July 10, 2024 • 47 mins
Step into the world of precious metals with our fascinating guest, Keith Weiner, founder of Monetary Metals. Ever wondered how you can earn interest on gold, an asset traditionally seen as non-yielding? Keith reveals his journey from tech entrepreneur to economics PhD, and unpacks the innovative strategies his company uses to lend and rent gold to businesses. Learn how these practices reflect the broader economic system, particularly in the context of a debt-driven economy and the historical value of gold as a measure against the declining dollar.
Curious about the dynamics between gold and Bitcoin? We break down the historical price fluctuations of gold and the factors driving its market. Post-COVID, the gold market has shown a bullish trend, but what about Bitcoin's role as "digital gold"? Keith and I critically examine Bitcoin’s volatility and why it fails to serve as a stable store of value compared to the timeless reliability of gold. Through this comparison, we challenge high-conviction beliefs in Bitcoin and its limitations, particularly for those seeking stable, long-term investments.
We also journey around the globe to understand the burgeoning demand for gold in places like China, Turkey, India, and the Arab world. Despite dwindling volumes in Western Europe, gold prices remain high, driven by regional economic conditions and currency devaluation fears. Additionally, we explore the roles of silver and gold in today's economy, the potential of silver bonds, and the implications of holding precious metals in various forms. Keith provides a rich perspective on these topics, blending historical context with contemporary insights, making this episode a must-listen for anyone interested in the intricate dance of monetary policy and precious metals.
The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
My name is Michael Guyatt, publisher of the Lead
Lag Report.
Joining me for the rough houris Keith Wiener of Monetary
Metals.
Keith, a lot of people knowabout you and know your
background, but for those whodon't do a brief intro on your
background.
Speaker 2 (00:22):
So I was your classic computer nerd in school, went
off to computer science major,dropped out because I got bored,
wanted to build a softwarecompany, which I did, called
Diamondware.
I sold that to Nortel NetworksAugust 19, 2008, right before
everything went over the edge,started to become fascinated
(00:42):
with markets and economics asthings were crashing, trying to
figure out how to protect myself, eventually came to the not
accredited.
I couldn't get a job with thisas credential, but got a PhD for
something called the NewAustrian School, studying money
and gold and credit and all thatsort of stuff, decided my next
company.
I wanted to be part of thesolution.
(01:03):
How do we fix this monetarysystem that's going off the
rails, taking us all with it?
And the idea was pay intereston gold and that will draw gold
into the market.
So that's what Monetary Metalsdoes.
I'm the founder and CEO ofMonetary Metals.
Speaker 1 (01:20):
So the first obvious question is how in the world do
you generate income on somethingthat has no yield?
Speaker 2 (01:27):
Well, if you think of gold as money, money itself
doesn't pay yield, but the useof money to finance productive
enterprise is what generatesyield.
That um rents metal to companiesthat need metal as inventory or
work in progress jewelers,fabricators, coatings, plating
(01:49):
companies, uh, refiners,recyclers there's a whole bunch
of different vertical industriesthat um need gold, and quite a
bit of it generally.
If it was copper at fourdollars a pound, you know you
just buy it and not worry aboutit, but gold being $2,300 an
ounce, you've got to finance itsomehow and they're happy to pay
(02:14):
a lease fee or a rental fee forthe privilege of getting that
inventory that they need.
The other is lending, and so welend to companies that have a
metal income.
Right now we have a silver bondopen that is to finance a
silver producer called BunkerHill Mine.
It's in northern Idaho.
They need money to refurbishand update a plant and get
(02:36):
restarted at the mine that hadbeen in historic production, and
the repayment of the silverplus the principal, plus the
interest, will come out of theirproduction.
They produce silver.
Speaker 1 (02:50):
Okay.
So whenever I think about anykind of income stream, I of
course think about valuation.
Right, it's sort of the oldschool way of how it used to be.
How do you value a stock bylooking at the cash flow
potential?
Can't really do that with goldand silver and other metals in
general, but I am curious givenyour years of experience, how do
you think about valuing goldand silver separate from the
(03:15):
income that you're able toderive from it?
Oh, you're saying if golddoesn't have a yield.
Speaker 2 (03:24):
How do you describe a price to it?
Well, that's the funny thing, Imean.
In a certain sense, any priceor no price is valid.
But what we do know is thatvirtually all of the gold ever
mined in human history I used tosay 5,000 years until sometime
last year I don't know when thediscovery was made, but I came
across an article about it Somewarrior king was discovered, a
(03:47):
burial site.
This warrior king wasdiscovered in bulgaria, romania,
um, dating back 6 500 years ago.
And uh, this guy was buriedwith all due honors and had
about seven kilos of gold in hisum, you know, tomb, you know,
and on this person he had a rodand all kinds of other stuff.
(04:08):
So we've been mining, mankindhas been mining gold since
essentially forever, back topre-recorded history, really and
all that metal is still insomebody's hands, and yet we
keep producing more.
So the concept of glut does notreally apply to gold and any
other commodity.
As soon as you build up alittle bit of inventory, the
(04:31):
price crashes.
The producers stop and theadditional consumers are drawn
in by the low price, and so theinventory is worked off until
you get back to whatever is anormal inventory buffer in
generally a few months.
But in gold the concept doesn'tapply, which means and this is
(04:51):
the key point I made, or one ofthe key points I made, excuse me
, in the debate, the Soho Forumdebate with Bitcoin, pierre
Pierre Rochard was that the nthplus one ounce of gold is worth
the same as the nth ounce, andthat means that gold is the
thing that measures all othereconomic values.
It's pretty damn hard to put aneconomic value on gold in terms
(05:16):
of something else.
All we see is that the actionsof traders on the market every
day are giving gold a pricearound $2,300 and change and
generally rising, because thething in which people are
measuring the value of gold, thedollar, is generally falling.
Speaker 1 (05:38):
As you look back at the last 12, 13 years or so of
gold movement, what do youascribe the sideways action to?
I mean, that was a prolongedperiod where gold really didn't
do anything.
Speaker 2 (05:56):
To me and to sort of recapitulate what I was just
saying and take it a whole stepfurther.
The price of gold is reallyjust the inverse of what's going
on, which is the price of thedollar.
Gold is the money.
The price of gold is reallyjust the inverse of what's going
on, which is the price of thedollar.
Gold is the money.
The dollar is credit, andcredit of increasingly
questionable and questionedquality.
But there's something veryperverse in the system, and that
(06:17):
is every debtor, which meansvirtually every producer in the
economic world, has borrowed inorder to get to their current
level of production.
If you don't borrow, yourcompetitors will.
So it's a nasty game that theFed has set up.
Every producer who's in debt isdesperately bidding on the
(06:38):
dollar to come up with enoughdollars by dumping their product
on the bid price, dumpingenough product to raise enough
revenues, that net of expensesthat can service their debts,
which means at least pay theinterest.
If you don't pay the interest,then terrible things happen to
you.
The creditors come along andseize your farm and your house
(06:58):
and whatever else you've pledged.
It was collateral, and so onewould think that, with all the
abuses that the federal reserve,in collusion with the treasury,
have committed against thedollar.
And, um, you know, there's avery lengthy list of abuses and
one would think, with the justsheer quantity of this
(07:20):
decreasing quality I call itcredit effluent.
It it's like this nasty, smelly, you know bacteria-laden stuff
that they're pumping out withincreasing force from their you
know treatment plant You'd think, with a various quantity of
this stuff and the sheer stinkof it, that the value of the
dollar should be going down,which is the inverse of the
(07:40):
price of gold going up, butcounterbalanced by every debtor
frantically, furiously, urgentlybetting on the dollar to
service their debts.
And so, yeah, you can have longperiods of time when there
isn't really an incipient crisisand during those times the
price of gold isn't rising, iethe price of the dollar isn't
(08:03):
falling.
That's not the time point atthe moment, but that was the
time from, let's say, 2012 to2018.
Speaker 1 (08:13):
So I want to share on the screen a post that you put
out A rate cut, you say.
Who could have predicted that?
Even if you're buying intotheir debunked idea of higher
rates leads to lower inflation,why are they abandoning the
pretense of normalizing rates?
Rates are going to slam back tozero all too soon.
That is an unpopular opinion,as I like to say on X, but I
(08:37):
want you to flesh that out alittle bit, for, whatever it's
worth, I tend to be more of adisinflationist, deflationist
from a very, very long-termperspective.
That's my bias.
There is the way that I thinkabout things, because I think,
inherently, debt is inflationaryonly to a point, and then it
becomes deflationary when it'stoo heavy.
But what are your thoughts onwhy rates might go back to that
(08:58):
lower bound?
Speaker 2 (08:59):
Yeah.
So let me unpack that, becauseI think there's about three
different ideas that I was sortof playing with.
In that one, you know the onequote.
Just put it back on the screen,if you would for a minute,
because I was just going to readmy own words and then, as a
reminder of what, can you zoom alittle bit?
I just can't quite read it onmy screen here.
(09:22):
One more Zoom, if you can,sorry.
Oh, so the first is everybody,for many, many years, during the
period of, you know, floodingthe market at zero interest
rates, everybody, including theFed, was saying well, you know,
eventually, you know, when thecrisis is over, we will
(09:45):
normalize rates.
And at the time I was prettysarcastic about it with another
unpopular opinion saying look,you know, the interest rate is a
downslope, you know, since, youknow, going back to 1981.
And sure, there's been zigs andzags along the way, but it's a
downslope.
Where on this almost straightline, you can almost put a
(10:07):
straight edge on it?
Where on the straight linewould you point to and say
that's, quote-unquote, normal.
But they were persisting.
They have to maintain theexcuse me, the fantasy that you
know they're going to go back tonormal.
And you know, a couple of yearsago now about two and a half
years they said okay, well, nowwe're going to start hiking
rates.
The crisis is over, inflationhas gotten hot, blah, blah, blah
(10:31):
, blah, blah I'll get back tothe inflation and interest rate
thing in a minute, you know andthis will give us a chance to go
back to normal.
All of a sudden, it's liketheir inflation number so-called
, you know, cools off bywhatever measure that is, and
then suddenly it's like oh yeah,we're going to start cutting.
Wait, I thought this wassupposed to be returned to
normalcy and now you're back tocutting.
(10:51):
Why and I'm being sarcasticI've been saying interest rate
structure is going to slam backto zero, which I'll get to in a
minute.
But the other thing I wanted toaddress first was this
relationship between rates andconsumer prices, and I always
like to put it this way thereare many, many harms, grievous
harms, done to all theparticipants in the economy when
(11:14):
the Fed distorts the interestrate, first of all, and then
when the interest rate is toolow or zero.
It's enormously harmful.
But if you were willing tooverlook all of the harms and
focus only on consumer prices,you should want lower rates
because lower rates make abusiness case for producers to
(11:35):
borrow more to add moreproductive capacity.
Suppose you own a chain of 49hamburger restaurants.
You always have a business case, which means an Excel
spreadsheet in your back pocketfor the marginal store, the one
you haven't opened, the 50thunit in your chain and you're
not opening it because thebottom cell is red ink.
(11:55):
It says you're going to losemoney.
And then let's say the Fedforces interest rates down
another tick and you plug in thenew interest rate, the new
borrowing cost, the new interestexpense, which is a significant
expense in your spreadsheet and, lo and behold, the red ink
turns to black.
And now it makes sense to buildthat store and you and every
other hamburger store hamburgerchain owner, plus all the
(12:17):
manufacturers of hamburger grillequipment, porcelain tiles,
plate glass windows, you name iteverybody suddenly has a fresh,
new, additional incentive toborrow more to add more
productive capacity.
So a time of falling interestrates is a time of soft, if not
outright falling prices.
If you want to hike interestrates, you render all of the
(12:41):
capital investments that weremade with lower interest rates
and therefore lower returns oncapital.
You render them allsub-marginal.
They all have to be liquidated,they all have to go out of
business, they all have to bedestroyed.
And with all that supply comingoff the market, then consumer
prices have to go up.
So they have the relationshipexactly backwards in their
(13:03):
theory.
But even aside from all of that, the problem is the forces that
are dragging interest ratesdown and have been doing so for
40 years, continue, which is adiminishing productivity of debt
.
That is, each fresh newlyborrowed dollar is producing
less and less revenue, less andless income, and so you have to
(13:25):
constantly, exponentially, beadding more debt just to keep
GDP even.
And when are we going to getthere?
I couldn't tell you whetherit's next month or eight months
from now, but-.
Speaker 1 (13:40):
I think the higher rates inherently strengthen the
position of the oligopolies andgives them more pricing power.
Because they have so much cash,now they're earning higher
interest on it and, to yourpoint, all the competitors which
are smaller can't do their NPVnet present value calculations.
So good luck, right.
Of course, you're going to have, oddly enough, more inflation
(14:01):
with higher rates.
Speaker 2 (14:03):
Yeah, I mean the return on capital ultimately has
to be above the cost of capitaland your way that does tend to.
I mean, it hurts everybody, butI think it tends to hurt the
bigger players a bit less thanthe smaller players.
They don't have the balancesheet strengths that are more
tenuous, you know.
They're more brittle, uh, youknow, versus the bigger
companies that have other meansof raising capital, um,
(14:26):
including equity, um, you know,and so on, but, um, you know,
anyways, uh, yeah, that's,that's pretty much it.
Speaker 1 (14:38):
I, uh I submitted a piece to investor place earlier
today, um, making the argumentthat, uh, rising unemployment
would actually be bullish forgold.
Not because I'm doing any kindof historical analysis, but just
because it makes sense to methat, as the economy slows down,
as unemployment rises, thereshould be a pickup in demand for
(14:59):
non-correlated assets.
And there really aren't thatmany non-correlated long-only
assets aside from gold primarilyand a couple of other, but gold
is sort of the main one.
Do you think we're in now alegitimate secular bull market
for gold?
I mean, it's been kind ofhovering around here right over
(15:19):
the last two months.
I think there was a lot ofexcitement around gold in April
when I kept on highlighting theconcerns around Japan and also
you had that risk of war betweenIran and Israel.
Right, it was a flight tosafety dynamic.
You kind of paused there.
But is this the pause thatrefreshes or is this the
(15:40):
distribution?
Speaker 2 (15:43):
I think and you mentioned unpopular opinions
that I may have held I waspretty unpopular in the gold and
silver space from 2012 to 2018because every time there'd be a
blip in the price, you know allthe gold pundits would come out
I shouldn't say all, but many ofthem, most of them would come
out and say you know, this is itto the moon?
And I would show my analysislooking at the gold basis, which
(16:05):
I do and say this is not theblips that you're looking for.
This is not sustainable.
It's about the speculatorsbetting it off of leverage in
the futures market.
Price is not going to remain,you know, elevated and sure
enough didn't.
That was a down to sidewaysmarket, but post-COVID,
something definitely flipped.
And now, as you pointed out,this year, this calendar year,
(16:29):
again, I think we are in a bullmarket in gold, which is really
a bear market in the dollar, ofcourse, and yeah, I think it's
durable and there's going to bezigs and zags and corrections.
The market says, well, whatabout this and what about that?
Inflation is coming down.
Maybe I should sell my gold,but you know the possibility of
war in the middle East, orUkraine, for that matter, it's
(16:51):
not over, so I should buy gold.
You know, it was all of thisnoise that adds to it, but at
the end of the day, um, thedollar is, you know, slowly
failing and, um, you know, thatmeans that it takes more and
more of those failing dollars tobuy an ounce of gold.
Speaker 1 (17:11):
So I got a kick out of uh one of your posts, because
those that have also followedme know that I will occasionally
take screenshots of uh, bitcoinand cryptocurrencies when
they're up big or down big,admittedly more when they're
down big, and I'll just saystore value, and I saw you did
the exact same thing right On anindependent say what's the word
(17:35):
for something that goes from71K to 57K in under a month in
quotes?
Store value.
And I don't have anythingagainst Bitcoin or the Bitcoin
maxis.
It's just, it's more a questionof definitions.
Store value can't have tailrisk, which I would argue means
gold is also not a store value.
We can maybe debate that.
But let's talk about volatility.
Gold volatility is verydifferent than Bitcoin and yet
everybody wants to make thatcomparison that Bitcoin is
(17:57):
digital gold Can we debunk that.
Speaker 2 (18:00):
I was going to say there's no similarities between
Bitcoin and gold whatsoever.
And they say these thingsglibly oh, it's digital gold.
Well, it's not actually likegold at all.
You know Bitcoin has apre-programmed I argue,
centrally planned cap on itsquantity.
Gold does not.
You know there's been goldmining.
You know, so far as we know,6,500 years there's going to be
(18:23):
gold mining as far as we canpredict for another.
You know thousands of500 years.
There's going to be gold miningas far as we can predict for
another thousands of more years,because the marginal utility of
gold does not diminish asquantity goes up.
Bitcoin they were.
You know Satoshi was terrifiedof that, and so you know he put
a cap on it.
But that means that Bitcoincan't respond to increases in
demand with increases inquantity, can only respond with
(18:46):
increases in price.
And then when you get a pricetrend going, then of course all
the speculators pile in withleverage and then overextend it,
and then you get these giantcorrections and then you know,
boom.
You know the volatility ismassively high.
And you know the point I try toexplain to the Bitcoiners is
the concept of drawdown.
You want to say this thing ismoney.
(19:06):
You know, pierre, in that debate, said, yeah, this is savings.
And I said, okay, if it'ssavings, then that means it's
suitable for an80-something-year-old widow, an
octogenarian widow with nofurther income potential in the
rest of her life.
He said, yeah, that's right.
I said okay, but what do youtell her?
And of course, we had thedebate right after Bitcoin had
fallen from, I think, 69,000 to16,000.
(19:28):
It was just right after thatfall.
I said what do you tell thislady who's put?
You know, you told her to putall of her life savings into
Bitcoin and just lost 75%.
You know, what do you tell herto do?
And then, in his time to thiswas the final rebuttal.
I didn't have a chance to sayanything.
(19:52):
After that, he stands up and hesays, well, I tell her to buy
more.
And uh, I'm just kind of mimedto the audience of, like you
know.
And uh, gene epstein, themoderator, is kind of like you
know, you can't, you're notallowed to say anything.
I'm just like you know.
Anyway, the audience picked upon it.
That was a preposterous thing,you know to.
So it has these massivedrawdowns.
Now, you're right, gold hasvolatility when measured in
dollars and I think that was oneof the pernicious, insidious
(20:14):
things by making the dollarirredeemable, by severing its
link to gold, what PresidentRoosevelt did for American
citizens in 1933, and then toforeign governments and foreign
central banks, nixon did thefinal deed in 1971, then you
know, if you're a conservativesaver, then gold is off the
table because it's volatile.
(20:36):
And you know, if you have achunk of money comes in and you
have to set that aside for anexpense you anticipate in six
months or a year, year and ahalf or whatever, buying gold,
you know there's a risk that youhave a drawdown.
Of course that risk in Bitcoinis amplified, you know, orders
of magnitude greater than it isin gold.
(20:57):
But yet you do have the problemin gold as well, and that's one
of the reasons why a lot ofpeople won't, dare you know,
hold it as the volatility.
The risk of the drawdown isunacceptable.
Speaker 1 (21:10):
Yeah, it's funny, mr Gene Epstein.
I interviewed him on his facesover a year ago, but it's like
that would never hold.
There would never be anargument you'd make in court.
I'd buy more for my 85-year-old, 86-year-old grandmother if all
their savings were in Bitcoin.
Of course, that would not holdin court with a lawsuit if
you're a fiduciary.
Speaker 2 (21:30):
That's right.
And on top of it, he had saidhe would recommend she put 100%
of her savings in already.
So how did she buy more anyway?
I mean, the whole thing wasjust absurd and outrageous.
Speaker 1 (21:42):
I have to say it is a ?
I don't know what it is.
I don't know if this is sort ofemblematic of a high conviction
, almost like cult-like beliefsin certain things, but the
narratives that you hear on theextremes when it comes to
Bitcoin are almost always thesame and they're always said
with the same level ofconfidence, independent of who
(22:03):
the person is.
I've always found that to beamazing.
It's almost like it's one voicethat's very consistent in the
message, independent of who theindividual actually is.
Speaker 2 (22:14):
Yeah, and obviously they get their talking points
from certain books the BitcoinStandard and obviously Michael
Saylor but it's kind of aninteresting thing.
I'm not particularly a big fanof skepticism as a philosophy,
but when you see BertrandRussell or Ralph Waldo Emerson
(22:37):
or Henry Thoreau, you know thesetypes of guys are like.
You know, the people who knownothing are absolutely strident,
fervent in their zealouscertainty and the more somebody
studies, the more they realizethey don't know.
And there's a certain kernel oftruth to that.
I mean, I sort of reject it ona lot of levels.
But to see these generallyyoung people who haven't really
(23:01):
thought about, they don't reallyunderstand the concept of
drawdown, and they're sittinghere waggling the finger at me
saying you need to read aboutBitcoin.
You don't understand the firstthing.
It's like, really, I've beenwriting about Bitcoin since
before you were old enough tohave a bank account there, kitty
, but they have this fervency,this zealotry.
(23:23):
The red lights in the eyes isan appropriate visual for it.
Speaker 1 (23:35):
There's a great quote .
I'm blanking on who said it,but it's something along the
lines of I'm not young enough toknow everything.
I think it's very appropriatewhen it comes to that.
Last time you and I chatted,you were mentioning, I think,
you were off to Dubai and Iasked you the question what in
the world is going on in Dubaifor a guy who's as busy as you?
And you said the demand forgold is exploding.
(23:56):
So I want to talk about golddemand picking up in other
countries.
Obviously, we're US centric,everybody always thinks about
the US but there's been somereal movement when it comes to
China and to your point on Dubaiand Middle East.
So lay that out for theaudience.
Speaker 2 (24:11):
So I would say broadly so the US, but also the
entire Anglosphere, australia,new Zealand, canada, the UK.
You know demand for gold rightnow is more abundant, has been,
for you know, some time.
We talked to bullion dealers.
Volumes are down 50 to 75percent.
You know from where they werebullion dealers.
Volumes are down 50 to 75%.
You know from where they were,let's say, two years ago Western
(24:36):
Europe and even Germany.
Who's the big gold buyer inEurope?
You know demand is way down,but there were four.
And so people say, well, why isthe price up?
And then for a while, I thinkit kind of stopped.
I don't track this too closely,but for a while there were even
outflows out of the ETFs.
Oh my God, the ETFs areoutflowing.
How can the price, you know,hold up?
I would say the same thing,which is the gold market.
(24:57):
You know total gold.
Out there is this vast ocean,and whether a little bit of gold
sloshes from one vault toanother or one corner of the
market to another, that has nopredictive power on price.
Etfs are not the be-all andend-all.
Maybe they're a good barometerof Western sentiment, but
anyways, there are four worldsthat are buying gold as rapidly
(25:19):
as they can get it and they havecapital controls that limit how
much they can get.
In most of these places that'sChina number one.
So the Chinese yuan is underpressure to go down.
The Chinese government isforced to defend it by buying
yuan, selling dollars.
So people say it'sde-dollarized and I say yeah,
and when it's fullyde-dollarized it'll be like when
(25:41):
the spider sucks the last bitof juice out of an insect or is
left over as a dry husk that'sdiscarded as worthless.
But the Chinese people don'ttrust the government, they don't
trust the currency, they don'ttrust the investment markets,
they don't trust the banks, theydon't trust the property market
in China anymore, becausethat's kind of rolled over.
And so they trust one thing,which is gold.
(26:01):
So they want to buy as muchgold as they can.
China is limiting how much goldcan come in.
So then you get premiums, china, you know, relative to the
world markets.
But there is gold obviouslycoming in, and, uh, chinese
demand is, and, and generallyasia, and the same story is true
whether it's thailand, vietnam,um, you know, they're buying
gold, um, number two.
(26:23):
And so that's an anti-yuan,anti-chinese government play and
that's really important toemphasize that, because that was
these four, three ofuananti-Chinese government play and
that's really important toemphasize that, because that was
these four.
Three of them are anti-localgovernment local currency.
Only one of them is reallyanti-dollar play.
Number two is Turkey.
Possibly incipienthyperinflation, certainly very
(26:45):
rapid devaluation of thecurrency.
I went to the Grand Bazaar whenI was in Istanbul last year.
I must have seen over 100booths, you know stalls that
sold gold, one Bitcoin kiosk inthe whole place and you know I
was asking about it and peoplesaid, oh yeah, you know pretty
much anybody that has any wealthor money in this country would
have at least 10 grams of gold.
(27:05):
The average person would have alot more than that, which is
remarkable because the averageAmerican would have exactly zero
ounces or zero grams.
They're buying as much as theycan.
The government is limiting itby quotas.
There are various ways that.
You know there are loopholes.
Through the quotas, gold iscoming in and you know demand is
(27:27):
insatiable at the moment.
The third is India.
I mean, india is always a buyerof gold, more so now.
And of course, it's ananti-Rupi, you know play.
It's not that the Rupi isundergoing hyperinflation, it's
just that the Rupi is doing whatit's always done, which is the
Rupi goes down at about 7% ayear against the dollar and, as
(27:55):
we just discussed, the dollar isnot exactly going up either,
and so the Indians are alwaysbuying gold as much as they can,
and there are import quotas andother things.
But the Indians have a varietyof ways of working around that,
one of which is they can goabroad and buy jewelry, wear the
jewelry and fly back to Indiawith it.
So they go to Dubai, they pickup some necklace that says the
store says no, make 0% makingcharge, which means they're
selling at its spot, and I tookout a calculator and calculated
(28:15):
it absolutely is.
I picked up a necklace it's 83and a half grams, almost three
ounces, of 24 karat gold.
This is monetary.
People call it jewelry.
This is money, let's face it.
This is not for wearing everyday, this is for storing money
in a form that works.
(28:36):
Anyway, they can wear thatpiece of jewelry, fly back to
India and then, if they didn'twant it in India, they can
immediately sell that to arefiner or someone within the
trade, because there's a 15%import duty on imported gold in
India but only a 5% VAT on goldjewelry in Dubai.
So they pick up a 10% gain onany bit of gold they buy in
(28:59):
Dubai.
And so I imagine there must be,you know, huge numbers of
Indians.
You know flying to Dubai buyinggold and then flying back and
the amount that they make on thegold to import it.
You know, offsets, whatever thecost of the airfare in the
hotel in Dubai.
So, again, and that's ananti-rupee currency, the Turkish
or it's an anti-lyric you knowplay the Chinese is anti-Yuan
(29:22):
play.
Finally, you get to the Arabworld and that's the one place
that it's hard to make a casethat it's an anti-local currency
play.
Those currencies in the Gulfregion are generally pegged to
the US dollar and unlike, let'ssay, the Chinese Yuan, for
example, or any banana republicin Latin America, for example,
those pegs are actually stable.
(29:43):
You look over a 30-year graphit's as flat as a table.
I mean, they really are flat.
Those people do not have toworry when they go to sleep at
night or they're going to losehalf their value when they wake
up in the morning or Mondaymorning after a weekend.
Those currencies are stable.
Yet they are buying gold as well, and I think that's the one
where they certainly loveAmericans.
(30:06):
I've certainly had a greatwelcome and a great reception
there.
But they don't love Americannot necessarily American foreign
policy, but certainly Americanmonetary policy and I think
they're buying gold as a hedgeagainst the insanity of look at
our election and whatever youthink of the two candidates and
whichever one you prefer, butthey're both.
(30:28):
One's over 80, one's nearly 80.
They're both big spenders, theyboth lie, they both, you know,
do all these things, you know.
Look at what the Fed has done,look at the amount of debt the
US government is racking up, andthey're buying gold, you know,
as a hedge for it.
And so there's four worlds thatare buying gold, even if the
(30:51):
Western world is not.
Speaker 1 (30:54):
I'm surprised you didn't mention Japan, because I
would think that the way theyen's acting, you would see a
pickup in gold demand there.
Speaker 2 (31:03):
There probably is.
I have not visited Japan, so Idon't really know a lot about it
.
I'm not in a position tocomment.
You're probably right.
There's probably a pickup ofgold buying there, I would
assume, so just given the waythe currency has acted.
Speaker 1 (31:15):
What about silver in all this?
I don't know if this is stillthe case, but it used to be the
argument that silver was poorman's gold and you had a ratio
and they would typically staywithin a ratio relative to each
other and if it got too far offthey converge.
Things like that.
Let's talk about silver for amoment in terms of the gold
(31:39):
demand and if there's acommensurate demand pickup in
that metal.
Speaker 2 (31:46):
Well, obviously there's been a price pickup, so
somebody's buying it and I don'tthink it's suddenly as of 2024,
suddenly it's solar demand orantiseptic countertops demand or
whatever.
Clearly it's monetary.
So I was on a panel at aprecious metals conference some
years back this might have beenpre-COVID, even who knows some
(32:07):
years back, this might have beenpre-COVID, even who knows and a
co-panelist was talking aboutsilver and had all these graphs
and statistics, excuse melooking at silver to see if it
correlated with othercommodities like crude oil and
wheat, cotton, copper, and I waslike I wonder where he's going
(32:29):
to go with all this.
And then, sure enough, and itwasn't really correlated
terribly well with any of them.
And then he pulled up thecorrelation with gold.
And then there it was Silvertraded, highly correlated with
gold, although obviously thegold-silver ratio varies in a
pretty wide range.
So I'd say, yeah, silver'smoney.
Historically, silver was themoney of the wage earner, the
(32:52):
farmer, the craftsman, theartisan, small savings held by
the people, generally in theirown hands at home, under the
floorboard, so to speak, whereasgold was obviously, you know,
for wealthier people and moregenerally was kept in the banks.
(33:15):
I think that's largely truetoday.
So if the wage earners aredoing well, you know, and not
just here but around the world,then you'll see, you know, a
pickup in silver demand.
If not, then perhaps not, butof course so.
Gold is a capital asset, tradesagainst other capital assets.
Anybody that has real estate orstocks or bonds, bitcoin, right
(33:41):
, any capital asset.
You know gold is in the mix orcould be in the mix if they
choose for it to be.
And you know silver again beingmore of the wage earners, uh,
you know venue, but the capitalasset class can, of course,
choose to focus on silver ifthey wish, and it's, it's
(34:02):
possible.
Some of that's happening andit's possible that in the rest
of the world the people thatcan't really here's the thing
psychologically.
I mean you can buy, um, you knowistanbul gold refinery makes it
.
Uh, you know there's a fewothers that make.
You can get a one-tenth of agram little wafer of gold
floating in a little plasticwindow and a credit card size
(34:23):
thing they call a certicard.
So I mean you wouldn't want tohold that piece of gold.
It's so small.
You put it your pocket, it'llget lost in the lint just about.
But you can get it in thatSurticard.
But there's no psychologicalsatisfaction to that tiny little
chip in that little plasticwindow that you know you can see
it but you can't touch it.
The same amount of silver mightbe two or three ounces.
(34:45):
That is a real heft in the handand I think the psychology of
that should not beunderestimated.
And what was I going with allthis?
I but anyway.
So people they're buying silverif gold is.
(35:05):
They can't buy enough gold tobe satisfying, and I think
that's clearly going on as well.
Speaker 1 (35:12):
Got a question from YouTube.
Keith said debt is deflationary, but surely that only applies
when it's being paid down, notwhen it's being run up by
trillions per year.
What do you think about that?
Speaker 2 (35:26):
Well, the point I was making earlier is that when
productive enterprises areborrowing, they're borrowing to
do what?
To increase productive capacity.
Your hamburger chain has justadded 2% more hamburger
production capacity.
I'm assuming all yourcompetitors have the same
spreadsheet in their back pocket.
The entire supply of hamburgersjust gone up 2%.
(35:50):
So is that going to cause anincrease in the price of
hamburgers or decrease thatprice of hamburgers?
Now, obviously, when thegovernment borrows in order to
just dole out free monies, thatfiscal policy of just giving out
free money is of course goingto tend to drive prices up.
But the broader point is thatthere is an arbitrage between
(36:13):
the cost of capital and thereturn on capital.
Return on capital issignificantly above cost of
capital.
Productive enterprises willborrow more to add capacity,
which of course pulls downreturn on capital, and they'll
keep doing that until return oncapital is marginally above cost
of capital.
So even yes, during the processof borrowing that tends to have
(36:35):
a damping effect or a softeningeffect on prices.
And then, of course, the otherhalf of the question once
they're stuck with that now,they have to service it
essentially forever, and that isenormously a drag, a burden on
all the producers and theperverse reason why there's such
(36:57):
a ferocious bid on the dollarthat never relents because of
all the debt of all the debt.
Speaker 1 (37:08):
You had sent me a DM saying you wanted to talk about
silver bond, which I don't knowwhat that means.
But so educate me and theaudience on silver bond what we
refer to.
Speaker 2 (37:13):
So a bond is when somebody issues a debt
instrument to finance something,and so Monster Metals right now
is.
We have an open deal in ourmarket.
We are financing a loan to asilver mine called Bunker Hill.
They produce lead, zinc andsilver, and so when we do a
(37:36):
silver or gold loan, we price itas a bond offering.
It's just like a conventionalbond, except that it's
denominated in silver, withinterest in principle Paid in
silver.
It happens to be paying 12%,and so for accredited investors
only.
But any accredited investor whowants to A get 12% return on
his silver and B help bring goldand silver back, remonetize and
(37:59):
bring them back into the market, then they should contact
Monetary Metals to considerparticipating.
Speaker 1 (38:09):
Peter, outside of gold and silver, what else are
you particularly excited forfrom an investment perspective?
Speaker 2 (38:20):
You know I hate to say it, bitcoin, because I can
already feel the slings andarrows.
You know I hate to say it,bitcoin, because I can already
feel the slings and arrowscoming.
No, you know, look, I'm awell-known guy that takes my
punches at the Bitcoin punchingbag and you know I'm all.
You know, my shield walls areup for that.
(38:41):
I almost hate to say it, but Ithink there's got to be one
massive drop in the interestrate and therefore 10-year
(39:02):
treasuries, 30-year treasuriesare going to be a hell of a play
sometime here.
Speaker 1 (39:06):
I would love to see it because that's been the bane
of my existence the last threeyears, tactically speaking.
But if you're going to have amassive drop in yields,
presumably that coincides with amassive drop in equities.
I mean sort of your return toflight to safety, risk off,
traditional stocks, down yieldsdown to fight to safety, risk
off traditional stocks down,yields down.
Speaker 2 (39:28):
There's a lot written about that and what people say
is when the Fed drops interestrates, that's a harbinger of a
drop in equities.
And I think the reason ispretty clear, which is the Fed
is dropping interest ratesbecause they're in a panic,
because something is happening.
The Fed doesn't really careabout the stock market.
I know everyone says there's aFed putt and this and that, but
(39:50):
they don't really care aboutstock prices and they don't
really care about whether youhave a job or not either.
They care about one thing,which is the solvency of the
banking system, and particularlythe large crony banks, which
are the Fed's clients, and whichmeans that they care about
credit.
If there are defaults that arestarting to come, then that
(40:14):
means that the banks are goingto take massive losses and it'll
blow holes in their balancesheet.
So that's when the Fed tries tocome in and of course, their
game is okay now we'll lower theinterest rate.
By the time they're doing that.
It's kind of a game of toolittle, too late.
If you look at what they did in2008, they slimed interest
(40:37):
rates to zero, but by that pointthe crash was already baked
into the cake.
But in general equity valuationwe're talking about cash flow.
You have to discount futurecash flows.
You discount that using somediscount factor and I argue that
the discount factor should bethe market rate of interest or
maybe the market rate ofinterest applicable to that
(40:58):
company.
So if that's a majorcorporation with double a credit
, then you should look at whatAA credit costs and use that as
the discount factor.
So the lower the interest rategoes in theory, the higher
equity prices should go.
Speaker 1 (41:16):
Got another question here and then we'll wrap up.
Let's see here From YouTube isthere any advantage to holding
your gold?
Got another question here andthen we'll wrap up.
Let's see here from YouTube Isthere any advantage to holding
your gold in the form of jewelryas opposed to coins, slash bars
, for instance?
I'm thinking jewelry might beless likely to be confiscated.
I guess it depends on how nicethe jewelry is in your
(41:37):
neighborhood, but let's teasethat out a little bit of it.
Speaker 2 (41:47):
So, um, you know, unless you're in the middle east
or india, the, the bid-askspread on jewelry in the west is
much, much wider than um, youknow what they borrow us, and so
what you really should belooking for is as the narrowest
bid-ask spread.
I?
I personally don't thinkconfiscation is, uh, an issue.
If you look at, there's tworeasons why roose, two reasons
why Roosevelt confiscated goldin 1933, why he made the whole
(42:09):
move to basically pull it out ofthe monetary system.
One is he wanted to stop therun of the banks, because in
those days the gold was deposits, and when people were
withdrawing their deposits itwas causing one banker after
another to fall over, and hewanted to stop that.
So he said, okay, you can'thave gold anymore.
And number two, he wanted toget control over the interest
rate.
Every time somebody pulled agold coin out of the bank, it
(42:32):
forced the bank to sell a bond,which pushes the bond price down
and the interest rate up, andhe wanted interest rates to go
down.
And so this was monetary policy.
Today, gold has nothing to dowith the monetary system.
I just don't think they care,and if they want to grab a lot
of loot they can look at theIRAs and 401ks, which have not
(42:55):
only a lot more wealth in there,but there's a very small number
of custodians for that.
What is it?
15 trillion or whatever in theIRS and 401ks?
It'd be a much easier thing tograb.
Congress can do it just bysimply changing the rules for
tax deferral.
They can say oh well, to retainyour tax deferred status, now
you have to have X percent ofyour retirement account in these
(43:18):
spiffing new treasuryretirement bonds that we're
going to issue.
That pay oh look, we're paying5%.
And if they do it right afterthe stock market crashes, I
think people would be cheeringit rather than screaming.
They'd try to grab the gold.
They'd be going door to doorand they would discover that
there's a very high correlationbetween gun ownership and gold
ownership.
I don't think that would govery well.
Speaker 1 (43:42):
That correlation does not vary very much over time,
and that's where there iscausation beyond the correlation
.
Uh, okay, for those who want totrack more thoughts, more your
work uh, where'd you point themto and just maybe talk about
monetary metals a little bitmore and we'll wrap up so
monetary metals is a.
Speaker 2 (43:58):
You know our whole uh , reason to exist is to pay
interest on gold and silver.
Um, check outmonetary-metalscom we have 60
some odd unique charts on thegold and silver markets.
We have all kinds of analysiscommentary, you know content,
from macro to gold price toeverything else.
Um, and then um, my twitterhandle, just scrolling in the
(44:22):
bottom of the screen, is at Real, keith Wiener.
Speaker 1 (44:28):
Appreciate those that joined the live stream.
Again, this will be an editedpodcast under Lead Lag Live on
the YouTube channel andhopefully I'll see you all next
time.
Thank you, keith, appreciate it.
My name is Michael Guyatt, publisher of the Lead
Lag Report.
Joining me for the rough houris Keith Wiener of Monetary
Metals.
Keith, a lot of people knowabout you and know your
background, but for those whodon't do a brief intro on your
background.
Speaker 2 (00:22):
So I was your classic computer nerd in school, went
off to computer science major,dropped out because I got bored,
wanted to build a softwarecompany, which I did, called
Diamondware.
I sold that to Nortel NetworksAugust 19, 2008, right before
everything went over the edge,started to become fascinated
(00:42):
with markets and economics asthings were crashing, trying to
figure out how to protect myself, eventually came to the not
accredited.
I couldn't get a job with thisas credential, but got a PhD for
something called the NewAustrian School, studying money
and gold and credit and all thatsort of stuff, decided my next
company.
I wanted to be part of thesolution.
(01:03):
How do we fix this monetarysystem that's going off the
rails, taking us all with it?
And the idea was pay intereston gold and that will draw gold
into the market.
So that's what Monetary Metalsdoes.
I'm the founder and CEO ofMonetary Metals.
Speaker 1 (01:20):
So the first obvious question is how in the world do
you generate income on somethingthat has no yield?
Speaker 2 (01:27):
Well, if you think of gold as money, money itself
doesn't pay yield, but the useof money to finance productive
enterprise is what generatesyield.
That um rents metal to companiesthat need metal as inventory or
work in progress jewelers,fabricators, coatings, plating
(01:49):
companies, uh, refiners,recyclers there's a whole bunch
of different vertical industriesthat um need gold, and quite a
bit of it generally.
If it was copper at fourdollars a pound, you know you
just buy it and not worry aboutit, but gold being $2,300 an
ounce, you've got to finance itsomehow and they're happy to pay
(02:14):
a lease fee or a rental fee forthe privilege of getting that
inventory that they need.
The other is lending, and so welend to companies that have a
metal income.
Right now we have a silver bondopen that is to finance a
silver producer called BunkerHill Mine.
It's in northern Idaho.
They need money to refurbishand update a plant and get
(02:36):
restarted at the mine that hadbeen in historic production, and
the repayment of the silverplus the principal, plus the
interest, will come out of theirproduction.
They produce silver.
Speaker 1 (02:50):
Okay.
So whenever I think about anykind of income stream, I of
course think about valuation.
Right, it's sort of the oldschool way of how it used to be.
How do you value a stock bylooking at the cash flow
potential?
Can't really do that with goldand silver and other metals in
general, but I am curious givenyour years of experience, how do
you think about valuing goldand silver separate from the
(03:15):
income that you're able toderive from it?
Oh, you're saying if golddoesn't have a yield.
Speaker 2 (03:24):
How do you describe a price to it?
Well, that's the funny thing, Imean.
In a certain sense, any priceor no price is valid.
But what we do know is thatvirtually all of the gold ever
mined in human history I used tosay 5,000 years until sometime
last year I don't know when thediscovery was made, but I came
across an article about it Somewarrior king was discovered, a
(03:47):
burial site.
This warrior king wasdiscovered in bulgaria, romania,
um, dating back 6 500 years ago.
And uh, this guy was buriedwith all due honors and had
about seven kilos of gold in hisum, you know, tomb, you know,
and on this person he had a rodand all kinds of other stuff.
(04:08):
So we've been mining, mankindhas been mining gold since
essentially forever, back topre-recorded history, really and
all that metal is still insomebody's hands, and yet we
keep producing more.
So the concept of glut does notreally apply to gold and any
other commodity.
As soon as you build up alittle bit of inventory, the
(04:31):
price crashes.
The producers stop and theadditional consumers are drawn
in by the low price, and so theinventory is worked off until
you get back to whatever is anormal inventory buffer in
generally a few months.
But in gold the concept doesn'tapply, which means and this is
(04:51):
the key point I made, or one ofthe key points I made, excuse me
, in the debate, the Soho Forumdebate with Bitcoin, pierre
Pierre Rochard was that the nthplus one ounce of gold is worth
the same as the nth ounce, andthat means that gold is the
thing that measures all othereconomic values.
It's pretty damn hard to put aneconomic value on gold in terms
(05:16):
of something else.
All we see is that the actionsof traders on the market every
day are giving gold a pricearound $2,300 and change and
generally rising, because thething in which people are
measuring the value of gold, thedollar, is generally falling.
Speaker 1 (05:38):
As you look back at the last 12, 13 years or so of
gold movement, what do youascribe the sideways action to?
I mean, that was a prolongedperiod where gold really didn't
do anything.
Speaker 2 (05:56):
To me and to sort of recapitulate what I was just
saying and take it a whole stepfurther.
The price of gold is reallyjust the inverse of what's going
on, which is the price of thedollar.
Gold is the money.
The price of gold is reallyjust the inverse of what's going
on, which is the price of thedollar.
Gold is the money.
The dollar is credit, andcredit of increasingly
questionable and questionedquality.
But there's something veryperverse in the system, and that
(06:17):
is every debtor, which meansvirtually every producer in the
economic world, has borrowed inorder to get to their current
level of production.
If you don't borrow, yourcompetitors will.
So it's a nasty game that theFed has set up.
Every producer who's in debt isdesperately bidding on the
(06:38):
dollar to come up with enoughdollars by dumping their product
on the bid price, dumpingenough product to raise enough
revenues, that net of expensesthat can service their debts,
which means at least pay theinterest.
If you don't pay the interest,then terrible things happen to
you.
The creditors come along andseize your farm and your house
(06:58):
and whatever else you've pledged.
It was collateral, and so onewould think that, with all the
abuses that the federal reserve,in collusion with the treasury,
have committed against thedollar.
And, um, you know, there's avery lengthy list of abuses and
one would think, with the justsheer quantity of this
(07:20):
decreasing quality I call itcredit effluent.
It it's like this nasty, smelly, you know bacteria-laden stuff
that they're pumping out withincreasing force from their you
know treatment plant You'd think, with a various quantity of
this stuff and the sheer stinkof it, that the value of the
dollar should be going down,which is the inverse of the
(07:40):
price of gold going up, butcounterbalanced by every debtor
frantically, furiously, urgentlybetting on the dollar to
service their debts.
And so, yeah, you can have longperiods of time when there
isn't really an incipient crisisand during those times the
price of gold isn't rising, iethe price of the dollar isn't
(08:03):
falling.
That's not the time point atthe moment, but that was the
time from, let's say, 2012 to2018.
Speaker 1 (08:13):
So I want to share on the screen a post that you put
out A rate cut, you say.
Who could have predicted that?
Even if you're buying intotheir debunked idea of higher
rates leads to lower inflation,why are they abandoning the
pretense of normalizing rates?
Rates are going to slam back tozero all too soon.
That is an unpopular opinion,as I like to say on X, but I
(08:37):
want you to flesh that out alittle bit, for, whatever it's
worth, I tend to be more of adisinflationist, deflationist
from a very, very long-termperspective.
That's my bias.
There is the way that I thinkabout things, because I think,
inherently, debt is inflationaryonly to a point, and then it
becomes deflationary when it'stoo heavy.
But what are your thoughts onwhy rates might go back to that
(08:58):
lower bound?
Speaker 2 (08:59):
Yeah.
So let me unpack that, becauseI think there's about three
different ideas that I was sortof playing with.
In that one, you know the onequote.
Just put it back on the screen,if you would for a minute,
because I was just going to readmy own words and then, as a
reminder of what, can you zoom alittle bit?
I just can't quite read it onmy screen here.
(09:22):
One more Zoom, if you can,sorry.
Oh, so the first is everybody,for many, many years, during the
period of, you know, floodingthe market at zero interest
rates, everybody, including theFed, was saying well, you know,
eventually, you know, when thecrisis is over, we will
(09:45):
normalize rates.
And at the time I was prettysarcastic about it with another
unpopular opinion saying look,you know, the interest rate is a
downslope, you know, since, youknow, going back to 1981.
And sure, there's been zigs andzags along the way, but it's a
downslope.
Where on this almost straightline, you can almost put a
(10:07):
straight edge on it?
Where on the straight linewould you point to and say
that's, quote-unquote, normal.
But they were persisting.
They have to maintain theexcuse me, the fantasy that you
know they're going to go back tonormal.
And you know, a couple of yearsago now about two and a half
years they said okay, well, nowwe're going to start hiking
rates.
The crisis is over, inflationhas gotten hot, blah, blah, blah
(10:31):
, blah, blah I'll get back tothe inflation and interest rate
thing in a minute, you know andthis will give us a chance to go
back to normal.
All of a sudden, it's liketheir inflation number so-called
, you know, cools off bywhatever measure that is, and
then suddenly it's like oh yeah,we're going to start cutting.
Wait, I thought this wassupposed to be returned to
normalcy and now you're back tocutting.
(10:51):
Why and I'm being sarcasticI've been saying interest rate
structure is going to slam backto zero, which I'll get to in a
minute.
But the other thing I wanted toaddress first was this
relationship between rates andconsumer prices, and I always
like to put it this way thereare many, many harms, grievous
harms, done to all theparticipants in the economy when
(11:14):
the Fed distorts the interestrate, first of all, and then
when the interest rate is toolow or zero.
It's enormously harmful.
But if you were willing tooverlook all of the harms and
focus only on consumer prices,you should want lower rates
because lower rates make abusiness case for producers to
(11:35):
borrow more to add moreproductive capacity.
Suppose you own a chain of 49hamburger restaurants.
You always have a business case, which means an Excel
spreadsheet in your back pocketfor the marginal store, the one
you haven't opened, the 50thunit in your chain and you're
not opening it because thebottom cell is red ink.
(11:55):
It says you're going to losemoney.
And then let's say the Fedforces interest rates down
another tick and you plug in thenew interest rate, the new
borrowing cost, the new interestexpense, which is a significant
expense in your spreadsheet and, lo and behold, the red ink
turns to black.
And now it makes sense to buildthat store and you and every
other hamburger store hamburgerchain owner, plus all the
(12:17):
manufacturers of hamburger grillequipment, porcelain tiles,
plate glass windows, you name iteverybody suddenly has a fresh,
new, additional incentive toborrow more to add more
productive capacity.
So a time of falling interestrates is a time of soft, if not
outright falling prices.
If you want to hike interestrates, you render all of the
(12:41):
capital investments that weremade with lower interest rates
and therefore lower returns oncapital.
You render them allsub-marginal.
They all have to be liquidated,they all have to go out of
business, they all have to bedestroyed.
And with all that supply comingoff the market, then consumer
prices have to go up.
So they have the relationshipexactly backwards in their
(13:03):
theory.
But even aside from all of that, the problem is the forces that
are dragging interest ratesdown and have been doing so for
40 years, continue, which is adiminishing productivity of debt
.
That is, each fresh newlyborrowed dollar is producing
less and less revenue, less andless income, and so you have to
(13:25):
constantly, exponentially, beadding more debt just to keep
GDP even.
And when are we going to getthere?
I couldn't tell you whetherit's next month or eight months
from now, but-.
Speaker 1 (13:40):
I think the higher rates inherently strengthen the
position of the oligopolies andgives them more pricing power.
Because they have so much cash,now they're earning higher
interest on it and, to yourpoint, all the competitors which
are smaller can't do their NPVnet present value calculations.
So good luck, right.
Of course, you're going to have, oddly enough, more inflation
(14:01):
with higher rates.
Speaker 2 (14:03):
Yeah, I mean the return on capital ultimately has
to be above the cost of capitaland your way that does tend to.
I mean, it hurts everybody, butI think it tends to hurt the
bigger players a bit less thanthe smaller players.
They don't have the balancesheet strengths that are more
tenuous, you know.
They're more brittle, uh, youknow, versus the bigger
companies that have other meansof raising capital, um,
(14:26):
including equity, um, you know,and so on, but, um, you know,
anyways, uh, yeah, that's,that's pretty much it.
Speaker 1 (14:38):
I, uh I submitted a piece to investor place earlier
today, um, making the argumentthat, uh, rising unemployment
would actually be bullish forgold.
Not because I'm doing any kindof historical analysis, but just
because it makes sense to methat, as the economy slows down,
as unemployment rises, thereshould be a pickup in demand for
(14:59):
non-correlated assets.
And there really aren't thatmany non-correlated long-only
assets aside from gold primarilyand a couple of other, but gold
is sort of the main one.
Do you think we're in now alegitimate secular bull market
for gold?
I mean, it's been kind ofhovering around here right over
(15:19):
the last two months.
I think there was a lot ofexcitement around gold in April
when I kept on highlighting theconcerns around Japan and also
you had that risk of war betweenIran and Israel.
Right, it was a flight tosafety dynamic.
You kind of paused there.
But is this the pause thatrefreshes or is this the
(15:40):
distribution?
Speaker 2 (15:43):
I think and you mentioned unpopular opinions
that I may have held I waspretty unpopular in the gold and
silver space from 2012 to 2018because every time there'd be a
blip in the price, you know allthe gold pundits would come out
I shouldn't say all, but many ofthem, most of them would come
out and say you know, this is itto the moon?
And I would show my analysislooking at the gold basis, which
(16:05):
I do and say this is not theblips that you're looking for.
This is not sustainable.
It's about the speculatorsbetting it off of leverage in
the futures market.
Price is not going to remain,you know, elevated and sure
enough didn't.
That was a down to sidewaysmarket, but post-COVID,
something definitely flipped.
And now, as you pointed out,this year, this calendar year,
(16:29):
again, I think we are in a bullmarket in gold, which is really
a bear market in the dollar, ofcourse, and yeah, I think it's
durable and there's going to bezigs and zags and corrections.
The market says, well, whatabout this and what about that?
Inflation is coming down.
Maybe I should sell my gold,but you know the possibility of
war in the middle East, orUkraine, for that matter, it's
(16:51):
not over, so I should buy gold.
You know, it was all of thisnoise that adds to it, but at
the end of the day, um, thedollar is, you know, slowly
failing and, um, you know, thatmeans that it takes more and
more of those failing dollars tobuy an ounce of gold.
Speaker 1 (17:11):
So I got a kick out of uh one of your posts, because
those that have also followedme know that I will occasionally
take screenshots of uh, bitcoinand cryptocurrencies when
they're up big or down big,admittedly more when they're
down big, and I'll just saystore value, and I saw you did
the exact same thing right On anindependent say what's the word
(17:35):
for something that goes from71K to 57K in under a month in
quotes?
Store value.
And I don't have anythingagainst Bitcoin or the Bitcoin
maxis.
It's just, it's more a questionof definitions.
Store value can't have tailrisk, which I would argue means
gold is also not a store value.
We can maybe debate that.
But let's talk about volatility.
Gold volatility is verydifferent than Bitcoin and yet
everybody wants to make thatcomparison that Bitcoin is
(17:57):
digital gold Can we debunk that.
Speaker 2 (18:00):
I was going to say there's no similarities between
Bitcoin and gold whatsoever.
And they say these thingsglibly oh, it's digital gold.
Well, it's not actually likegold at all.
You know Bitcoin has apre-programmed I argue,
centrally planned cap on itsquantity.
Gold does not.
You know there's been goldmining.
You know, so far as we know,6,500 years there's going to be
(18:23):
gold mining as far as we canpredict for another.
You know thousands of500 years.
There's going to be gold miningas far as we can predict for
another thousands of more years,because the marginal utility of
gold does not diminish asquantity goes up.
Bitcoin they were.
You know Satoshi was terrifiedof that, and so you know he put
a cap on it.
But that means that Bitcoincan't respond to increases in
demand with increases inquantity, can only respond with
(18:46):
increases in price.
And then when you get a pricetrend going, then of course all
the speculators pile in withleverage and then overextend it,
and then you get these giantcorrections and then you know,
boom.
You know the volatility ismassively high.
And you know the point I try toexplain to the Bitcoiners is
the concept of drawdown.
You want to say this thing ismoney.
(19:06):
You know, pierre, in that debate, said, yeah, this is savings.
And I said, okay, if it'ssavings, then that means it's
suitable for an80-something-year-old widow, an
octogenarian widow with nofurther income potential in the
rest of her life.
He said, yeah, that's right.
I said okay, but what do youtell her?
And of course, we had thedebate right after Bitcoin had
fallen from, I think, 69,000 to16,000.
(19:28):
It was just right after thatfall.
I said what do you tell thislady who's put?
You know, you told her to putall of her life savings into
Bitcoin and just lost 75%.
You know, what do you tell herto do?
And then, in his time to thiswas the final rebuttal.
I didn't have a chance to sayanything.
(19:52):
After that, he stands up and hesays, well, I tell her to buy
more.
And uh, I'm just kind of mimedto the audience of, like you
know.
And uh, gene epstein, themoderator, is kind of like you
know, you can't, you're notallowed to say anything.
I'm just like you know.
Anyway, the audience picked upon it.
That was a preposterous thing,you know to.
So it has these massivedrawdowns.
Now, you're right, gold hasvolatility when measured in
dollars and I think that was oneof the pernicious, insidious
(20:14):
things by making the dollarirredeemable, by severing its
link to gold, what PresidentRoosevelt did for American
citizens in 1933, and then toforeign governments and foreign
central banks, nixon did thefinal deed in 1971, then you
know, if you're a conservativesaver, then gold is off the
table because it's volatile.
(20:36):
And you know, if you have achunk of money comes in and you
have to set that aside for anexpense you anticipate in six
months or a year, year and ahalf or whatever, buying gold,
you know there's a risk that youhave a drawdown.
Of course that risk in Bitcoinis amplified, you know, orders
of magnitude greater than it isin gold.
(20:57):
But yet you do have the problemin gold as well, and that's one
of the reasons why a lot ofpeople won't, dare you know,
hold it as the volatility.
The risk of the drawdown isunacceptable.
Speaker 1 (21:10):
Yeah, it's funny, mr Gene Epstein.
I interviewed him on his facesover a year ago, but it's like
that would never hold.
There would never be anargument you'd make in court.
I'd buy more for my 85-year-old, 86-year-old grandmother if all
their savings were in Bitcoin.
Of course, that would not holdin court with a lawsuit if
you're a fiduciary.
Speaker 2 (21:30):
That's right.
And on top of it, he had saidhe would recommend she put 100%
of her savings in already.
So how did she buy more anyway?
I mean, the whole thing wasjust absurd and outrageous.
Speaker 1 (21:42):
I have to say it is a ?
I don't know what it is.
I don't know if this is sort ofemblematic of a high conviction
, almost like cult-like beliefsin certain things, but the
narratives that you hear on theextremes when it comes to
Bitcoin are almost always thesame and they're always said
with the same level ofconfidence, independent of who
(22:03):
the person is.
I've always found that to beamazing.
It's almost like it's one voicethat's very consistent in the
message, independent of who theindividual actually is.
Speaker 2 (22:14):
Yeah, and obviously they get their talking points
from certain books the BitcoinStandard and obviously Michael
Saylor but it's kind of aninteresting thing.
I'm not particularly a big fanof skepticism as a philosophy,
but when you see BertrandRussell or Ralph Waldo Emerson
(22:37):
or Henry Thoreau, you know thesetypes of guys are like.
You know, the people who knownothing are absolutely strident,
fervent in their zealouscertainty and the more somebody
studies, the more they realizethey don't know.
And there's a certain kernel oftruth to that.
I mean, I sort of reject it ona lot of levels.
But to see these generallyyoung people who haven't really
(23:01):
thought about, they don't reallyunderstand the concept of
drawdown, and they're sittinghere waggling the finger at me
saying you need to read aboutBitcoin.
You don't understand the firstthing.
It's like, really, I've beenwriting about Bitcoin since
before you were old enough tohave a bank account there, kitty
, but they have this fervency,this zealotry.
(23:23):
The red lights in the eyes isan appropriate visual for it.
Speaker 1 (23:35):
There's a great quote .
I'm blanking on who said it,but it's something along the
lines of I'm not young enough toknow everything.
I think it's very appropriatewhen it comes to that.
Last time you and I chatted,you were mentioning, I think,
you were off to Dubai and Iasked you the question what in
the world is going on in Dubaifor a guy who's as busy as you?
And you said the demand forgold is exploding.
(23:56):
So I want to talk about golddemand picking up in other
countries.
Obviously, we're US centric,everybody always thinks about
the US but there's been somereal movement when it comes to
China and to your point on Dubaiand Middle East.
So lay that out for theaudience.
Speaker 2 (24:11):
So I would say broadly so the US, but also the
entire Anglosphere, australia,new Zealand, canada, the UK.
You know demand for gold rightnow is more abundant, has been,
for you know, some time.
We talked to bullion dealers.
Volumes are down 50 to 75percent.
You know from where they werebullion dealers.
Volumes are down 50 to 75%.
You know from where they were,let's say, two years ago Western
(24:36):
Europe and even Germany.
Who's the big gold buyer inEurope?
You know demand is way down,but there were four.
And so people say, well, why isthe price up?
And then for a while, I thinkit kind of stopped.
I don't track this too closely,but for a while there were even
outflows out of the ETFs.
Oh my God, the ETFs areoutflowing.
How can the price, you know,hold up?
I would say the same thing,which is the gold market.
(24:57):
You know total gold.
Out there is this vast ocean,and whether a little bit of gold
sloshes from one vault toanother or one corner of the
market to another, that has nopredictive power on price.
Etfs are not the be-all andend-all.
Maybe they're a good barometerof Western sentiment, but
anyways, there are four worldsthat are buying gold as rapidly
(25:19):
as they can get it and they havecapital controls that limit how
much they can get.
In most of these places that'sChina number one.
So the Chinese yuan is underpressure to go down.
The Chinese government isforced to defend it by buying
yuan, selling dollars.
So people say it'sde-dollarized and I say yeah,
and when it's fullyde-dollarized it'll be like when
(25:41):
the spider sucks the last bitof juice out of an insect or is
left over as a dry husk that'sdiscarded as worthless.
But the Chinese people don'ttrust the government, they don't
trust the currency, they don'ttrust the investment markets,
they don't trust the banks, theydon't trust the property market
in China anymore, becausethat's kind of rolled over.
And so they trust one thing,which is gold.
(26:01):
So they want to buy as muchgold as they can.
China is limiting how much goldcan come in.
So then you get premiums, china, you know, relative to the
world markets.
But there is gold obviouslycoming in, and, uh, chinese
demand is, and, and generallyasia, and the same story is true
whether it's thailand, vietnam,um, you know, they're buying
gold, um, number two.
(26:23):
And so that's an anti-yuan,anti-chinese government play and
that's really important toemphasize that, because that was
these four, three ofuananti-Chinese government play and
that's really important toemphasize that, because that was
these four.
Three of them are anti-localgovernment local currency.
Only one of them is reallyanti-dollar play.
Number two is Turkey.
Possibly incipienthyperinflation, certainly very
(26:45):
rapid devaluation of thecurrency.
I went to the Grand Bazaar whenI was in Istanbul last year.
I must have seen over 100booths, you know stalls that
sold gold, one Bitcoin kiosk inthe whole place and you know I
was asking about it and peoplesaid, oh yeah, you know pretty
much anybody that has any wealthor money in this country would
have at least 10 grams of gold.
(27:05):
The average person would have alot more than that, which is
remarkable because the averageAmerican would have exactly zero
ounces or zero grams.
They're buying as much as theycan.
The government is limiting itby quotas.
There are various ways that.
You know there are loopholes.
Through the quotas, gold iscoming in and you know demand is
(27:27):
insatiable at the moment.
The third is India.
I mean, india is always a buyerof gold, more so now.
And of course, it's ananti-Rupi, you know play.
It's not that the Rupi isundergoing hyperinflation, it's
just that the Rupi is doing whatit's always done, which is the
Rupi goes down at about 7% ayear against the dollar and, as
(27:55):
we just discussed, the dollar isnot exactly going up either,
and so the Indians are alwaysbuying gold as much as they can,
and there are import quotas andother things.
But the Indians have a varietyof ways of working around that,
one of which is they can goabroad and buy jewelry, wear the
jewelry and fly back to Indiawith it.
So they go to Dubai, they pickup some necklace that says the
store says no, make 0% makingcharge, which means they're
selling at its spot, and I tookout a calculator and calculated
(28:15):
it absolutely is.
I picked up a necklace it's 83and a half grams, almost three
ounces, of 24 karat gold.
This is monetary.
People call it jewelry.
This is money, let's face it.
This is not for wearing everyday, this is for storing money
in a form that works.
(28:36):
Anyway, they can wear thatpiece of jewelry, fly back to
India and then, if they didn'twant it in India, they can
immediately sell that to arefiner or someone within the
trade, because there's a 15%import duty on imported gold in
India but only a 5% VAT on goldjewelry in Dubai.
So they pick up a 10% gain onany bit of gold they buy in
(28:59):
Dubai.
And so I imagine there must be,you know, huge numbers of
Indians.
You know flying to Dubai buyinggold and then flying back and
the amount that they make on thegold to import it.
You know, offsets, whatever thecost of the airfare in the
hotel in Dubai.
So, again, and that's ananti-rupee currency, the Turkish
or it's an anti-lyric you knowplay the Chinese is anti-Yuan
(29:22):
play.
Finally, you get to the Arabworld and that's the one place
that it's hard to make a casethat it's an anti-local currency
play.
Those currencies in the Gulfregion are generally pegged to
the US dollar and unlike, let'ssay, the Chinese Yuan, for
example, or any banana republicin Latin America, for example,
those pegs are actually stable.
(29:43):
You look over a 30-year graphit's as flat as a table.
I mean, they really are flat.
Those people do not have toworry when they go to sleep at
night or they're going to losehalf their value when they wake
up in the morning or Mondaymorning after a weekend.
Those currencies are stable.
Yet they are buying gold as well, and I think that's the one
where they certainly loveAmericans.
(30:06):
I've certainly had a greatwelcome and a great reception
there.
But they don't love Americannot necessarily American foreign
policy, but certainly Americanmonetary policy and I think
they're buying gold as a hedgeagainst the insanity of look at
our election and whatever youthink of the two candidates and
whichever one you prefer, butthey're both.
(30:28):
One's over 80, one's nearly 80.
They're both big spenders, theyboth lie, they both, you know,
do all these things, you know.
Look at what the Fed has done,look at the amount of debt the
US government is racking up, andthey're buying gold, you know,
as a hedge for it.
And so there's four worlds thatare buying gold, even if the
(30:51):
Western world is not.
Speaker 1 (30:54):
I'm surprised you didn't mention Japan, because I
would think that the way theyen's acting, you would see a
pickup in gold demand there.
Speaker 2 (31:03):
There probably is.
I have not visited Japan, so Idon't really know a lot about it
.
I'm not in a position tocomment.
You're probably right.
There's probably a pickup ofgold buying there, I would
assume, so just given the waythe currency has acted.
Speaker 1 (31:15):
What about silver in all this?
I don't know if this is stillthe case, but it used to be the
argument that silver was poorman's gold and you had a ratio
and they would typically staywithin a ratio relative to each
other and if it got too far offthey converge.
Things like that.
Let's talk about silver for amoment in terms of the gold
(31:39):
demand and if there's acommensurate demand pickup in
that metal.
Speaker 2 (31:46):
Well, obviously there's been a price pickup, so
somebody's buying it and I don'tthink it's suddenly as of 2024,
suddenly it's solar demand orantiseptic countertops demand or
whatever.
Clearly it's monetary.
So I was on a panel at aprecious metals conference some
years back this might have beenpre-COVID, even who knows some
(32:07):
years back, this might have beenpre-COVID, even who knows and a
co-panelist was talking aboutsilver and had all these graphs
and statistics, excuse melooking at silver to see if it
correlated with othercommodities like crude oil and
wheat, cotton, copper, and I waslike I wonder where he's going
(32:29):
to go with all this.
And then, sure enough, and itwasn't really correlated
terribly well with any of them.
And then he pulled up thecorrelation with gold.
And then there it was Silvertraded, highly correlated with
gold, although obviously thegold-silver ratio varies in a
pretty wide range.
So I'd say, yeah, silver'smoney.
Historically, silver was themoney of the wage earner, the
(32:52):
farmer, the craftsman, theartisan, small savings held by
the people, generally in theirown hands at home, under the
floorboard, so to speak, whereasgold was obviously, you know,
for wealthier people and moregenerally was kept in the banks.
(33:15):
I think that's largely truetoday.
So if the wage earners aredoing well, you know, and not
just here but around the world,then you'll see, you know, a
pickup in silver demand.
If not, then perhaps not, butof course so.
Gold is a capital asset, tradesagainst other capital assets.
Anybody that has real estate orstocks or bonds, bitcoin, right
(33:41):
, any capital asset.
You know gold is in the mix orcould be in the mix if they
choose for it to be.
And you know silver again beingmore of the wage earners, uh,
you know venue, but the capitalasset class can, of course,
choose to focus on silver ifthey wish, and it's, it's
(34:02):
possible.
Some of that's happening andit's possible that in the rest
of the world the people thatcan't really here's the thing
psychologically.
I mean you can buy, um, you knowistanbul gold refinery makes it
.
Uh, you know there's a fewothers that make.
You can get a one-tenth of agram little wafer of gold
floating in a little plasticwindow and a credit card size
(34:23):
thing they call a certicard.
So I mean you wouldn't want tohold that piece of gold.
It's so small.
You put it your pocket, it'llget lost in the lint just about.
But you can get it in thatSurticard.
But there's no psychologicalsatisfaction to that tiny little
chip in that little plasticwindow that you know you can see
it but you can't touch it.
The same amount of silver mightbe two or three ounces.
(34:45):
That is a real heft in the handand I think the psychology of
that should not beunderestimated.
And what was I going with allthis?
I but anyway.
So people they're buying silverif gold is.
(35:05):
They can't buy enough gold tobe satisfying, and I think
that's clearly going on as well.
Speaker 1 (35:12):
Got a question from YouTube.
Keith said debt is deflationary, but surely that only applies
when it's being paid down, notwhen it's being run up by
trillions per year.
What do you think about that?
Speaker 2 (35:26):
Well, the point I was making earlier is that when
productive enterprises areborrowing, they're borrowing to
do what?
To increase productive capacity.
Your hamburger chain has justadded 2% more hamburger
production capacity.
I'm assuming all yourcompetitors have the same
spreadsheet in their back pocket.
The entire supply of hamburgersjust gone up 2%.
(35:50):
So is that going to cause anincrease in the price of
hamburgers or decrease thatprice of hamburgers?
Now, obviously, when thegovernment borrows in order to
just dole out free monies, thatfiscal policy of just giving out
free money is of course goingto tend to drive prices up.
But the broader point is thatthere is an arbitrage between
(36:13):
the cost of capital and thereturn on capital.
Return on capital issignificantly above cost of
capital.
Productive enterprises willborrow more to add capacity,
which of course pulls downreturn on capital, and they'll
keep doing that until return oncapital is marginally above cost
of capital.
So even yes, during the processof borrowing that tends to have
(36:35):
a damping effect or a softeningeffect on prices.
And then, of course, the otherhalf of the question once
they're stuck with that now,they have to service it
essentially forever, and that isenormously a drag, a burden on
all the producers and theperverse reason why there's such
(36:57):
a ferocious bid on the dollarthat never relents because of
all the debt of all the debt.
Speaker 1 (37:08):
You had sent me a DM saying you wanted to talk about
silver bond, which I don't knowwhat that means.
But so educate me and theaudience on silver bond what we
refer to.
Speaker 2 (37:13):
So a bond is when somebody issues a debt
instrument to finance something,and so Monster Metals right now
is.
We have an open deal in ourmarket.
We are financing a loan to asilver mine called Bunker Hill.
They produce lead, zinc andsilver, and so when we do a
(37:36):
silver or gold loan, we price itas a bond offering.
It's just like a conventionalbond, except that it's
denominated in silver, withinterest in principle Paid in
silver.
It happens to be paying 12%,and so for accredited investors
only.
But any accredited investor whowants to A get 12% return on
his silver and B help bring goldand silver back, remonetize and
(37:59):
bring them back into the market, then they should contact
Monetary Metals to considerparticipating.
Speaker 1 (38:09):
Peter, outside of gold and silver, what else are
you particularly excited forfrom an investment perspective?
Speaker 2 (38:20):
You know I hate to say it, bitcoin, because I can
already feel the slings andarrows.
You know I hate to say it,bitcoin, because I can already
feel the slings and arrowscoming.
No, you know, look, I'm awell-known guy that takes my
punches at the Bitcoin punchingbag and you know I'm all.
You know, my shield walls areup for that.
(38:41):
I almost hate to say it, but Ithink there's got to be one
massive drop in the interestrate and therefore 10-year
(39:02):
treasuries, 30-year treasuriesare going to be a hell of a play
sometime here.
Speaker 1 (39:06):
I would love to see it because that's been the bane
of my existence the last threeyears, tactically speaking.
But if you're going to have amassive drop in yields,
presumably that coincides with amassive drop in equities.
I mean sort of your return toflight to safety, risk off,
traditional stocks, down yieldsdown to fight to safety, risk
off traditional stocks down,yields down.
Speaker 2 (39:28):
There's a lot written about that and what people say
is when the Fed drops interestrates, that's a harbinger of a
drop in equities.
And I think the reason ispretty clear, which is the Fed
is dropping interest ratesbecause they're in a panic,
because something is happening.
The Fed doesn't really careabout the stock market.
I know everyone says there's aFed putt and this and that, but
(39:50):
they don't really care aboutstock prices and they don't
really care about whether youhave a job or not either.
They care about one thing,which is the solvency of the
banking system, and particularlythe large crony banks, which
are the Fed's clients, and whichmeans that they care about
credit.
If there are defaults that arestarting to come, then that
(40:14):
means that the banks are goingto take massive losses and it'll
blow holes in their balancesheet.
So that's when the Fed tries tocome in and of course, their
game is okay now we'll lower theinterest rate.
By the time they're doing that.
It's kind of a game of toolittle, too late.
If you look at what they did in2008, they slimed interest
(40:37):
rates to zero, but by that pointthe crash was already baked
into the cake.
But in general equity valuationwe're talking about cash flow.
You have to discount futurecash flows.
You discount that using somediscount factor and I argue that
the discount factor should bethe market rate of interest or
maybe the market rate ofinterest applicable to that
(40:58):
company.
So if that's a majorcorporation with double a credit
, then you should look at whatAA credit costs and use that as
the discount factor.
So the lower the interest rategoes in theory, the higher
equity prices should go.
Speaker 1 (41:16):
Got another question here and then we'll wrap up.
Let's see here From YouTube isthere any advantage to holding
your gold?
Got another question here andthen we'll wrap up.
Let's see here from YouTube Isthere any advantage to holding
your gold in the form of jewelryas opposed to coins, slash bars
, for instance?
I'm thinking jewelry might beless likely to be confiscated.
I guess it depends on how nicethe jewelry is in your
(41:37):
neighborhood, but let's teasethat out a little bit of it.
Speaker 2 (41:47):
So, um, you know, unless you're in the middle east
or india, the, the bid-askspread on jewelry in the west is
much, much wider than um, youknow what they borrow us, and so
what you really should belooking for is as the narrowest
bid-ask spread.
I?
I personally don't thinkconfiscation is, uh, an issue.
If you look at, there's tworeasons why roose, two reasons
why Roosevelt confiscated goldin 1933, why he made the whole
(42:09):
move to basically pull it out ofthe monetary system.
One is he wanted to stop therun of the banks, because in
those days the gold was deposits, and when people were
withdrawing their deposits itwas causing one banker after
another to fall over, and hewanted to stop that.
So he said, okay, you can'thave gold anymore.
And number two, he wanted toget control over the interest
rate.
Every time somebody pulled agold coin out of the bank, it
(42:32):
forced the bank to sell a bond,which pushes the bond price down
and the interest rate up, andhe wanted interest rates to go
down.
And so this was monetary policy.
Today, gold has nothing to dowith the monetary system.
I just don't think they care,and if they want to grab a lot
of loot they can look at theIRAs and 401ks, which have not
(42:55):
only a lot more wealth in there,but there's a very small number
of custodians for that.
What is it?
15 trillion or whatever in theIRS and 401ks?
It'd be a much easier thing tograb.
Congress can do it just bysimply changing the rules for
tax deferral.
They can say oh well, to retainyour tax deferred status, now
you have to have X percent ofyour retirement account in these
(43:18):
spiffing new treasuryretirement bonds that we're
going to issue.
That pay oh look, we're paying5%.
And if they do it right afterthe stock market crashes, I
think people would be cheeringit rather than screaming.
They'd try to grab the gold.
They'd be going door to doorand they would discover that
there's a very high correlationbetween gun ownership and gold
ownership.
I don't think that would govery well.
Speaker 1 (43:42):
That correlation does not vary very much over time,
and that's where there iscausation beyond the correlation
.
Uh, okay, for those who want totrack more thoughts, more your
work uh, where'd you point themto and just maybe talk about
monetary metals a little bitmore and we'll wrap up so
monetary metals is a.
Speaker 2 (43:58):
You know our whole uh , reason to exist is to pay
interest on gold and silver.
Um, check outmonetary-metalscom we have 60
some odd unique charts on thegold and silver markets.
We have all kinds of analysiscommentary, you know content,
from macro to gold price toeverything else.
Um, and then um, my twitterhandle, just scrolling in the
(44:22):
bottom of the screen, is at Real, keith Wiener.
Speaker 1 (44:28):
Appreciate those that joined the live stream.
Again, this will be an editedpodcast under Lead Lag Live on
the YouTube channel andhopefully I'll see you all next
time.
Thank you, keith, appreciate it.
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