency even though it's not backed by anything.
And the reason they did that is because it was
so expensive. They literally had to print money say it
was it had worth and instead of using it to
pay their debts, to basically fight this war. And so
(13:01):
the market the United States, well the United States just
became flooded with all this paper currency. So the paper
currency plus all the goldback currency just became less and
less valuable. And I think the inflation that came about
after the Civil War, because inflation happens when the value
(13:23):
of your currency is weak because there's too much of
it like out there. Yeah, it was like twenty five
percent during the Civil War. And just for a reference,
in twenty twenty two, at the peak of the most
recent inflation in June, it was at nine percent and
that was pretty uncomfortable. I can't imagine twenty five percent.
Speaker 1 (13:45):
No, we were in a pretty bad way. And this
was also a time when the country started dabbling in
national debt and saying like, hey, like, as a country,
we can go into deep debt. Yeah, and like, let's
see if anybody really cares it. Went this is these
are pretty staggering numbers. The national debt in eighteen sixty
was sixty five million. Six years later it was two
(14:06):
point seven six billion dollars. And this is when gold
standard or what are they called gold bugs started saying, hey,
I think you've just proved our point, Like you printed
all this money the Fiat currency, and we're in real
trouble now.
Speaker 2 (14:22):
Yeah, And so Lincoln says, hold on, hold on, and
he rolls up his sleeves a little bit and gets
to work, spits in his hand, rubs them together, picks
up an ax for no reason, just to kind of
look tough.
Speaker 1 (14:34):
Yeah.
Speaker 2 (14:34):
Sure, there works, and he says, we're going to take
all of those, all of the bills out there, all
the dollars on the market, and just take them back
and start destroying them. Yeah, and by doing that, we're
going to actually lower the supply of dollars, which increases
their value. Right, And so problem solved. That's going to
(14:55):
fight inflation because the dollar is stronger again because there's
less dollars on there. And on just a basic economic
basis of supply and demand, it makes sense. But what
the government didn't realize all the way back in the
eighteen sixties is that it takes a little more finesse
than that to not just screw up the economy like
(15:16):
a pendulum from one problem to the opposite problem.
Speaker 1 (15:19):
Yeah, Like, can you imagine being a citizen in the
United States back then, in those early days when they're
just trying to figure this stuff out, and you know,
I bet a lot of people didn't have a real
understanding of this, But if you did, could you imagine
just seeing your country be like, hey, let's print a
bunch of paper and say it's really valuable, right, and
then when they got in trouble, be like, hey, let's
(15:41):
burn all that stuff that we printed and said was valuable.
Speaker 2 (15:44):
Yeah, Like they would just come up behind, like congressmen
would come up behind people counting their money and just
yank it out of their hands and run off and
you couldn't do anything about it.
Speaker 1 (15:55):
Yeah, paper football, So that was a real hot item
at the time.
Speaker 2 (15:58):
So, okay, a bunch of bills, a bunch of money
just gets taken back, burned, destroyed, taken off of the market.
It's just not there anymore, and the value of the
dollar strengthens. The problem is because the dollar is more
is worth more than it was before, and seems like
(16:18):
it's just going to keep going up in value. People
are like, well, I'm going to hang on to my
dollar because it's going to increase in value, so I'll
be able to buy more later. The problem is in
the current term that means that people aren't out buying stuff.
And if you're making say pre industrial televisions, which were
just boxes that you know, like somebody with a puppet
(16:40):
could get in and make a little show, but they
call them TVs back then, if you're making those and
people are not spending money on the pre industrial televisions,
your profits are going to start to go down, you
have less reason to produce more and more of those,
which means you need less workers, which means you start
laying people off, which means those workers have less wages
(17:02):
to spend money on. And the whole thing becomes this
self feeding cycle that just gets worse and worse and worse.
And we call them recessions, and when they're really bad,
we call them depressions. And that happened from the government
soaking up all of those bills after the Civil War,
and it caused what's called the Long Depression from eighteen
seventy three to eighteen seventy nine.
Speaker 1 (17:24):
Yeah, and some say it almost went to like nineteen hundred,
like eighteen ninety seven before we were fully out of that.
And it was a real, like I think it was
a real wake up call early on to the United
States of like, hey, you can't There's got to be
a better way than just printing a bunch of money
when you think you need it, like kind of artificially
manipulating the value of the dollar like that is only
(17:48):
going to lead to trouble. So, boy, that's a great
first act, I think I think so too. Back in
form after vacation yeah.
Speaker 2 (17:58):
Yeah, I feel pretty good.
Speaker 1 (18:00):
Okay, you're feeling good.
Speaker 2 (18:01):
Yeah, and you're doing great. You're looking sharp.
Speaker 1 (18:03):
Man, I appreciate it. So let's take a break. We'll
come back and we'll talk about the Golden Age. We
love our golden ages. The golden age of the gold
standard right after.
Speaker 2 (18:11):
This, so the United States just basically just stepping in
(18:44):
it and then stepping out of it and stepping in
another pile of it. Yeah, in the eighteen seventies, this is.
Speaker 1 (18:50):
Not talking about gold either, right, No, no.
Speaker 2 (18:52):
No, I couldn't come up with something that wasn't just
absolutely gross. So yeah, I'll keep moving on. But this
was the time when the world was globalizing for kind
of the first time, and so other countries are taking
note of this and they're like, yeah, this gold standard
might be a good thing. And like you said, it
kicked off a golden age from eighteen seventy one to
(19:14):
basically through war about to World War One. It was
a golden age for gold. There's no other way to
put it. I didn't want to say that, but there's
no other way to put it.
Speaker 1 (19:25):
Yeah, It's like what forty something years where everyone was
sort of agreeing that the gold standard was the place
to be because there was debate like after the mess,
you know, post Civil War, of like what we're even
allowed to do as a country, and like can the
government even print money? Like that? The Supreme Court came
(19:45):
along in eighteen seventy one. They said, yes, they can
print money. Maybe they need to, you know, we need
to rethink our process, but the government printing money is okay.
Speaker 2 (19:57):
Yeah, it's kind of it's legal. Yeah. Yeah, So that
I was settled, but that still didn't mean like that
the government should do that. There was still this question
should we keep going this way as supported by the
Greenback Party, who were like, yes, this actually makes a
lot of sense. Or there are other groups like the
silver movement, the gold bugs were out there who were like, no,
we need a commodity backed currency, right. Apparently the Wizard
(20:22):
of Oz and I'm sure we've mentioned this before, but
it was supposed to be an allegory for this debate
over whether to go with the Greenbacks and World City,
go with the gold standard, the yellow brick road, or
to go with the Ruby standard. Which were the slippers.
Speaker 1 (20:44):
Right or the were wheat like you suggested that would
be the scarecrow exactly.
Speaker 2 (20:50):
Yeah, So all of those scarecrow rubies, gold, the greenbacks,
all of those were part of this national bait. And
finally it was settled in nineteen hundred when William McKinley
was made president. He said, it's gold. We're just going
with gold. And even more than that, you cannot print
(21:11):
a dollar beyond the amount of gold. We have to
back it up.
Speaker 1 (21:16):
Yeah, that was that was key to that whole declaration.
He was a pro gold candidate, pro gold standard, and
like you said, in nineteen hundred twenty one, he was like,
we got to have some real teeth behind this. I
can't just say it as president and make it so.
So they passed the Gold Standard Act of nineteen hundred,
and that had some language in there that said exactly
(21:38):
that is, hey, that circulation, it's got to be tied
to gold. We can't print one dollar more than we
have in equal amounts of gold. And that was it.
You know, that was the classic gold standard period. It
meant that nations were trading with one another on equal
ground and it was dependent on sending like physical gold
(22:00):
one another. If you were producing more and exporting more,
then you had a lot of gold, you know, stockpiled
in your country. If you had a trade deficit, you
had a lot less gold, and it was everyone kind
of knew what that meant, and it worked for a
long time.
Speaker 2 (22:16):
It did work. I mean, there were dozens of nations
all on the gold standard at the same time, so
you knew how much you were going to get paid
for your shipmen of pre industrial televisions overseas, right, because
there were bonkers for them in Portugal. But the reason
why you knew is because there was such stability among
(22:37):
your currency and international currency pegged to gold, that when
you ship that shipment out, by the time it arrived
it was the same price. Yes, with fiat currency, the
price of stuff can fluctuate so much over a day
or a week that when you sent a shipment out,
(22:57):
if you hadn't already settled the contract, which you proba
probably did, but by the time it arrived, you might
be making way less than you were going to when
you shipped it out. That's not really what happened during
the classic Golden age of the gold standard. It was
all much more stable than that.
Speaker 1 (23:13):
That's right. But like you said, we pegged the end
of that to basically World War One, because, as you
mentioned earlier, wars are really expensive. They're going to spike
your national debt if you get involved in one. And
in Europe and World War One, they were like, this
war's really really expensive, and our supply of gold is
being constrained, so we have to we have to leave it.
(23:37):
So the international gold standard dissolved basically mostly worldwide except
for the US and UK. We stayed on that gold standard.
And because of that, for a while, the British pound
and the US dollar were basically the global reserve currencies
because you know, they had gold to back them, so
(23:57):
they were the gold standard, the dollar in the pound.
Speaker 2 (24:01):
Yeah, because it's not I mean, it's not figurative when
you're saying like you had to use your gold to
buy back your currency if you were in a trade deficit, right,
you actually had to ship gold to the country you
were buying your dollars or your pounds back from.
Speaker 1 (24:15):
Yeah.
Speaker 2 (24:16):
So with the US and the UK having currencies pegged
to gold and then be being the global reserve currency,
you could just ship currency overseas, which is so much
easier than shipping gold, right, So that was each lighter,
it is super light. So the US and England both
ended up with like the vast majority of the world's gold,
(24:37):
because you know, you could take a dollar, you could
take a pound to the US of the UK and
say give me some gold for this, and those those notes,
those the paper dollars were good as gold essentially, which
is I'm pretty sure where that came from.
Speaker 1 (24:52):
Yeah, I mean that's funny. The gold standard and good
as gold, like a lot of these terms like literally
come from these weird monetary policies.
Speaker 2 (24:59):
Yeah, yeah, William McKinley.
Speaker 1 (25:03):
Yeah, old gold back. So things were going along okay
after that, and then the nineteen twenty nine stock market
crash came and banks started failing all over the world
and everyone you know those you know, when stuff like
this happens, there's it seems like it used to happen more,
(25:25):
but there can be a real panic, and people start
converting their dollars and their pounds to gold because they
were like, we know, gold is worth something I don't
want to have like this this paper currency on hand.
That's like clearly losing value very quickly.
Speaker 2 (25:39):
Right, if I weigh a day, I might get less
gold than I will if I cash my bank account
into today. And remember earlier, I said, like, how this
is all. It all kind of self regulates, it all
moves naturally from one place to another. But still humans
can screw things up just because we're human. This is
how we screwed it up. There were a banking can
(26:00):
after banking panics, where people just made runs on banks
and said give me all my money and the bank
would be like, we don't have it. They would shell
out all their money and end up closing. And there
were like ten thousand bank closures in the early nineteen
thirties in the United States alone between nineteen thirty and
nineteen thirty two because people would run in and like
just take all their money out, and so banks were failing.
(26:23):
This was before the FDIIC. So if you had a
bunch of money and the bank like closed forever before
you could cash it in, you were broke. Like that
money was worthless, right, And that caused even more people
to make runs on banks, which created this huge, terrible
ripple effect. And so the UK and the US were
(26:43):
both faced with this challenge like what do you do.
Do you stay on the gold standard or do you
go off the gold standard? And the UK was.
Speaker 1 (26:51):
Up first, Yeah, they abandoned the gold standard in nineteen
thirty one. Apparently there's a story that their central banker
named Monte Hugh Norman at the time, suffered a nervous
breakdown because he was you know, it's kind of up
to him to make that final call. And can you
imagine the pressure to be in charge of like a
(27:13):
kind of a worldwide economy, almost right, and how important
these decisions are.
Speaker 2 (27:18):
So ask your question, no, no, I cannot imagine that
kind of.
Speaker 1 (27:23):
Pressure it either. So the pounds value, of course, immediately
drops even further than it already was. So people that
were had lost faith in the paper money were saying, like,
see there, like good thing. We traded in our pounds
for gold and America and of course everywhere around the
world is seeing this happen, so everyone else is losing confidence.
(27:43):
And this is when you know, further runs on banks happened.
And we had a president, a lame duck named Herbert Hoover,
who was leaving office in nineteen thirty three and told
incoming FDR he was like, hey, you know, we're in
real trouble here. The reason we have gold is because
can't trust governments. And FDR was like you know what,
(28:04):
I think I've got this. So he went in office
and he said, I'm going to I'm going to fix
this crisis for good.
Speaker 2 (28:12):
One of Yeah, one of the first things he did was,
I think the day after he was inaugurated, he declared
a four day banking holiday, so all the banks closed
right for four days so there couldn't be any runs
on banks. And I was watching this. There's this dude
who's a YouTuber named the Casual Historian, and he bills
(28:33):
himself as a Conservatorian, which I take to be in
a combination of a conservative and a vegetarian right probably,
But he was explaining that this actually didn't do much
in real terms, like the banks that were about to
fail before the banking holiday still failed afterwards. But as
far as the public was concerned, it was a huge
(28:55):
signal for essentially the first time that the government was
going to step in. Because there's one thing that you
cannot argue against with the gold standard is because you're constrained,
you cannot print more money than you have gold to
back it. There is nothing you can do in an
economic crisis except sit there and watch it happen. You
(29:16):
can't do anything there's no leverage for you to pull
the pull the country out of it. The only way
that you can pull your country out of a recession
or a depression is by printing more money and actually
devaluing the money that people are hoarding. So it's you're
basically saying, you got all this money that you're stashed
away because it's so valuable. Well, guess what, It's not
(29:38):
so valuable anymore, so you might as well get out
there and spend it.
Speaker 1 (29:42):
Yeah, for sure. And you know, we were in big
trouble obviously in the nineteen thirties, you know, you mentioned
earlier sort of that cycle that happens when companies are
producing less and fewer customers and not hiring people or
firing people. And in nineteen thirty three, the unemployment of
the United States was twenty five percent.
Speaker 2 (30:02):
That's so crazy.
Speaker 1 (30:04):
I know, it's staggering. And I think worldwide, almost one
in three people were out of work in nineteen thirty two,
So it wasn't just the United States like that many
people being out at work at once, And that's the
thing that I always you know, thankfully it hasn't happened yet,
but with the AI conversations and people. I've had conversations
with people in my sphere.
Speaker 2 (30:25):
Are you sure? They were people and not box.
Speaker 1 (30:28):
They think it's such a great thing. And I was like,
you know, I'm not even arguing the merits of arts
or not and things like that, But I said, I
just worry about what would happen if like twenty percent
of the workforce was laid off in the span of
like a year or so because of AI. It's like,
that's what I worry about. And we haven't seen that yet, thankfully,
but I guess we'll see.
Speaker 2 (30:46):
Yeah, you, me and I were talking about the same thing,
and she brought up a really great question, which is
like one of the things that a lot of the
AI proponents say is like, eventually you were going to
create this utopia where like no one has to work
and everybody's right. And her question is like, if that's
your goal, why don't we take some of that wealth
and just start now before I act? Right, do we
(31:07):
have to wait for AI to do that? We can
do it now? I thought, yes, rather clever. I stood
up and clapped right.
Speaker 1 (31:15):
She's like, that's weird. Here, we're in our living room.
She left the room, all right, So things are bad.
They had that banking holiday. Congress passes what's called the
Emergency Banking Act at the time, which basically, like you said,
allowed them to, in an emergency issue, just start printing money. Basically,
(31:36):
that's not back to the gold standard, but we had
that gold standard because the gold Standard Act of nineteen hundred,
so they had to create this Banking Act, I guess
to work around that.
Speaker 2 (31:47):
Right, Yeah, They basically said, Okay, this is just emergency measures,
and we're just printing this money to give to banks
to keep them from going under. So the government is
signaling all over the place, we're stepping in. We're going
to make sure that this that like, we're going to
do something about this for the first time. I think
that was my point before I got off on the
(32:09):
tangent for a little while a minute ago. But the
government is signaling all over the place that they're going
to back up banks so you don't have to run
and get all of your money out and just keep
making this whole thing worse. So that was like a
first step. But the problem is is there was still
plenty of gold out there that people were hoarding. They
were like, yeah, that's great, thanks a lot, but I'm
not taking this goal back to the bank right now
(32:31):
because I don't have any confidence in the banking system.
So the government figured out how to deal with this.
They said, well, you know what, we will put you
in jail for ten years and find you the modern
equivalent of two hundred and fifty thousand dollars. If you
don't give us your gold, we'll give you the equal
amount of paper dollars back, but you can't legally own
(32:56):
gold anymore.
Speaker 1 (32:58):
Yeah, and that was it. That was I mean, I
think it was about a month after they sort of
restored that public confidence with the Emergency Banking Act, like
FDR was moving very quickly and said all right, we're
suspending the gold standard officially. And then the next year
was that Gold Reserve Act of nineteen thirty four that
you were talking about, where they were like, yeah, you can't.
(33:19):
I mean, you can keep your rings and if you
got like collectible coins and stuff, we're not coming after those. Yeah,
but you can't have bars of gold and a safe
in your house anymore.
Speaker 2 (33:28):
Yeah. And Jimmy the Greek was like, whow right close.
So yeah, so now you had to have you had
to use paper currency, so this was the shift in
the United States, and this had already happened in other countries,
like you said, especially in Europe after World War One,
and the gold standard was dead. And one of the
(33:52):
things that demonstrated the death of the gold standard was
economists generally today say that the US being able to
print money and basically kickstar inflation to pull us out
of the deflationary spiral aka the depression. That's basically ninety
percent of the reason that the US got out of
(34:13):
the Great Depression. It was leaving the gold standard being
able to print money. Because if you can just print
money and take money off the market and put more
money on the market when you need it, you can
adjust the economy enough to get it out of crises
one way or the other. And that that's actually the
better way of doing it. And so the gold standard
(34:35):
never came back again.
Speaker 1 (34:37):
That's right. And so that could be the end of
our show, but that would be weird because we haven't
had our second ad break yet. So we're gonna do that,
and we're going to come back and just say see
you later and read a listener mail, right, because the
gold standard's gone forever, gone forever, all right, we'll be
right back. Okay, we're back here for Act three, which
(35:25):
means this time for listener mail. Because a gold standard
is dead.
Speaker 2 (35:28):
This is where the golden gun goes off.
Speaker 1 (35:30):
That's right, because no, the gold standard is not dead.
It actually had another sort of brief not even stint,
like it kind of had a maybe not a Golden Age,
but maybe a heyday when the Bretton Woods Agreement came around,
which was a U in a United Nations agreement that
came around in nineteen forty four in Brettonwood's New Hampshire
(35:52):
that had a whole brand new system that was really
kind of like that original gold standard, with forty four
country signed on along with the US that said, all right,
the US dollar now is pegged to gold at thirty
five dollars an ounce, and everybody else that's signing on
is tying their currency to our dollar.
Speaker 2 (36:13):
Right, so there's a fixed rate, like there's fifteen pesos
for one dollar and one dollar equals this much gold.
So it's essentially the world going back on a gold standard.
They just figured out a good way around it to
make it much easier, right. Yeah, and again, just like
the first time, if everybody's playing by the rules. Then
(36:34):
this keeps you from monkeying with interest rates to make
your exports more attractive. It prevents trade wars, it does
all sorts of calm, peaceful stuff. But the problem is
there's just and this is the same problem today. There
just wasn't enough gold in the world to cover the
increasing expense of modern life.
Speaker 1 (36:55):
Yeah, for sure. And they had put things in place
because you know, they were a little smarter than time around.
They were like, all right, we'll create the International Monetary Fund,
We'll create the World Bank. So that means that there's
their official worldwide bodies kind of coordinating this monetary policy
between all the countries to make sure that no one's
doing hinky stuff. And it took a long time. This
(37:16):
wasn't like, you know, they reached this agreement in nineteen
forty four and by nineteen forty five it was all
set in stone. I think it didn't actually take effective
fourteen years later in nineteen fifty eight. By the nineteen sixties,
like shortly thereafter, the US was was spending like a
like a drunk ten year old military spending was in
(37:37):
foreign aid. We're all just like ramping up spending on imports,
foreign investment. There are a lot of dollars from the
United States and worldwide circulation. And even though we held
a lot of the world's gold reserves, like seventy five
percent at the time, like you said, we still didn't
have enough gold to cover all that kind of money.
Speaker 2 (37:55):
No, and this is the I mean, this is what
keeps governments honest. There is a possibility of a worst
case scenario where all of the people holding those dollars
can all come back at once and say, hey, we
want this, we want our goal. We're turning in our currency,
give us our gold. And you know it's bad enough
when you're talking about citizens making runs on banks. If
(38:17):
you're talking about entire foreign governments bringing all of their
cash reserves to you and saying we want gold, you
got a really big problem. And finally, in nineteen seventy one,
Nixon admitted, like, we don't have enough gold to cover
the currency out there. Sorry, guys, you can't turn that
in for gold anymore. Sorry, and just kind of backed
(38:39):
out of the room.
Speaker 1 (38:40):
Yeah, he backed out of the room. And it was
it was a big deal because this isn't the kind
of thing that we could we had pegged our dollar
to like worldwide value, so we couldn't just say that
by ourselves. In nineteen seventy three, the Monetary Fund they
went off the gold standard. They basically kind of came
(39:02):
along for the ride, yeah, and said, all right, everybody
should kind of go to this fiat currency system, and
like that was the true real end of the gold standard,
and like there's this that ship is so far out
of the harbor now, there's no way they could go back.
Speaker 2 (39:16):
To it now. And it eventually kind of became a
fringe right wing position for some reason. They just kind
of adopted it. But that doesn't mean all of the
right wing agrees with it. In fact, Milton Friedman, who's
a right wing conservative economist hero, he was even like,
that's a terrible idea to go back on it. He
(39:37):
wrote a paper, and I think nineteen ninety or co
wrote one that basically demonstrated just how bad of an
idea it would be. But there's still plenty of people
who are like, no, gold is where I want to
put my faith in. One of the reasons why it's
still around is because people believe that if there's a
social collapse right afterward, people will still accept gold. They
(40:02):
won't accept dollars or pounds or euros, but they'll take
gold in return. So that's one reason a lot of
people still have faith in goals and investment. There's other
people who are like, gold's always going to become more
and more valuable because there's a finite amount of it, right,
And that actually is the same thing for bitcoin. There's
(40:24):
a finite amount of bitcoins, which means that over time
it's going to become more and more valuable. It's going
to buy more and more stuff, which makes it a
deflationary currency, which actually makes it dangerous because that means
people are more likely to buy in HORD bitcoins or
buy in HORD gold because eventually it's going to become
more valuable, and that's how you go into a recession.
Speaker 1 (40:46):
Yeah. I've never I'm just you know, me and economics
and money. I'm just a big dummy with all that.
So cryptocurrency is something that even though we've podcasted on it,
I just it's not like I'm saying like I don't
try cryptocurrency. I just I don't understand it and I
have no interest in understanding it.
Speaker 2 (41:04):
Yeah. Yeah, although it does seem to have gained a
lot of legitimacy, especially Yeah coin sure, but I mean
it's a wild ride, like it was at like sixteen
thousand earlier this year, early like last year, and now
it's at like sixty one, and sixty one is down
from ninety something a month or two ago. Like maybe
(41:25):
it's a long term thing, but that's not something you
want to I mean, you would have to be so
insane to trade that stuff on a daily basis.
Speaker 1 (41:33):
I don't have the stomach for I'm just that's not
who I am either. You know, I want to I
want to sit around and you and I want to
sit around listen to elevator music, not track the currency cryptocurrency.
Speaker 2 (41:44):
No, but for some people that is quite thrilling.
Speaker 1 (41:47):
Oh I bet it is. Have fun with that if
that's your thing for Larry David. Right, So, like we said,
I think an act one that you know, there are
still people that argue for the gold standard and people
that aregue against it, even though that ship is sailed,
and there are you know, some pretty good arguments each way.
If you're for the gold Standard, you know you can say,
(42:10):
like hey, that's going to definitely put a lid on
this crazy government spending that we have had going on,
and it'll stabilize the money supply. We've seen it do
that literally, so you know, that's a pretty decent like
they got a lot of data to back those claims
up for sure.
Speaker 2 (42:28):
Yeah, one of them is it's just basically throwing shade
at how out of control government spending gets when the
government is allowed to literally just print money when it
wants to. One of those things that you'll see a
lot is that the purchasing power of the dollar has
declined by more than eighty five percent since the US
(42:50):
left the gold standard in nineteen seventy one. And the
reason why is because the government just keeps printing money
anytime it likes, which causes inflation. Well, that's purposeful, like
a fiat currency is an inflationary currency as opposed to
a deflationary currency like gold. They want inflation to happen
because inflation you can keep on top of. It's deflation
(43:12):
that's really hard to come out of. So yeah, it's
not really a problem if you can buy less with
a dollar than you did before because you're adjusting for inflation.
It's not a problem as long as your wages are
keeping up with it. The problem is is wages haven't
kept up with it, and so people are being paid
the same amount as before and are able to buy
less because they have less money. Even though the cost
(43:35):
of living has increased their wages are wages haven't gone
up commensurate to it.
Speaker 1 (43:41):
Yeah, for sure. And if you want to talk about
like you know, we're talking about printing money and a
spike in the cash supply, here's a pretty staggering statistic.
The supply of money in nineteen seventy, this is what
they call the M two money supply, which is all
the cash, all the money and checking accounts, all the
travelers checks, was about six hundred billion dollars in nineteen seventy,
(44:02):
the year before I was born. In August of last year,
it was twenty two trillion dollars, which is an increase
of three thousand, five hundred and sixty six percent over
whatever fifty four years, and twenty percent of that was
created in twenty twenty.
Speaker 2 (44:23):
Yeah, just that year.
Speaker 1 (44:25):
Yeah.
Speaker 2 (44:26):
Yeah, So there's this, I mean, there's clear evidence that
like the government will just print money as much as
it can whenever it wants to. Part of the problem
is is that also increases the national debt because for
money out there, if you can print money, make new money,
you can spend that new money if you're the organization
that is creating the money. So the national debt increased
(44:48):
tremendously too over that same time period from nineteen seventy
to twenty twenty five.
Speaker 1 (44:55):
Yeah, it could increase nine thousand percent. It was three
hund undred ninety eight billion back then and now it
is over thirty six trillion dollars, and it's a number
that is just hard to even comprehend. That seemingly nobody,
well not nobody, but the right people aren't concerned enough.
Speaker 2 (45:14):
About So gold bugs are like, see, if you let
the government print money, they're going to print money and
they're going to spend more money. The gold standard keeps
them from being able to do that.
Speaker 1 (45:24):
And of story, that's right. But there are anti goldbugs.
There are people who prefer fiat currency and the ability
for the government to step in and throw levers and
control monetary policy through debate and decision making. And that's
one of the big arguments. It's like, hey, we need
to be able to make these decisions sort of on
(45:47):
the fly and move quickly to save ourselves in times
of doubt and in times of economic stress, and they
can also combat a lot of those a lot of
that data too. They can also say, well, yeah, but
you really should look at these numbers instead.
Speaker 2 (46:02):
Yeah. So goldbugs always say that that there's stability in
gold currency, right, But the problem is is that if
you look at the gold markets, they fluctuate tremendously, so
that's actually kind of out the window. Another one, this
one I couldn't find an answer to that. I can't
wrap my head around those. And the total value of
(46:24):
all the gold in the world is thirty six trillion dollars,
which is eye popping, but.
Speaker 1 (46:29):
That's the debt. But yeah, exactly ironically.
Speaker 2 (46:33):
But if you took the entire global economy and valued that,
that's more like one hundred and twenty six trillion dollars.
So if the world went on a gold standard again,
how would you shrink one hundred and twenty six trillion
dollars into thirty six trillion? That right there, that's what
we've been saying. The ship has left the harbor, that
train has left the station. It's just there's again, there's
(46:56):
not enough gold to cover the value of everything in
the world.
Speaker 1 (47:00):
Yeah, for sure. Another big sort of argument that people
against the gold standard point too, is like, hey, look
at our stock market. People aren't putting their money in
their mattress anymore and making runs on banks. They're shifting
that money. They're cash dollars into the stock market, and
those dollars have grown and grown and grown. I mean,
there are always dips in the stock markets, and even
(47:23):
you know, there have been some very bad days in
a row with the stock market, and you know, the
crash of two thousand and eight and the dot com
bubble and all that stuff always affects the stock market,
but it's proven to be a pretty stable thing over time.
Speaker 2 (47:39):
It has. And in fact, if you there's this comparison
I found I can't remember where I found it, but
if you took five thousand dollars in nineteen seventy one
to celebrate the birth of Chuck, Yeah, and you said,
I'm going to go buy five thousand dollars worth of gold,
It's going to be a great present for Chuck. I'm
also going to bring a little I'm a little frank incense.
(48:01):
It is going to get biblical in the year. The
gold actually would have increased about seventy five hundred percent.
And this is gold prices are so all over the place.
This is probably already out of date. But I think
in the end of twenty twenty five, you would have
had three hundred and seventy nine thousand, five hundred dollars
(48:22):
worth of gold from that five thousand dollars worth of
gold you bought in nineteen seventy one. So that makes
it seem like, okay, great, gold's a good investment. What
happens if you invested it in the stock.
Speaker 1 (48:32):
Market, Well, if you had had that same five grand
after my birth and put it in the S and
P five hundred, you would have made two hundred and
seventy one thousand, five hundred dollars. So the gold standard
wins in that case. But that is if you were
just taking those dividends, if you're taking the money that
you're making from the stocks and saying like, all right,
that's that's my income or whatever. If you had kept
(48:55):
reinvesting all that from the five grand, it would be
one point one eight five million plus what five hundred bucks. Yeah,
So that's a return of almost twenty four thousand percent
rather than seventy five hundred percent.
Speaker 2 (49:11):
Right, And even if you're like, okay, we'll wait a minute,
adjusting for inflation, how much is that? So I looked
it up. I went on our beloved west Egg, and
something that costs five thousand dollars in nineteen seventy one
would cost you forty thousand dollars today. So even after
you bought that five thousand dollars thing, you'd still have
one point one million and change left over. So it
(49:33):
would be much better to invest it in the market.
As volatile as it is, as unpredictable as it is,
as as easy as it is to lose your shirt
over the course of time, the ability to unleash the
stock market that having a fiat currency and being able
to print money creates is a it's a better return
on investment.
Speaker 1 (49:53):
Yeah, I'm surprised I got through this one.
Speaker 2 (49:56):
You did great.
Speaker 1 (49:58):
Well, you did great.
Speaker 2 (49:58):
You did great.
Speaker 1 (50:00):
Who wrote the original article here? Who is this?
Speaker 2 (50:02):
That was Olivia Joint She did great.
Speaker 1 (50:03):
Yeah, she did great too. And you did a lot
of great supplemental research. Everyone's doing great, everybody.
Speaker 2 (50:08):
It was just great up in here. We should also
say we probably got a lot of stuff frong. We
probably walked past a lot of stuff. This is such
a detailed nuance discussion that people who are like monetary
policy walks this is one of their favorite things to do,
is to point out all of these nitpicky little things
based on mind boggling economics that are really hard to describe.
(50:30):
We just glanced over the surface of this, but I think, yeah,
probably we got more right than you'd think.
Speaker 1 (50:37):
Yeah, it's tough to tackle something like this because there
are people that know a gazillion times and more about
this kind of thing than we do.
Speaker 2 (50:43):
Yep, and Chuck just said tackle, so he unlocked listener mail.
Speaker 1 (50:49):
I'm going to call this this was from our crowd's episode,
and this is a classroom hack, a question hack from
a I think a teacher. Hey, guys, love the episode
about Yeah, I'm a middle school teacher and crowds are
my standard environment. Your comments about being afraid to ask
a question in class really spoke to me because a
big part of my job is navigating the power of
(51:10):
language with crowds in my students. There's a simple teacher
hack that is most effective and easiest, the easiest change
I've ever made to my communication with students and Aaron
from New Brunswick, Canada. I will go ahead and say that,
like anyone speaking in front of a crowd where you
like source questions, I think this is a pretty good
way to go. And here it is. Instead of saying
(51:31):
does anyone have any questions? What I say instead is
what questions do you have? There must be questions. It
really works a completely different response from the students. Guys.
The assumption that questions are expected always prompts at least
one kid to get the courage, which opens up the
gates for everyone else who is too apprehensive. Thanks for
(51:52):
being my first podcast in twenty twelve and for continuing
to bring joy and relaxation to a tire but satisfied teacher.
Peace and love and again that is from Aaron with
an E from New Brunswick, Canada.
Speaker 2 (52:03):
Thanks Aaron, Peace and love back to you too, and
thanks for teaching.
Speaker 1 (52:07):
It's a good hack.
Speaker 2 (52:08):
It's a great hack. Questions who's got them? I know
there's some? Don't lie right, and then just get more
aggressive right huh huh, give me a question?
Speaker 1 (52:19):
Yeah that works.
Speaker 2 (52:20):
If you want to be like Aaron and send us
a great email and say peace and love that's awesome.
You can send it off again via email to the
email address stuff podcast at iHeartRadio dot com.
Speaker 1 (52:35):
Stuff you Should Know is a production of iHeartRadio. For
more podcasts my heart Radio, visit the iHeartRadio app, Apple Podcasts,
or wherever you listen to your favorite shows.
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Betrayal Season 5
Saskia Inwood woke up one morning, knowing her life would never be the same. The night before, she learned the unimaginable – that the husband she knew in the light of day was a different person after dark. This season unpacks Saskia’s discovery of her husband’s secret life and her fight to bring him to justice. Along the way, we expose a crime that is just coming to light. This is also a story about the myth of the “perfect victim:” who gets believed, who gets doubted, and why. We follow Saskia as she works to reclaim her body, her voice, and her life. If you would like to reach out to the Betrayal Team, email us at betrayalpod@gmail.com. Follow us on Instagram @betrayalpod and @glasspodcasts. Please join our Substack for additional exclusive content, curated book recommendations, and community discussions. Sign up FREE by clicking this link Beyond Betrayal Substack. Join our community dedicated to truth, resilience, and healing. Your voice matters! Be a part of our Betrayal journey on Substack.