Part Of The Problem - Dave Smith - Keith Weiner Talks Money
Aired: 2024-03-10
Duration: 01:11:28


=== Rolling Back The State (02:17) ===

[00:00:00]  Fill her up!
[00:00:02]  You are listening to the gas digital move!
[00:00:08]  We need to roll back the state.
[00:00:10]  We spy on all of our own citizens.
[00:00:12]  Our prisons are flooded with nonviolent drug offenders.
[00:00:16]  If you want to know who America's next enemy is, look at who we're funding right now.
[00:00:21]  Every single one of these problems are a result of government being way too big.
[00:00:33]  What's up, everybody?
[00:00:34]  Welcome to a brand new episode of Part of the Problem.
[00:00:37]  I'm Dave Smith.
[00:00:38]  You also see in picture Robbie the Fire Bernstein.
[00:00:41]  We have a bunch of gigs coming up.
[00:00:43]  Go to comicdave Smith.com.
[00:00:44]  We're going to Rosemont, Chicago, Key West, Portland.
[00:00:50]  Bunch of stuff coming up.
[00:00:51]  ComicDaveSmith.com and, of course, RobbyTheFire.com for all of his stuff.
[00:00:54]  Today, we have a very special guest joining us.
[00:00:57]  He is the CEO of Monetary Metals, one of our great sponsors here on this show, Keith Weiner.
[00:01:02]  How are you, sir?
[00:01:04]  Doing good.
[00:01:04]  How about you?
[00:01:05]  Very good.
[00:01:06]  Very good.
[00:01:06]  And I'm happy to talk to you.
[00:01:08]  We're going to be talking about all types of different economic and monetary states of the state of the world.
[00:01:17]  So let's start with kind of a broad question that you can take wherever you want to.
[00:01:23]  One of the things that I got very interested in when I first became a libertarian was money.
[00:01:28]  Money is one of these very interesting things that affects everybody so much, yet almost nobody understands even what it is.
[00:01:37]  People certainly have understood over the last few years that the price inflation has been hurting them.
[00:01:46]  But there's been a lot of developments, particularly concerning the war in Ukraine, the BRICS alignment.
[00:01:54]  Where do you think we are right now in terms of dollar stability?
[00:01:58]  Where do you see us going in the near future?
[00:02:01]  What are your thoughts?
[00:02:02]  You know, I was going to say the first thing that has to be acknowledged is that most people take pretty much everything in our economy and our whole civilization sort of for granted because there's so much to know and everyone is a specialist.

=== Global Monetary Cheating (15:10) ===

[00:02:18]  Like you get on an airplane, as I'm about to do tomorrow, you kind of trust like, okay, the engineers at Boeing or Airbus kind of knew what they were doing and the maintenance people of Delta, you know, followed the checklist correctly and replaced all the parts they're supposed to replace with OEM equivalents and all that kind of stuff.
[00:02:38]  You know, if somebody's cheating, well, then planes are going to fall out of the sky.
[00:02:42]  And, you know, you turn on the tap and you drink some water and you're kind of trusting that the people who run the water system, you know, using the right amount of chlorine or whatever it is they're supposed to use.
[00:02:52]  And they have filters that pull out the bacteria and the cysts and whatever they're in there.
[00:02:56]  Every last aspect, you sort of have to, you don't have a choice.
[00:03:00]  I mean, there's no way to withdraw unless you want to be like a hermit living in the wilderness, I suppose.
[00:03:05]  But the same thing is true with money.
[00:03:08]  I mean, nobody sits down and defines, you know, from first principles these kinds of things unless you're an academic who studies it.
[00:03:16]  And, you know, the dollar system is, I'm not sure I would say the word chugging along, maybe staggering along or whatever, as it's been for, you know, many, many, many decades.
[00:03:27]  Every once in a while, there's a sea change of what happens to it.
[00:03:30]  They created the Federal Reserve in 1913, and that was a change in the quality of something, not appreciated very much in 1913.
[00:03:38]  But in 1929, we saw there were consequences to that.
[00:03:42]  1933, President Roosevelt declares gold to be illegal, pulls gold out of the banking system, voids all the gold contracts, go to jail if you get caught in possession of gold.
[00:03:53]  And that had a big change to the system, underappreciated at the time.
[00:03:58]  1971 Nixon says, okay, that's it.
[00:04:01]  Even for foreign central banks, no more gold redeemability.
[00:04:04]  Although he says, temporarily.
[00:04:06]  It's been a long, it's been a long temporarily.
[00:04:08]  Yeah.
[00:04:10]  You know, there's a YouTube clip of him, you know, saying that.
[00:04:14]  I could just say what a mendacious man that he was.
[00:04:17]  And everybody should go to, if you haven't seen the clip of this guy, you know, talking about temporarily suspending, you know, everybody should watch it, that 30-second clip.
[00:04:24]  It is the greatest political speech of all time when Nixon's selling that this is good for the world.
[00:04:28]  It's good for stability.
[00:04:31]  It's just politics at its best, the way he sells it.
[00:04:34]  I also love the most brilliant part of it is the framing of like that base that the French were trying something sneaky kind of.
[00:04:42]  Like the idea that it's like, oh, these guys, they're trying to like mess with our dollar.
[00:04:46]  Literally, it was the deal.
[00:04:48]  The deal was that dollars are redeemable and we're backing out of the deal.
[00:04:52]  It's like, literally, you know what I mean?
[00:04:53]  Like if you were like, you offered to trade someone something and they went, okay, I'll make that trade.
[00:04:59]  And you're like, whoa, whoa, whoa, whoa.
[00:05:01]  What are we doing here, France?
[00:05:03]  Yeah, it would be like Darth Vader getting all huffy and indignant that Han Solo was trying to.
[00:05:08]  Yeah, right.
[00:05:10]  I'm sorry.
[00:05:10]  Okay, so continue.
[00:05:13]  So, you know, there's many changes and there's a change in character.
[00:05:17]  There's a change in quality or honesty of the whole thing.
[00:05:21]  And, you know, late 1990s, long-term capital management blew up.
[00:05:25]  The Fed famously under Greenspan injected massive amounts.
[00:05:28]  Then Alan Greenspan's like, wait, irrational exuberance.
[00:05:32]  Well, yeah, you know, you just dumped what at that time would be, you know, today it would be trillions.
[00:05:36]  At that time, I guess it was hundreds of billions.
[00:05:39]  I don't know exactly how much.
[00:05:41]  And, you know, bit by bit, obviously the response to 2008, the response to COVID, each time, you know, they have one play in the playbook and they resort to it.
[00:05:51]  And increasingly, people, they're going to be able to put their finger on it.
[00:05:55]  And they think there's going to be hyperinflation tomorrow, which is not the case.
[00:06:00]  They think, you know, they're trying to figure out what the symptoms are going to be, but they sort of almost put their finger on the problem that is the people that are running the system are cheating.
[00:06:08]  It's the equivalent of, you know, what if Delta, you know, were just faking the logbooks and every time you're supposed to change, I don't know, a turbine bearing or something like that, you didn't change it, but you just, you know, you could falsify the sign in the book.
[00:06:21]  Yeah, I changed it.
[00:06:22]  It's all good.
[00:06:23]  You know, eventually planes are going to fall out of the sky.
[00:06:27]  They're cheating.
[00:06:28]  That's what they're doing.
[00:06:30]  And now we have a movement called modern monetary theory, which is like even more brazen about, yeah, let's not even call it cheating.
[00:06:37]  Let's just redefine it as it's perfectly fine.
[00:06:40]  And, you know, what are the consequences of this?
[00:06:43]  Well, the whole system isn't working.
[00:06:45]  So I just, I just tweeted today about Q4 GDP and Q4 GDP went up.
[00:06:50]  I'm trying to remember the number, but on an annualized basis, it's 430 billion or 340 billion, something like that.
[00:06:57]  And yet the debt went up on an annualized basis of 2.4 trillion.
[00:07:02]  So like, you know, a huge amount of borrowed extra money injected into the system, or what people call money, or I don't actually call it money at all.
[00:07:13]  And you get a tiny little, you know, one seventh.
[00:07:16]  So you put in seven, you know, imagine putting, I don't know, seven gallons of gas in your car and you get one gallon worth of go forward.
[00:07:23]  And then you're out of gas and you need, you know, you need to put 10 in to get one gallon.
[00:07:27]  So there's some diminishing return to the whole thing, which is obviously not sustainable and going to lead to horrible, you know, consequences.
[00:07:35]  And there's another bank blowing up now.
[00:07:38]  Community Bank of New York is in the process of blowing up.
[00:07:42]  And, you know, we'll see where it all goes.
[00:07:44]  But so my concept of inflation isn't really to do with the quantity of the stuff.
[00:07:49]  And I certainly don't concede that the dollar is money.
[00:07:52]  It's a credit.
[00:07:53]  It's an irredeemable credit.
[00:07:54]  But my concept has to do with it's counterfeiting.
[00:07:57]  something fundamentally dishonest about it.
[00:07:59]  And so rather than looking at the statistic of how much of it is piled up, look at what's fundamentally unsound about it.
[00:08:05]  What is the dishonesty?
[00:08:06]  How are they cheating?
[00:08:08]  And, you know, it's kind of like if you have a 14-year-old kid who's like, dad, can I borrow 100 bucks?
[00:08:15]  Your first question might be, what do you need that for?
[00:08:17]  And the second question is, what do you mean borrow?
[00:08:19]  I mean, you know, you don't make any money.
[00:08:22]  How are you going to, there's no repay, right?
[00:08:25]  You call it borrow, but it's not borrow.
[00:08:27]  But imagine now if, I don't know, if you were on Wall Street and you take that $100 and you securitize it and you sell it to investors as an asset-backed security, right?
[00:08:38]  And now all of a sudden, you get a credit rating on it of, you know, AAA or AA or something like that.
[00:08:44]  And now this paper is trading all backed by the bogus promise of a 14-year-old who has no means and no intent to ever repay it.
[00:08:52]  And that's a counterfeiting operation if it did that at scale.
[00:08:56]  And that's what ultimately happens in the monetary system.
[00:09:01]  That's how it works.
[00:09:02]  Yeah, no, it's very close.
[00:09:04]  No, that's exactly right.
[00:09:06]  And it's like people understand that people understand that their grocery bills are much higher than they were a few years ago, but they don't always make the connection that that value that you're losing is being robbed from you by somebody else.
[00:09:23]  It's not just vanishing into thin air in a sense.
[00:09:26]  It's somebody is stealing that from you.
[00:09:28]  It's quite a scam.
[00:09:29]  You almost have to tip your hat to them.
[00:09:31]  So I have to ask, if we're looking at the financial system as being a scam and that the, you know, the dollar, it's a scam by the U.S. government.
[00:09:40]  I've looked at the storylines of BRICS and otherwise of new competitors trying to come into the market and have a alternative currency, us kind of going off of what was the, you know, oil being exclusively priced in dollars since the 70s, since Nixon.
[00:09:55]  And I get caught by these headlines.
[00:09:56]  I read these headlines and I start thinking, oh, is this the end of the dollar?
[00:10:00]  But I've heard you and others say otherwise that, you know, basically the dollar is king shit.
[00:10:05]  It's still people's only option.
[00:10:06]  And there's so much debt priced in it that we're kind of stuck with it.
[00:10:10]  So I'm curious, like with your kind of perspective of we are in a house of cards.
[00:10:15]  Do you see like a movement away from the dollar that might actually take place or everyone's still kind of stuck with it for the foreseeable future?
[00:10:24]  I mean, there's no question that around the world, they're very conscious of how the dollar screws them.
[00:10:31]  And, you know, Americans be pretty smug about how all the goods flow into America as a result of this system.
[00:10:40]  And, you know, they're kind of right in a lot of ways for the long reasons.
[00:10:43]  I'll explain that remark.
[00:10:44]  And the rest of the world, especially the ones that don't have dollar swap lines, are kind of screwed.
[00:10:50]  And when things get tighter, boy, are they, you know, things get very rough in certain places.
[00:10:54]  And they would love an alternative.
[00:10:56]  The problem is nobody wants gold as money.
[00:10:59]  I mean, that's not in the Overton window at all.
[00:11:03]  And whether you're in India, whether you're in the Middle East, whether you're in Asia, all the monetary planners, most of them came to the U.S. or London.
[00:11:13]  They all studied the same Keynesian crap.
[00:11:18]  That's what passes through macroeconomics, right?
[00:11:20]  So they're not thinking gold at all.
[00:11:24]  And to the extent that they think, well, we'd love to have our local currency, you know, become that reserve.
[00:11:29]  Well, that's what kind of things break down.
[00:11:32]  So of the BRICS, if you count Brazil, Russia, India, China, and South Africa, and there's different definitions, obviously more countries are joining, but those are the core.
[00:11:42]  Four out of five of them have capital controls.
[00:11:45]  Brazil is the only one with an open capital account.
[00:11:47]  So it's illegal to take your money out of Russia, NTK, China, South Africa.
[00:11:51]  You can't.
[00:11:53]  Now, China, very famously, people find all sorts of ways to evade those capital controls.
[00:11:57]  If you get caught doing that, then very ugly things will happen to you.
[00:12:02]  They'll disappear you to a dungeon somewhere.
[00:12:05]  But people, you know, people do it, but it can't be a reserve currency used by the rest of the world if it's subject to capital controls.
[00:12:13]  And that should be obvious.
[00:12:15]  So in the Middle East on my last trip, and I'm about to be back in Dubai pretty soon on this next one.
[00:12:22]  I had a chance to sit down with the owner of a pretty substantial jewelry manufacturing company.
[00:12:29]  So he deals in gold, you know, big quantities of gold all the time.
[00:12:34]  And we were talking about this.
[00:12:36]  First thing to say about the guy is very nationalistic to India, even though he's had most of his career in the Middle East.
[00:12:42]  Very nationalistic India, very loyal to Modi, very much not a fan of the U.S. and any U.S. administration in the last probably 50 years, if not longer.
[00:12:54]  Not a fan of the dollar and U.S. foreign policy, the whole thing, right?
[00:12:59]  But when the topic of the BRICS currency came up, he just started laughing.
[00:13:02]  He said, have you seen a chart of the Indian rupee?
[00:13:05]  Have you seen a chart of the Brazilian real of the Chinese yuan, et cetera, et cetera?
[00:13:10]  He said, they're all falling.
[00:13:11]  So now you take these fallen currencies and you combine them, four small fallen currencies and combine them into one big falling currency.
[00:13:19]  It's a joke.
[00:13:20]  That's his words.
[00:13:21]  He said it's a joke.
[00:13:22]  He was just laughing.
[00:13:23]  He's like, there's no substitute for the US dollar.
[00:13:26]  And here's a guy who doesn't like the dollar, doesn't like America particularly.
[00:13:29]  And it was just very matter of fact about it.
[00:13:33]  Another meeting I had there, I met with a family office who, you know, we were talking about investments in this and that and monetary metals.
[00:13:43]  We pay interest on gold.
[00:13:45]  And we're talking about the dollar and their local currency in that particular country, several of those countries, are pegged to the dollar.
[00:13:53]  And unlike most other pegs that you see around the world, it's table flat.
[00:13:57]  If you look at a chart of their currency, the last 20, 30 years, I mean, it just doesn't budge.
[00:14:02]  So whoever's managing that peg is getting it right.
[00:14:07]  And I said to them, but if you hold your local currency, it's just as good as holding dollars.
[00:14:12]  Not any better than holding dollars, it's pegged to the dollar, but it's just as good as the dollar, except there's always a risk that a currency peg will break.
[00:14:20]  And when it breaks, it can break violently and you can lose 30% in a millisecond.
[00:14:26]  So if you want to hold dollars, why hold proxies for dollars, which is your local currency?
[00:14:30]  Why not hold actual dollars?
[00:14:33]  So talking to the principal of the family office and his attorney, and they both look at each other and they look back to me and the lawyer says, that is our investment philosophy exactly.
[00:14:44]  We hold just enough local currency to meet immediate liquidity needs for three months.
[00:14:49]  The rest is in dollar denominated assets and gold.
[00:14:53]  So I think there's absolutely a desire on the part of people and governments to segue past the dollar, but they don't see a path for how to do it.
[00:15:02]  And the thing I would add to this is there's no paper currency that can remotely come close to replacing the dollar.
[00:15:11]  There's nothing else out there that has the liquidity, has the scale, that has the open capital markets.
[00:15:16]  Whatever you can say about Washington, the dollar and finances in America are much more transparent than they are in, say, Russia, India, Brazil, China.
[00:15:25]  I mean, as bad as we are, they're a whole other level.
[00:15:29]  Gold is the one thing that can replace it, but the world needs a path paved.
[00:15:35]  How do you get to gold, which is the whole point of monetary metals?
[00:15:38]  Gold has to earn interest.
[00:15:39]  If it doesn't earn interest, it's just a pet rock, whatever you want to call it.
[00:15:45]  And maybe it goes up in price.
[00:15:46]  And obviously, it does tend to go up in price.
[00:15:48]  It's done very well in price, obviously, over the last 50 years since Nixon's mandacious statement.
[00:15:56]  But it's not really a financial system asset.
[00:15:58]  It's not really a monetary system asset when it's just sitting there dormant.
[00:16:04]  But if it earned a yield, then that's how people will use it as a savings vehicle and as a vehicle for finance.
[00:16:12]  And gold will then begin to supplant the dollar bit by bit financing production, which is ultimately what this has to be about.
[00:16:20]  So if I'm understanding correctly, so essentially you're saying, and please correct me if I'm wrong.
[00:16:26]  But so basically you're saying that what's holding bricks back from actually being a threat to rivaling the dollar, it would require like Russia and India and these countries to basically get rid of capital controls and have transparency in their financial markets.
[00:16:46]  And the concept of them doing that doesn't seem very likely that that's going to happen anytime soon.
[00:16:53]  Or it would require people understanding that gold is the way to go and everybody's just basically we're permeated with this just ignorant understanding of monetary theory.
[00:17:05]  Yeah, I mean, as far as capital controls, that's like the first, it kind of reminds me back when I used to live in New York, commuting to and from the island.
[00:17:14]  And I lived in the west side of the Hudson River in Rockland County.
[00:17:18]  And you'd be on the Cross Bronx Expressway and it's bumper to bumper traffic going like 0.1 mile an hour and then stopping.
[00:17:25]  And then finally you see there's some jackknife tractor trailer or something like that.

=== Replacing Dollar Debt With Gold (06:37) ===

[00:17:29]  And you're like, oh, great.
[00:17:30]  All I have to do is another quarter mile of this and I'll get past it.
[00:17:33]  And then the traffic's going to open up.
[00:17:35]  But no, it's still bumper to bumper after that because there was an accident another half a mile down the road.
[00:17:40]  And there's one blockage after another after another.
[00:17:43]  And it can take you three and a half hours to get home on something that should take 30 minutes.
[00:17:48]  So yeah, they'd have to get rid of capital controls.
[00:17:50]  That would be the first thing.
[00:17:51]  But then there are countries like Switzerland and Japan that don't have capital controls.
[00:17:58]  You can get in and out of the front, as they can, if you want to.
[00:18:01]  And they certainly have a greater degree of transparency and other things, maybe arguably rival the U.S.
[00:18:07]  But there's other things too, including liquidity.
[00:18:10]  If you're a big player and you need to do a $50 billion transaction, what's the one market you can count on not to move?
[00:18:17]  If you say, here's $50 billion with a treasury paper, I'm going to dump it on the bid.
[00:18:23]  You're not going to crash the bid for the time.
[00:18:26]  You're not going to get execution slippage like that.
[00:18:29]  And the other markets don't have that.
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[00:19:19]  All right.
[00:19:19]  Let's jump back into the show.
[00:19:21]  I have to add, how much more runway do you think the U.S. has to cheat?
[00:19:24]  If everyone's kind of stuck with the US dollar because currencies are competing and the US dollar is still the best, I think if you look at the chart of how much like debt we're taking on and expanding, it's going like, what are we at?
[00:19:38]  A trillion every hundred days or something?
[00:19:40]  The figures I've been seeing, I might not have that right, but I know that it's kind of exponential.
[00:19:44]  So I guess I start to wonder, you know, in a market where people are realizing, hey, we're getting robbed by the U.S. dollar and they're trying to figure out, can we come up with the competitor?
[00:19:56]  Just typically speaking, if you look at markets and there's one product that's terrible, you think, oh, some competitor will step in with a better product.
[00:20:03]  So I wonder kind of, you know, if you even look at it from like a 50 or a longer perspective, just how much more runway do we have to continue to inflate and steal from people?
[00:20:13]  That is a very good question.
[00:20:15]  And I think, you know, one thing, one thing that should be said, the dollar is terrible in a couple of regards, but it's actually really great in several other regards.
[00:20:26]  Extremely liquid, extremely low friction, extremely trustworthy in the sense that if you have your dollars at JPMorgan and you say, I need to wire them tomorrow, you got that transaction.
[00:20:41]  You're not worried about getting them out of a place that nominally doesn't have capital controls, but for big transactions, suddenly there are people holding their hand out for a bribe or whatever.
[00:20:50]  There's a lot of things about it that actually do work.
[00:20:53]  And the reason why, you mentioned earlier, and I want to talk about there's debt denominated in dollars.
[00:21:00]  And the reason why there's debt denominated in dollars, which is if you have a project, let's say it's a power plant or a factory or whatever, you need to raise a billion dollars worth of capital, that's the capital market that you go to.
[00:21:16]  If you're in Kenya, what do they use?
[00:21:17]  The shilling.
[00:21:18]  There's no capital market in shillings.
[00:21:22]  You come to the dollar market because that's where the capital is available.
[00:21:28]  So once you're in that debt, and let's say you borrow that money to manufacture, I don't know, cars, pencils, computer chips, whatever, or food, let's say it's a farm, you now need to produce as much as it takes and dump that on the bid price in dollars to raise enough cash that net of all your expenses, you can service your debt.
[00:21:49]  Because if you don't service your debt, then the bank's going to take over the asset and kick you out.
[00:21:54]  And so let's say you borrowed that from a local bank in Kenya, you borrowed that from a bank in Europe, you borrowed that from a bank of Switzerland, maybe even a bank in the United States.
[00:22:03]  But there's so much of this activity going on outside the United States that doesn't even touch the U.S. banks at all.
[00:22:12]  But those banks are certainly going to be aggressive to foreclose on the collateral if you don't service the loan.
[00:22:18]  So everybody's servicing the loan, which means all the producers change this treadmill.
[00:22:22]  And every time the interest rate changes or whatever, I mean, the theory is the government, the U.S. government is supposed to devalue the dollar, thus easing everybody's debt burden.
[00:22:32]  But what happens is as the economy becomes more sluggish, it becomes harder to earn those revenues.
[00:22:39]  And so the debt burden actually rises.
[00:22:41]  Then they think, okay, let's lower the interest rate.
[00:22:43]  And I think the Fed's going to come back to lowering.
[00:22:46]  I don't exactly know when, but they will.
[00:22:48]  And interest rates go back to zero.
[00:22:50]  And as the interest rate falls, the burden of debt rises perversely.
[00:22:57]  And so all the debtors are chained to this.
[00:23:00]  And in a certain sense, it's like, how do you fix the system?
[00:23:03]  Well, all the debtors that are in dollar debt have to get out of debt.
[00:23:07]  But there's a curious feature of any irredeemable paper currency system, which is it's impossible in the aggregate to get out of debt.
[00:23:15]  There is no, and I use the word extinguisher, there's no extinguisher of debt.
[00:23:19]  If you pay a debt in dollars, you're paying using IOUs.
[00:23:22]  All you can do is shift it so any individual debtor could get out of the loop.
[00:23:26]  But in aggregate, the debt can only, not only can't it go down, it can only go up and it must go up exponentially.
[00:23:33]  So in aggregate, all the producers are shackled to it.
[00:23:35]  How do they get out of it?
[00:23:37]  Well, there is a path which is replaced the dollar debt with gold debt.
[00:23:41]  The gold debt can be extinguished by the payment of a gold coin at the end, at the end of the transaction.
[00:23:47]  But until then, everybody's changed it and it gets tighter and tighter.
[00:23:51]  So what I think happens is all the other currencies fail one by one.
[00:23:56]  And the people who are in those currencies will be willingly giving their capital into the dollar system because they perceive the dollar to be more stable, safer than the local currency.

=== No Extinguisher For Aggregate Debt (11:50) ===

[00:24:07]  Look at Argentina right now.
[00:24:08]  How long is it going to be before they officially dollarize?
[00:24:11]  I don't know.
[00:24:11]  But that could tip sooner or later.
[00:24:17]  Do you think that's the right Javier Malay, who's he's talked about how they're going to dollarize?
[00:24:22]  I don't know exactly what moves he's taken.
[00:24:25]  Do you think that's the right move from the Argentinian perspective?
[00:24:29]  If I was advising him, absolutely not.
[00:24:32]  I would say go to gold.
[00:24:34]  And I have not taken the time to write an open letter to Malay.
[00:24:38]  I did write an open letter a decade ago to Prime Minister Tsipras of Greece when it looked like they were just going to default and Germany just wanted to twist the knife a little bit.
[00:24:49]  And I was like, you have a golden opportunity here.
[00:24:52]  Be ashamed if you squander it.
[00:24:53]  And of course, he didn't listen.
[00:24:55]  But it was published in Greek, in Greek.
[00:24:58]  It was translated into Greek.
[00:24:59]  It was published in a Greek publication.
[00:25:01]  It was sent to him and the finance minister and all the members of parliament by somebody that I know in Greece who did that.
[00:25:08]  But, you know, no, I think they should go to gold, but, you know, that's outside the pale, even for Malay, probably.
[00:25:16]  But I mean, I guess the reason why it's a little bit, it kind of makes you scratch your head is because for Javier Millay, obviously a guy who's like well read in Murray Rothbard and Mises and stuff like that, you wouldn't think that would be outside of his Overton window.
[00:25:35]  He may personally be willing to consider it, but I think there's a political reality of, I mean, frankly, on the other hand, I could be wrong.
[00:25:42]  Frankly, he's doing more for every time I read what's going on, he's doing more than I would say, what a thought that you could get away with.
[00:25:51]  And I know the Argentinian culture to some degree.
[00:25:53]  My stepfather passed away a few years ago.
[00:25:55]  His family, he moved here from Argentina.
[00:25:58]  And his family, I've met the Argentinian side of the family.
[00:26:02]  And they are just so blinders on die-hard socialists that, you know, and these are the better people.
[00:26:09]  These are independent business people and doctors and lawyers.
[00:26:12]  And, you know, these aren't the toiling lumpen proletariat, you know, begging the government for handouts and wages.
[00:26:21]  And they're all such die-hard socialists.
[00:26:22]  I'm like, I see no possibility of anything interesting occurring there.
[00:26:29]  And he got elected.
[00:26:30]  So, you know, I guess anything's possible.
[00:26:34]  Yeah, yeah, right.
[00:26:35]  Well, that is true.
[00:26:36]  I mean, I also do wonder that this is a little outside the scope of economics, but I mean, I guess it relates to some degree.
[00:26:42]  But I've often just speculated that, you know, Javier Millay is also perhaps limited by what his concerns over what three-letter agencies in the United States of America might do.
[00:26:56]  And certainly going to an independent currency as opposed, excuse me, going to like a gold standard versus dollarizing.
[00:27:04]  Dollarizing might guarantee him some personal security, but that's, you know, just speculation.
[00:27:11]  Yeah, I'm not, I won't necessarily go there, but I get you.
[00:27:18]  Okay, so let's talk about monetary metals.
[00:27:22]  So what is the kind of mission statement?
[00:27:27]  What's the goal of monetary metals as it relates to all of this stuff?
[00:27:32]  We would like to, let me take a step back.
[00:27:36]  Sure.
[00:27:37]  So there's obviously a problem in the monetary system.
[00:27:39]  I think we've established that I think gold is the solution.
[00:27:42]  That's the free market alternative.
[00:27:44]  When the socialists screw it up enough, eventually, there's a quote I love from Winston Churchill, where he said, God bless the Americans, because after they've tried everything else, they'll do the right thing.
[00:27:56]  And to me, that sort of characterizes like, okay, after we've tried socialism, socialism messes it up.
[00:28:02]  Even Argentina will elect to Javier Malay and close down all these agencies.
[00:28:08]  privatize industries and all kinds of things.
[00:28:11]  So the dollar is failing.
[00:28:13]  We need something else.
[00:28:15]  It's not serving the needs certainly of investors and savers very well.
[00:28:20]  So we need to get to gold.
[00:28:22]  How do you do that?
[00:28:24]  And so the mission of Monet Fair Metals, the why, is to offer an incentive to people and really pave a pathway to gold.
[00:28:35]  So there's a quote from Keynes that most people who read Rothbard or Mises or in any way interested in libertarianism would be familiar with this quote when he talks about there's no sure way to overthrow the capitalist order, which means civilization.
[00:28:52]  You completely delete capitalism.
[00:28:54]  What are you left with?
[00:28:54]  You're left with the grinding, ruinous poverty of North Korea, which is the place where capitalism has penetrated the least, right?
[00:29:02]  And they're starving to death and they don't have electric lights even.
[00:29:05]  And you can see that in satellite imagery, right?
[00:29:09]  There's no surer way of overthrowing the capitalist order than by debauching the money.
[00:29:14]  And he goes on and on and on.
[00:29:15]  People assume that he just means inflation, but he gives it away at the end.
[00:29:18]  That's not exactly what he means.
[00:29:20]  When you get to the end of the quote, it's when he says, and it destroys by engaging all the hidden forces of economics, which today we'd use the word incentives.
[00:29:33]  And there's been a lot of, obviously, you know, work on discovering incentives and why incentives matter.
[00:29:40]  By engaging all the hidden forces of economics in favor of destruction, and not one in a million can recognize what's destroying their world.
[00:29:49]  And I don't think, I mean, if he meant that consumer prices are rising, then he was a moron because everybody talks about inflation every day.
[00:29:58]  And I'm just old enough to remember the late 1970s.
[00:30:02]  I was a 12-year-old kid.
[00:30:04]  Every week, my parents would, you know, we'd go out to eat on Friday night.
[00:30:07]  That was like our one splurge.
[00:30:09]  And then we go to the grocery store and I get dragged to the grocery store.
[00:30:12]  And even to a 12-year-old kid who's interested in other things, every price of every item in the grocery store was up enough that I remembered it and noticed it.
[00:30:20]  And then I noticed on the nightly news, they talked about the misery index, unemployment plus inflation.
[00:30:26]  Everybody talks about inflation every day.
[00:30:28]  So I think Keynes meant something else.
[00:30:30]  And what he was talking about was driving interest rates to zero, driving asset prices to infinity.
[00:30:35]  And the reason why nobody diagnoses this as a problem is because there's endless bull markets and everybody loves the bull market.
[00:30:42]  And meanwhile, you're destroying, you're consuming the capital that civilization depends on.
[00:30:46]  That's how you overthrow it.
[00:30:48]  So you've got this problem.
[00:30:50]  You need to transition to an honest monetary system.
[00:30:54]  And I think the interest is the key to the whole thing.
[00:30:57]  If people can earn interest on, let's say, gold, then all of a sudden gold makes sense to them in a way that it didn't before.
[00:31:04]  And we certainly experienced that with clients.
[00:31:09]  And what we're leveraging here, and we talked about the Overton window, when people talk publicly, especially in polite company, I guess Twitter may be a little bit of an exception and obviously quite a echo chamber with the way algorithms filter and reinforce.
[00:31:25]  There's like a squelch.
[00:31:27]  Everything below, every signal below a certain threshold essentially suppressed a zero.
[00:31:31]  If you rise above the noise source, suddenly it's amplified and 18,000 people are jumping on your thread saying whatever.
[00:31:38]  But when people are talking publicly in polite company or they're voting, then most people, outside the libertarian movement, we'll call them the muggles.
[00:31:48]  Most muggles think, well, yeah, I mean, you kind of have to have a fiat currency.
[00:31:54]  You kind of have to have some inflation because it's good for GDP.
[00:31:57]  It's good for jobs.
[00:31:59]  Yeah, you need to have a central bank and monetary policy so that when there's a crisis, let alone they're the cause of the crisis in the first place.
[00:32:07]  But people have short memories and they don't connect cause and effect.
[00:32:11]  You have those things.
[00:32:12]  Yeah, you need a central bank.
[00:32:13]  And they sort of say to themselves almost to reinforce it as much as anything else that, yeah, we need this.
[00:32:19]  This is right and good and proper.
[00:32:21]  But when it comes to being a steward of their own wealth, then they're more rational and to say more selfish.
[00:32:30]  And nobody wants to put their, you know, they may concede publicly that you need a currency going down to 2% per year, which is what every major central bank of the world states as their goal.
[00:32:43]  That's, you know, they define that as price stability.
[00:32:45]  So what would Orwell say about that?
[00:32:48]  You know, maintain the purchasing power of the currency means 2% chronic inflation forever.
[00:32:54]  But, you know, leaving aside that, you know, nobody wants to put their wealth into something that's programmed, intentionally going down, not some conspiracy theory in the dark corners of the internet.
[00:33:05]  It's stated purpose of the managers of this currency to make it go down to 2% per year.
[00:33:12]  And nobody wants to willingly put their money into that fireplace and light it up.
[00:33:17]  Okay.
[00:33:18]  Yeah, and I don't know too many people whose retirement accounts is like a shoebox full of cash.
[00:33:23]  No, and to light it up, okay, it's a slow burn, right?
[00:33:26]  It's not going to burn it all at once.
[00:33:27]  It's only 2% per year.
[00:33:29]  Nobody would do that.
[00:33:30]  And so if you give people an option, it's, okay, here's this thing called gold, which obviously isn't subject to inflation.
[00:33:35]  And by the way, there's a 3% interest rate on it in gold.
[00:33:39]  Well, they may publicly say that they believe in the economic merits of this whole thing.
[00:33:45]  They may concede that, but then privately with their own, you know, how they vote with their own money is different from how they vote with their ballot.
[00:33:52]  And that's what we're leveraging is that people are better stewards of their own money.
[00:33:57]  And Milton Friedman, who I'm not a fan of, if you see any of my tweets, by any means, I'm not a fan of Milton Friedman.
[00:34:05]  But he talks about the difference between how people spend their own money on themselves and how they spend other people's money on other people.
[00:34:12]  And he's talking about it from an efficiency, utilitarian standpoint.
[00:34:18]  But it's pretty obvious that you put a bunch of bureaucrats in charge of the people's money to spend on the people, and you get boondoggles.
[00:34:26]  You get just gobsmacking degrees of waste and inefficiency, stupefying levels of it.
[00:34:35]  And with somebody spending their own money on themselves, yeah, people can waste money colossally all the time.
[00:34:40]  But you know what?
[00:34:40]  People actually, for the most part, are pretty good at doing that.
[00:34:45]  And they ask questions about what's the return going to be and how do I know this is safe and what are the risks?
[00:34:51]  And they're asking all those things that when they're spending other people's money on other people, most questions aren't even there.
[00:34:59]  So anyways, the point of all this is that I think about Keynes' quote, engaging the hidden forces of economics.
[00:35:05]  And he's talking as a paragraph talking about how to overthrow civilization.
[00:35:09]  This is not a good guy.
[00:35:10]  I mean, he's like, hey, you know, we're going to burn it all down.
[00:35:13]  He's like the Joker, and I forget which Batman movie it was, when Batman is a little frustrated with the Joker talking to Alfred.
[00:35:20]  And then Alfred says, he's talking about his experience in Vietnam or World War II or something like that.
[00:35:24]  And he said, there's some people, or Africa, he was in the British Army or something.
[00:35:30]  He's like, there's some people that just want to see the world burn.
[00:35:34]  They can't be reasoned with.
[00:35:35]  They can't be bargained with.
[00:35:36]  They're not interested in money.
[00:35:38]  They just want the world to burn.
[00:35:40]  And that's, you know, that's what, in my opinion, that's what Keynes was.
[00:35:44]  So I think about that and I think, okay, what if you reverse that and say, okay, leverage the hidden forces of economics, i.e. incentives, not in favor of the world burning down, but in favor of helping the world transition to something honest.

=== Levers For An Honest Transition (04:40) ===

[00:35:57]  What if you did that?
[00:35:58]  Would that work?
[00:35:59]  And that was the sort of vision and a founding idea of monetary metals of what we're doing, but more importantly, why are we doing it?
[00:36:10]  If you just want to make a buck in this world, I came out of the software business and I successfully built and sold the software company in 2000.
[00:36:18]  I sold it on August 19, 2008 to Nortel Networks, which as a historical footnote was the last transaction they ever did.
[00:36:29]  They went bankrupt shortly after that.
[00:36:31]  And one of the last decent transactions anybody did, because in September with Lehman blowing up and other things, that was it.
[00:36:37]  There was no more exits for startups.
[00:36:39]  And, you know, if all I wanted to do was make money, the easiest thing to do would be to be, you know, do another software company.
[00:36:47]  I'd had a team that followed me to hell and back.
[00:36:49]  They were like, when are we going to jump ship from Nortel and then Avaya?
[00:36:54]  Let's do another software company.
[00:36:55]  We have plenty of ideas, access to capital, great advisors.
[00:36:59]  That would be the easy thing to do.
[00:37:01]  But the reason why I'm doing this is I rather like civilization.
[00:37:06]  I'd rather not see it overthrown.
[00:37:09]  And so this is my, you know, a lot of people, when they come to realize this, they start to look for where would they have a little private bunker?
[00:37:17]  Where would they find a little bit of property somewhere to hide out and wait for whatever is going to come to sort of pet the zombie apocalypse to pass and they find some real piece of real estate in northern Idaho or upstate New York or wherever?
[00:37:30]  And I looked at a lot of places.
[00:37:32]  I looked in South Island, New Zealand.
[00:37:34]  I looked at a lot of places.
[00:37:35]  I came to realize that, you know, even if you survive, I mean, South Island, New Zealand, there's very few people.
[00:37:43]  I think livestock to people of the 17 to 1 or 20 to 1 ratio.
[00:37:48]  They have a good, strong work ethics.
[00:37:49]  They're honest people.
[00:37:50]  They're great people.
[00:37:51]  But it's like you're living in this bleak, remote, isolated place.
[00:37:55]  Even now with civilization holding together, it's not exactly a fun lifestyle, at least for me.
[00:38:01]  And then, you know, assuming that the zombie apocalypse happens and you're stuck there and that's it.
[00:38:06]  There isn't jet travel anymore.
[00:38:08]  There isn't electricity anymore.
[00:38:09]  You're kind of stuck.
[00:38:10]  Best case scenario in the 18th century agrarian world.
[00:38:16]  Life expectancy was under 40.
[00:38:18]  So, you know, I passed my shelf life already, even when I started looking at that time.
[00:38:23]  And of course, the world isn't ending yet.
[00:38:25]  So getting back to your question, Rob, I think there's some years left.
[00:38:30]  It's not tomorrow or anything like that.
[00:38:33]  But one by one, the other currencies fail.
[00:38:36]  And what happens ultimately if we don't transition is that there's this diminishing effect.
[00:38:46]  It takes more and more debt to juice up less and less economic activity as the debt increasingly becomes this burden.
[00:38:54]  I remember hearing it once from a professor I studied under.
[00:38:58]  He was talking about imagine if you threw all the garbage in the attic.
[00:39:03]  Every time you had a pail of garbage, you'd open the attic hatch and push it up there.
[00:39:08]  And that's this debt burden.
[00:39:10]  And then you successfully close the hatch one more day and you're like, I'm getting away with it.
[00:39:14]  It's fine.
[00:39:15]  Well, it's not fine.
[00:39:18]  And then in the end, I wrote an article called The Heat Death of the Economic Universe.
[00:39:23]  What happens when it finally takes infinite debt to get zero GDP?
[00:39:31]  Well, then at some point, the lights go out.
[00:39:34]  And I expect that we will not be able to see today.
[00:39:37]  We rely on the production of energy and food, and food depends on energy because we produce food in vast industrial scale.
[00:39:45]  But it's not the way farming needs to be done.
[00:39:48]  And the way farming is still done in much of the world today, it's done by the square mile with one guy in an air-conditioned tractor combine, doing a square mile in an afternoon kind of thing.
[00:40:00]  Well, when the diesel stops flowing, that's it.
[00:40:03]  And of course, food requires distribution, which is all powered by fossil fuels or energy, requires warehousing and everything else.
[00:40:10]  When that stops, then things get very, very, very bad.
[00:40:17]  We're still a number of years off.
[00:40:18]  I mean, possibly a decade or more.
[00:40:21]  Hopefully decades.
[00:40:23]  But when you see the debt growing as fast as it is and the diminishing effect, increasingly diminishing, if I can say that, then you really wonder if there's anything near decades.
[00:40:36]  I don't personally believe there'd be decades.

=== Constant Bailouts And Rising Rates (14:55) ===

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[00:41:25]  All right, let's get back into the show.
[00:41:26]  So I got to ask, as we talk about, you know, the possible implosion, let's look at the current economy.
[00:41:32]  I'm a little bit surprised by what's going on with the Biden economy and that I saw QE coming to an end.
[00:41:38]  I thought the stock market would be coming down.
[00:41:41]  I saw all the money printing that happened during COVID.
[00:41:43]  I saw inverted yield curves.
[00:41:45]  Everything was looking like, hey, we're headed for trouble.
[00:41:48]  And yet you had Janet Yellen, who doesn't have a great track record of being right about things going, well, we're going to have a soft landing.
[00:41:54]  All their talk was about soft landing.
[00:41:56]  And now all of a sudden, I guess I read the newspaper and they talk about, looks like we had a soft landing.
[00:42:01]  Looks like the employment numbers are looking okay.
[00:42:04]  I don't quite understand that or how much that has changed by migrant, illegal migrants either being hired or government workforce.
[00:42:11]  It doesn't matter.
[00:42:12]  We don't have to get too into the particulars.
[00:42:13]  But I hand it back to you because we had been talking about all the zombie companies that exist in the S ⁇ P.
[00:42:19]  So I'm curious, like if you just look at the current snapshot, looking at a year out, are we currently kind of in a somewhat safe space here?
[00:42:27]  Does it look like Biden actually managed the economy well, that things are cooking along like okay?
[00:42:32]  Or is it just totally nonsense metrics and a little bit of calm before we see some chaos?
[00:42:39]  Most of these questions have a long-winded answer, but that's a really short answer.
[00:42:43]  Biden manage it well.
[00:42:44]  No, that's an easy answer.
[00:42:46]  Absolutely not.
[00:42:49]  And these kinds of economic cycles are way beyond any one president anyway.
[00:42:55]  The origins of this arguably go back to Greenspan and his insanity and then Bernanke and the crash of 2008 and then the response to that and QE.
[00:43:05]  You have to really look at these things over a period of decades.
[00:43:09]  Long leads and lags, as Milton Friedman would say.
[00:43:13]  To me, jobs and a lot of other things, GDP, are downstream of credit.
[00:43:20]  As long as you can keep the credit flowing smoothly and continuing to grow exponentially, then people are going to continue to be employed and business activity continues.
[00:43:31]  Consuming capital.
[00:43:31]  But as long as the, the seed corn, is flowing into the, the party, then you know everything, everything's fine, seemingly fine anyway.
[00:43:39]  Um, so they raise interest rates.
[00:43:42]  And the problem is, you know, and I I wrote, I wrote an article called Keith Wiener's macroeconomic equation, r is greater than I he must be, so r is return on capital and I is the cost of capital, the interest rate.
[00:43:55]  You can't borrow 10 to finance a hamburger store.
[00:43:58]  That's going to return five percent on capital.
[00:44:01]  You're dead.
[00:44:02]  And so if you're making five percent and then they jack up the, the interest rate to uh, you know, I mean t-bills are paying over five percent, but if you're a hamburger chain, i'm sure your cost of capital has got to be eight or more.
[00:44:15]  And if you're making five, I mean as soon as things reprice, you're dead.
[00:44:20]  So um what, what have they done to?
[00:44:23]  To extend and pretend housing, because they kicked the can down the road?
[00:44:28]  That that's, that's what they do is there's a headline number of this?
[00:44:31]  Is the interest rate, right?
[00:44:32]  But then, behind the scenes, you know the difference between the FED today and the FED of 2006, 2007 is, you know, and they're pretty open about this, right?
[00:44:42]  Is they say that they think the FED of pre-crisis was asleep at the switch, that they were negligent and they didn't get on top of it.
[00:44:50]  And um, you know Gellen, actually she was what president of the SAN Francisco FED at the time a lot of them said, a subprime, subprime is contained, everything's fine.
[00:45:00]  We don't see this becoming a systemic crisis, months before it became a huge systemic crisis.
[00:45:05]  Well, the difference today is they're all aware of that and everyone can say oh, they're going to be just as dumb today as they were then.
[00:45:12]  But I think a better way of looking at it is that the French army in World War Ii fight to World War One with the Maginal line right, is they learned?
[00:45:20]  They learned the lesson from the last war, but in a very concrete bound narrow, blinder sort of way.
[00:45:27]  And so I think today the FED and the regulators are I use the term hyper proactive.
[00:45:32]  They're not going to let the slightest thing, you know, blip without having a.
[00:45:37]  You know, people use the, the analogy of their squid or an octopus.
[00:45:41]  Well, they have a tentacle tamping down every little thing they find um, and so there's, there's very little question that they're buying some of this debt, and they were authorized to buy even corporate uh, you know securities uh, but there's other things going on, one of which is the FED has this uh, reverse repo facility.
[00:46:01]  So if you're a bank and you bought Treasury bonds in summer of 2020, which you were encouraged to do that that was monetary policy at the time and the interest rate on the 10-year bond was 0.6 percent um, and so that's what you're supposed to do and that's what Silicon Valley BANK did.
[00:46:19]  They loaded up on this stuff and, of course, they had massive inflows of deposits due to qe at the time and or they didn't call it qe in 2020, whatever they called it and fiscal stimulus obviously, um.
[00:46:32]  Then um, you know, the FED says, you know, a year and a half, two years later okay, now we're going to hike rates.
[00:46:38]  Well, that means that the price of the bond goes down, and so those 10-year treasuries went down between 20 and 25 percent.
[00:46:46]  So if you thought you had a billion dollars worth of that on your balance sheet, now you have 750 million.
[00:46:52]  You have a giant hole.
[00:46:53]  I mean, if you're a bank, you're you're screwed.
[00:46:55]  So Silicon Valley BANK went under other banks were going to go under until the FED said okay well, we're going to let you con these bonds off to us through this reverse repo facility now.
[00:47:07]  Normally you'd only be able to get market price, but we'll lend you based on par whatever you paid for it when you bought it originally in 2020.
[00:47:14]  Well, then based on that.
[00:47:16]  So effectively, we have one interest rate for thee and another interest rate for me.
[00:47:21]  So if you're one of their crony banks, the interest rate isn't really 5% plus.
[00:47:27]  It's 0.5% or whatever on those 10-year months.
[00:47:32]  And so that relieves a lot of the pressure, right?
[00:47:33]  So there wasn't any more crisis anywhere.
[00:47:36]  I mean, today, you know, starting yesterday, I saw the headlines about Community Bank of New York.
[00:47:41]  But, you know, that takes the pressure off.
[00:47:44]  Another thing that has just really been bugging me, I have a golf buddy who is a registered investment advisor.
[00:47:52]  He sells a lot of insurance products and annuities and things like that.
[00:47:56]  And every time we get together for golf, it's like four times a year, you know, the topic is always, why haven't junk bonds collapsed in price?
[00:48:06]  If you look at the spread between junk bonds and treasury bonds, it just hasn't moved the way it should given interest rates spiking.
[00:48:14]  I mean, if companies were already zombie before interest rates were hiked, right?
[00:48:18]  So a zombie is a company whose profits are less than its interest expense.
[00:48:22]  So interest rates are zero and they're making less than that.
[00:48:25]  And now you spike interest rates to 5%.
[00:48:27]  Well, clearly you've just moved the margin.
[00:48:29]  There's a lot more people under the margin than there used to be.
[00:48:31]  Why aren't these head into massive defaults and therefore collapsing the market?
[00:48:36]  And every time we get together, it's like, what the hell is going on?
[00:48:39]  What the hell's going on?
[00:48:40]  So a couple of golf games ago, I think this was around September, I got together with him and he said, I think I've got the answer.
[00:48:49]  I said, oh, dude, tell.
[00:48:50]  He said, so he just spoke to some of the compliance people and the CIO at some insurance company, pretty big insurance company that sponsors these products.
[00:48:59]  And the answer is they've been given the green light by their regulators to load up on this junk stuff.
[00:49:06]  Now, normally, look, if you're an insurance company, it's all about how much leverage can you get.
[00:49:11]  So if you buy this asset, they let you 10 to one leverage.
[00:49:14]  If you buy this asset, like you've only, you know, two to one leverage or whatever based on, you know, the credit rating and some other things and Basel regulations and whatever.
[00:49:23]  So, you know, junk bonds pay a higher interest rate, but to an insurance carrier, you have to reserve a lot more capital.
[00:49:31]  You get a lot less leverage to buy it.
[00:49:32]  And so it's a lot less attractive than it might seem given the interest rate differential.
[00:49:37]  But the regulators have given them the green light to go load up on this stuff.
[00:49:42]  And that seemingly solves the problem, right?
[00:49:46]  Now, the junk bond market isn't crashing.
[00:49:48]  Well, what is that going to do to the market, you know, to the insurance carriers and the, you know, I don't know who exactly is insurance.
[00:49:55]  Is it annuities?
[00:49:55]  It's pension funds.
[00:49:57]  He's talking to somebody running an annuity portfolio, but one would presume if they're giving them the green light, they're also going to do the same thing for pension funds and, you know, who knows who else loading up on this stuff.
[00:50:08]  And to me, this is just like the banks loading up on treasury bonds in summer of 2020.
[00:50:13]  It's completely not prudent.
[00:50:15]  Eventually, it's going to blow up.
[00:50:16]  And when it blows up, everyone's going to say, where the hell was the risk management?
[00:50:20]  Where the hell were the regulators?
[00:50:21]  Well, they were cutting backroom deals.
[00:50:23]  That's where the hell they were.
[00:50:24]  So it's not just a problem, right?
[00:50:26]  Yeah, it's all just different forms and I guess more sophisticated forms of banker bailouts.
[00:50:33]  I guess maybe one of the things they learned from the last go-round too was that direct banker bailouts like from Congress are pretty unpopular.
[00:50:41]  So they can do it in this in this way.
[00:50:43]  And I guess people don't realize.
[00:50:44]  But it kind of all comes down to the old Peter Schiff analogy of like, you're hungover.
[00:50:51]  So you have a beer in the morning.
[00:50:54]  You know what I mean?
[00:50:54]  And that like kind of takes the edge off.
[00:50:56]  And then the next day you're even more hungover.
[00:50:58]  So you got to have two beers in the morning.
[00:51:00]  And it's just kind of, we're waiting till when you overdose eventually.
[00:51:05]  But as long as we keep thinking the hangover is the problem and not recognizing that it's really the solution to your body purging kind of these toxins.
[00:51:16]  Yeah.
[00:51:17]  Anyway, it's really interesting to think about it like that.
[00:51:21]  And it's really interesting to recognize how much it is just this constant state of bailing you out from the last mistake.
[00:51:27]  And don't worry, the promise is that there'll be a bailout for this in the future.
[00:51:32]  So I guess we're on this, we're on this course inevitably.
[00:51:37]  Yeah, I mean, at some point it becomes, I use the term imponderable.
[00:51:41]  So suppose you're a big depositor at a non-two-big to fail bank, you're a big depositor at a regional community bank.
[00:51:48]  And with Silicon Valley Bank, they started out by saying, actually, what's really funny, I just want to rewind two days before.
[00:51:56]  There was a Wednesday when the state banking regulators said Silicon Valley Bank is fine.
[00:52:02]  Friday, they seized the bank because it wasn't fine anymore.
[00:52:05]  So two days it went from fine to not fine somehow.
[00:52:08]  But that's pretty abrupt by any standard.
[00:52:12]  So the regulators are seizing it Friday afternoon and they said to all the depositors, okay, everything up to 250,000 will be available on Monday because of FDRC insurance, which is the law.
[00:52:24]  Everything over 250,000, I think they said you're going to get 40 cents on the dollar initially.
[00:52:28]  And after that, we have to see how the auction goes.
[00:52:30]  We're going to auction off the assets.
[00:52:32]  By Sunday, they said, oh, by the way, we seized another bank, which is signature bank.
[00:52:37]  And yeah, all those deposits over $250,000, we're going to make those funds available to you also on tomorrow morning.
[00:52:46]  So, okay, so great for everybody with a big deposit in Silicon Valley Bank.
[00:52:50]  So they bailed out all the VC firms and the big late stage tech startups that presumably had hundreds of millions of dollars there.
[00:53:00]  But now there's a question.
[00:53:02]  I mean, the law is the law.
[00:53:03]  It says depositors are insured up to 250.
[00:53:07]  But if you have a bigger deposit than that, are you insured?
[00:53:11]  Well, you can't really know that.
[00:53:13]  I mean, they suspended or broke the law in that particular case.
[00:53:17]  Are they going to do it again for you?
[00:53:19]  Maybe, maybe not.
[00:53:20]  It depends on political wins.
[00:53:21]  It depends on the connections of your bank.
[00:53:24]  It depends on the connections of the other depositors that stand to lose them.
[00:53:28]  I mean, you don't know.
[00:53:29]  You can't know.
[00:53:30]  It's imponderable.
[00:53:32]  And so that's where we're at.
[00:53:34]  And now there's another bank that's in trouble and the stock is crashing.
[00:53:37]  And we'll see what happens with that.
[00:53:40]  But the system just keeps on grinding.
[00:53:44]  And of course, what is this going to do?
[00:53:46]  This is going to bring all the deposits to the top two or three big crony banks.
[00:53:54]  And that's the rational behavior of every depositor, right?
[00:53:58]  Bring it to a bigger bank.
[00:53:59]  It's such an interesting short-term picture.
[00:54:02]  And I'm talking short-term 10 years because basically what you're looking at is alternative currencies are going to fail first.
[00:54:09]  So that's going to flood into the U.S. market.
[00:54:11]  And you've got the smaller banks are going to fail.
[00:54:13]  So that's going to flood into JP Morgan.
[00:54:15]  And so you've basically got a financial system where it just feels more socialized, where everything's basically going to converge on to the three biggest banks and the Fed, essentially.
[00:54:26]  That's it.
[00:54:26]  Everything moves to the biggest balance sheet.
[00:54:28]  And then people are going to say, see, late stage capitalism.
[00:54:32]  And I always cut and paste this little rant I have.
[00:54:36]  I'm like, oh, you think we have capitalism?
[00:54:38]  Well, we have a welfare state so expensive that high and progressive income tax, which is Communist Manifesto, Plank No. 2, is not sufficient to pay for it.
[00:54:47]  And you have to have a central bank, which is Communist Manifesto, Plank No. 5.
[00:54:51]  Every productive enterprise is forced to get regulated by the government.
[00:54:58]  Most professions are forced to get licensed by the government.
[00:55:02]  The government outright owns the roads, the airports, the harbors, the electric grid, water, sewer, mail, radio spectrum, and one.
[00:55:13]  There's a giant Ponzi retirement scheme and schools, which is Communist Manifesto plank number 10.
[00:55:21]  And you want to say this is capitalism?
[00:55:23]  But in the late stages of whatever this is, I think Benito Mussolini had a better term for it than capitalism.
[00:55:31]  Whatever this is, we're in the late stages of it.

=== Late Stages Of Dystopia (02:34) ===

[00:55:33]  And the late stages of it push everything, especially with the falling interest rate, push everything to the biggest balance sheet.
[00:55:40]  At the end of the day, there was a Sylvester Stallone movie where he wakes up in the future.
[00:55:47]  Demolition Man?
[00:55:48]  Demolition Man.
[00:55:49]  He wakes up in the future.
[00:55:50]  And the first thing he finds out is all restaurants are Taco Bell.
[00:55:54]  And he's like, oh, no.
[00:55:58]  You know, all assets are going to be, you know, whether BlackRock or JP Morgan or whatever, but all assets are going to move to the biggest balance sheet.
[00:56:06]  You will own nothing and be happy.
[00:56:08]  This is sort of the dystopian vision.
[00:56:10]  I think it collapses before it actually gets to that point, but this is the dystopian vision of where this is late stages of whatever this is, you know, lead to because of regulatory compliance, because they're the best connected crony and therefore the one to get the first bailout.
[00:56:28]  You know, the community banks can't, you know, they can't just, they don't have treasury and the fat on speed dial, you know, the way JP Morgan does.
[00:56:38]  So I just want to say real quick, Robin, then you can, you can make your point, but we did, it's just, you remind me, I don't know if you remember this, Rob, but many years ago, we did on the podcast go through the, all the planks of in the communist manifesto, and every single one of them, we either 100% live under, or we're at least partially there.
[00:56:59]  We partially have both of them.
[00:57:01]  Yeah, like we, there's none that you couldn't say anything about.
[00:57:04]  You know what I mean?
[00:57:04]  If you even look at like just the fact that like, look, like I own my house, but if I don't pay the property taxes on it, the government can take it from me.
[00:57:15]  So it's not really even true ownership in the sense that like basically the government's letting me live here under the condition that I pay them for it.
[00:57:25]  And if I don't pay them, they seize it.
[00:57:28]  It kind of feels a lot more like I'm renting it from the government than I really own it in any legitimate sense.
[00:57:33]  But so, yeah, the, and of course, the awful trap that we're caught in and we saw this after 08 is that, yeah, when there's these, this incredible government intervention and then there's a consolidation, every, every leftist you know goes, look, capitalism is leading to this consolidation of power.
[00:57:53]  And that's the cycle.
[00:57:54]  Guys, after the last few years, I think everybody has rethought how prepared they need to be.
[00:58:01]  I'm not saying the world's going to collapse tomorrow, but we kind of do want to be prepared in case we find ourselves in that situation.

=== Wealth As A Gamble (12:21) ===

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[00:58:58]  All right, let's get back into the show.
[00:59:00]  So Keith, while we have here, I think the audience is always annoyed when we don't bring this up.
[00:59:04]  And I think your response might piss them off even more.
[00:59:06]  But Bitcoin's way off.
[00:59:08]  Yeah, Bitcoin's way up.
[00:59:10]  I'm sitting, I feel like I'm rich again.
[00:59:11]  I'm loving it.
[00:59:12]  I'm buying this story of that the pension funds are coming in.
[00:59:15]  BlackRock's entering the market.
[00:59:17]  I'm all excited.
[00:59:18]  Now, to be honest, I don't understand why it was priced at five when I bought it, some, not enough, or why it's priced at 60 now.
[00:59:24]  But I'm just holding it.
[00:59:25]  I have no idea what I'm doing.
[00:59:26]  I'm all for Bitcoin.
[00:59:28]  I like the story there, but I know you have a bit of a different outlook on it.
[00:59:32]  So I'll let you close out the show and let us know why, in your opinion, you don't think everyone should be all excited about the new Bitcoin technology.
[00:59:39]  Yeah, I mean, as a technology, I would say a couple of things in preamble.
[00:59:43]  And then the answer is pretty short, but the preamble is pretty long.
[00:59:46]  Number one, you know, I'm a software guy at heart, and even though I haven't written any software in 20 years, but I love the tech.
[00:59:52]  I mean, it's fascinating, the problems they solved.
[00:59:55]  And blockchain is a very interesting technology.
[00:59:57]  And I think there are applications that are real-world applications that matter.
[01:00:04]  That's number one.
[01:00:04]  Number two, I always want to clarify that this is a, you know, we're in a rigged casino game created by the Fed, which is pursuing Kane's mad plan.
[01:00:16]  If you drive all yields to zero, but by the way, we're talking about renting your house.
[01:00:21]  You're also renting your house from the bank because in a zero interest rate environment, the price of the house is so high that unless you get lucky and inherit one from a parent, you have to borrow lots and lots and lots and lots of dollars to get into it.
[01:00:33]  And you can never really pay it off.
[01:00:34]  So you're actually renting it from the bank.
[01:00:38]  You know, anyway, you know, we're in this world where the Fed has deliberately starved everybody of yield, notwithstanding the current blip, which I think is going to be temporary.
[01:00:50]  And so people have to find capital gains in lieu of dividends or yield wherever they can find it.
[01:00:59]  So it forces people into whatever bubble they can get into.
[01:01:03]  And that's rational behavior in response to what the Fed has done.
[01:01:07]  And Bitcoin is obviously one hell of, I won't necessarily use the word bubble here.
[01:01:12]  My goal isn't to piss people off per se, but to present certain universal truths and say, look, think.
[01:01:20]  Price has gone up massively.
[01:01:23]  People say, do you think Bitcoin is better than gold?
[01:01:25]  And I say, well, it's obviously superior to gold at skyrocketing.
[01:01:28]  Gold doesn't do that.
[01:01:30]  Bitcoin is obviously also superior to gold at crashing.
[01:01:35]  That's the flip side of it.
[01:01:37]  And so to anybody who has bought a five and sold to 60 or hodled to 60 and beyond, I mean, you know, great for them.
[01:01:45]  That's how you have to play the game.
[01:01:48]  Don't hate the player, you know, hate the Fed who has forced everybody into this game.
[01:01:54]  That said, economically, when, and I make a really important distinction, I think this is all the difference in the world to economics.
[01:02:02]  Not that necessarily matters to anybody's individual portfolio, but economically as a concept, we're looking at part of the problem.
[01:02:10]  What's the problem in civilization today?
[01:02:12]  And how is Keynes destroying it?
[01:02:15]  There's all the difference in the world between speculation and investment.
[01:02:20]  So in investment, you are fundamentally, you're financing new production and increased either production, increased production of something that already exists.
[01:02:29]  So somebody's going to go and till another square mile of wheat because the world needs to eat more, or you're financing the production of something entirely new that never existed before.
[01:02:41]  Steve Jobs has this iPhone thing and he thinks it's going to change the world, wants to borrow some money to build a factory.
[01:02:46]  So you're financing new production of something.
[01:02:49]  And the gain to the investor comes from the increase in the profits that come from the increase in production.
[01:02:56]  Speculation is you're just betting on something, whether it's a lump of gold going up, whether it's a piece of land that's going up, whether it's a Bitcoin that's going up.
[01:03:04]  The profit comes from the buying of the next speculator.
[01:03:09]  Nothing new was produced, right?
[01:03:11]  You bought this thing and you held it and then you sold it.
[01:03:14]  Nothing changed in the world except the next buyer is coming along willing to pay you more.
[01:03:18]  So you fork over.
[01:03:19]  So in this case, 5,000 of your hard-earned dollars to buy this years ago.
[01:03:24]  in the hopes that somebody else will come along and fork over even more of his hard-earned dollars than you forked over to the first guy.
[01:03:29]  You're not getting your money back.
[01:03:31]  You gave that to the old guy who exited back to 5,000.
[01:03:34]  He was probably checking himself or maybe he bought back in later.
[01:03:37]  Wow, you know, I sold the 5,000, I thought that was a lot.
[01:03:39]  And today it's 67,000 or whatever it is now.
[01:03:44]  But the next guy comes along and gives you his hard-earned capital at today's $67,000 or whatever, because he thinks or hopes that somebody else is going to come along and pay him $167,000 or $1.167,000.
[01:03:59]  I'm sorry, a million.
[01:04:02]  Doesn't looking at it, though, from a purely speculative perspective overlook, I guess, the real reason people are holding it, which is that they're hoping that it will be used as currency or baselayer for currency.
[01:04:14]  And so that there'll, I guess, be demand for it almost like a good.
[01:04:19]  You know, I'm not necessarily a big fan of technical analysis generally and Elliott Wave and all that stuff.
[01:04:26]  But there's a fascinating comment made by Bob Prechter that I came across, I don't know, 15 or 18 years ago.
[01:04:33]  And that is that when markets move, people will point to whatever contemporaneous news came out.
[01:04:40]  I'm okay with that.
[01:04:41]  And say, well, this news is the cause, or this story is what caused the price move.
[01:04:47]  And he argues, which I don't entirely agree with, by the way, but he argues that all price moves are not exogenous coming from the news, but endogenous of the market is sort of self-energizing and going up and down the way it wants to go.
[01:05:02]  And then they're going to post hoc, you know, rationalize it by pointing some news item.
[01:05:06]  And so I think this is going to be money one day and all these things, I think, are part of the story that people tell.
[01:05:14]  But, you know, the reality is people are buying it because it's going up.
[01:05:18]  Right.
[01:05:18]  I get it.
[01:05:18]  Yeah, yeah.
[01:05:19]  In other words, most of the current price movement, at least, is just speculators, which certainly seemed to be in the last bull run as the stock market was going up and everyone was sitting on, I guess, government money coming into the system with COVID or just the stock market being pumped up.
[01:05:35]  Bitcoin seemed to trade exactly in line with basically the S ⁇ P.
[01:05:39]  I mean, if you look at kind of just the upward trajectory.
[01:05:41]  So I buy that story that at least on current gains, it could just be purely speculative.
[01:05:47]  Well, plus, everyone knew that they were going to open it up for ETFs.
[01:05:53]  And so there was quite a massive amount of price increase that occurred, you know, in the lead up to when the ETFs actually opened for business.
[01:06:02]  And then, of course, the ETFs were a lot of people coming in that never had exposure, you never could have exposure to it before.
[01:06:09]  Like, oh, I want to get in on this thing.
[01:06:10]  And so they buy the ETF.
[01:06:12]  So you've had more flow.
[01:06:13]  So you have XYZ group of people front and running this.
[01:06:17]  This flow comes in.
[01:06:19]  And then the question with a speculative flow like this, though, is always, okay, what next?
[01:06:24]  And as long as there's nothing, it's not actually generating any free cash flow.
[01:06:30]  Okay, well, eventually it peters out.
[01:06:33]  And that's where the problem is.
[01:06:35]  So people think when the price goes down, that's where the capital is destroyed.
[01:06:41]  The Austrian school says actually the destruction occurs on the way up.
[01:06:45]  It's during the boom that the destruction is occurring.
[01:06:48]  Because every time somebody sells during the bull run and takes profits, well, of that, replenishes the capital they had, you know, invested in in the first place.
[01:06:58]  But some of it they spend as a profit, and they spend it on consumer goods.
[01:07:03]  So it's so, a bull market of this sort i'll call it a keynote engineered bull market um is is a as a vast mechanism for the conversion and I use that word understanding that there's a legal overtone of conversion.
[01:07:18]  It's a kind of an illicit taking of property, not necessarily theft, and maybe even return it, or you're just trespassing or whatever but conversion of one party's wealth into another party's income.
[01:07:29]  So you put in 5 000, you sell, let's say a 65, you have a 60 000 profit.
[01:07:34]  Well, some of that you're going to consume, some of that you're going to grow your, your nest egg, presumably I don't mean you personally, but in general and whatever is consumed you're spending that.
[01:07:44]  That speculator just gave you 60 000 of his life savings.
[01:07:47]  He never would have spent that, that was his savings, but you're spending part of it because he's given it to you for that um, you know to do with whatever you want.
[01:07:56]  And so every time there's a spending of someone's life savings.
[01:08:00]  That's how keynes plan to overthrow civilization, and so bitcoin isn't any different.
[01:08:07]  It's not any worse, but it's not any better, I guess, than anything else that, as long as number go up, whether it's stocks, whether it's you know, 50 year old whiskeys that nobody's ever going to drink, whether it's antique ferraris that nobody's ever going to drive, whether it's you know, stocks that nobody's ever going to make, you know the company's never going to make any money on whatever it may be.
[01:08:26]  You know real estate that people are betting on, um, it's this, it's this machine that's converting uh, you know, somebody's wealth into somebody else else's income to be consumed and um so, in that sense, it's not, it's part of the problem, it's not part of the solution and um, you know that's, that's.
[01:08:45]  That's the nature of the world we're in, and for everybody who's making money on it, that's the incentive the FED has given you.
[01:08:51]  You don't have a choice.
[01:08:52]  It's either make the money in it or stand on the sidelines and not make the money on it while the same thing is going on.
[01:08:58]  Anyway, right it, so it's.
[01:09:00]  I don't blame the people that are participating in it, but no, it's.
[01:09:03]  It's one of the worst things uh, maybe the worst thing that the Federal Reserve does is that it forces everybody to become speculators and it forces us all to live in this um, kind of casino economy.
[01:09:16]  By the way, I will say, you're uh, I think your description of of Keyn is perfect.
[01:09:20]  I don't know that i've ever exactly thought of it uh, in that way that essentially what he was advocating for is the destruction of civilization.
[01:09:28]  And uh famously, Richard Nixon's quote after taking us off the gold standard was, uh, we're all Keynesians now.
[01:09:34]  So there you go.
[01:09:35]  That kind of talks about the business of getting wealth becomes a gamble.
[01:09:40]  I forget the exact, I don't remember the exact words of it, but he's quite cognizant that in a normal world getting wealth is done, one you know, one trade at a time, one bit of production at a time.
[01:09:52]  If you're a farmer, every year you produce a little bit more, you clear another little bit of acreage, get it planted, you know, get out the tree stumps and the rocks and whatever it's like hard work, and bit by bit you're becoming wealthy and two or three generations in, you know, the grandkids have a lot of wealth.
[01:10:08]  And he recognized that in this environment, you're going to get these massive price moves and people are going to get far richer, far faster betting on the price moves than they ever could, the old-fashioned way of doing hard work.
[01:10:23]  And I think he was kind of like, yeah, let's do this to them and see, you know, see if they recognize what's happening.

=== Betting On Massive Price Moves (00:58) ===

[01:10:29]  Yeah.
[01:10:30]  Well, listen, we're out of time, unfortunately.
[01:10:32]  And I say unfortunately because it is really fascinating to hear your perspective on these things.
[01:10:38]  If people do not want to destroy civilization and instead they want to buy gold and get paid a yield interest in gold, where can they go to do that?
[01:10:47]  Our website is monetary-metals with an s for.com.
[01:10:52]  And on Twitter, I'm at RealKeith Weiner.
[01:10:55]  Keith, thank you so much for coming on.
[01:10:57]  Really enjoyed it.
[01:10:58]  We got to do it again.
[01:10:59]  And don't forget, come out and see me and Rob.
[01:11:02]  We're going to be, what's next?
[01:11:04]  Boston.
[01:11:04]  I'm sorry, Boston, Chicago, Rosemont and Chicago, then Key West, then Portland, comicdave Smith.com.
[01:11:12]  And this Friday night, I'm doing the dojo of comedy.
[01:11:15]  Sam Tripley's got a showcase show over there, a bunch of really funny comics.
[01:11:18]  So if you're out in Jersey, that's going to be a fun time coming out.
[01:11:21]  All right.
[01:11:22]  Again, thank you, Keith, and thanks to everybody for watching or listening.
[01:11:26]  That's it for this episode.
[01:11:27]  Catch you next time.