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Speaker 1: What's up, everybody.

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Speaker 2: Welcome to financial heresy, where we talk about how many

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Speaker 2: works so that you can make more, keep more, and

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Speaker 2: give more. Today, I've got a guest on the show

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Speaker 2: for you. His name is Keith Weener. He is the

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Speaker 2: CEO and founder of Monetary Metals. And when I tell

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Speaker 2: you that I haven't had a conversation about economics that

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Speaker 2: I enjoyed more than this conversation in a very long time,

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Speaker 2: I am not joking. Keith is He's brilliant, very intelligent,

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Speaker 2: knows his economics backwards and forwards, left and right, and

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Speaker 2: so we had an absolutely wonderful conversation here about the

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Speaker 2: way that money works and interest rates and saving and lending,

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Speaker 2: and the effects of regulation and monetary policy on prices,

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Speaker 2: and then ultimately how people can the solutions, how people

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Speaker 2: can kind of escape the system and be savers without

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Speaker 2: being lenders, be savers and lenders and make interest that

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Speaker 2: is above the inflation rate. And so really fantastic conversation here,

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Speaker 2: Excited for you all to listen to it. His name

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Speaker 2: is Keith Wiener and his business is Monetary Metals. The

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Speaker 2: link for that will be in the show notes below.

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Speaker 2: All Right, well, thank you, so much Keith for joining

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Speaker 2: me today. This interview has been a long time coming,

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Speaker 2: and I am excited for the conversation here. We're going

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Speaker 2: to talk about. I know that there are a lot

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Speaker 2: of golden nuggets if you will, that we're going to

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Speaker 2: discuss today that I think people are not aware of

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Speaker 2: in the in the industry. So thanks for coming on today.

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Speaker 1: Thanks for having me.

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Speaker 2: To start off, I'd like to hear a brief background

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Speaker 2: on you and your story, and you're the CEO founder

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Speaker 2: of Monetary Metals, and so if you could provide a

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Speaker 2: little bit of a story on how you started that

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Speaker 2: and what the company does and how you got here today.

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Speaker 1: So it really goes.

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Speaker 3: Back to my previous company, which was voice over IP

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Speaker 3: technology company called diamond Ware, which I sold to Nortel Networks.

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Speaker 3: The transaction closed August nineteen, two thousand and eight, so

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Speaker 3: right before the world went into the ABYSS, right before

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Speaker 3: Nortel went into the ABYSS. We were the last acquisition

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Speaker 3: Nortel ever did, although I didn't know that at that time.

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Speaker 1: And as you know, events were unfolding that fall.

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Speaker 3: At first I thought, oh, this is great, I've got

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Speaker 3: all my you know, just sold my company I've got

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Speaker 3: all this wealth sitting in cash and a couple two

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Speaker 3: big defail banks. Everything's going on sale. This is going

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Speaker 3: to be great. And the more that I saw what

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Speaker 3: was going on, and the more that I read number one,

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Speaker 3: it looked a lot worse than just a correction. And

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Speaker 3: then number two, nobody was really adequately explaining it because

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Speaker 3: nobody was really trying to get to the route.

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Speaker 1: Everybody kind of.

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Speaker 3: Started in the middle of the well, there's too much

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Speaker 3: money printing, and you know, this happened, and that happened,

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Speaker 3: and so eventually I became very interested in markets and

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Speaker 3: economics just to figure out how to protect myself. I

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Speaker 3: had fourteen years to build this company, sold it, cashed out,

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Speaker 3: and didn't want to lose it, and.

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Speaker 1: You know whatever was happening, which I didn't understand at

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Speaker 1: that time.

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Speaker 3: So it come to more and more monetary economics come

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Speaker 3: to the idea of gold es central to the whole thing.

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Speaker 3: Essentially getting a not a credit and I can never

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Speaker 3: get a job with this as a degree, but the

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Speaker 3: work was real a degree PhD in monetary economics, and

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Speaker 3: decided that gold had to be part of the solution

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Speaker 3: to this monetary crisis. That was building for a long time.

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Speaker 3: Even then, now here we are, you know, fourteen fifteen

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Speaker 3: years later, it's been building for another fifteen years compared

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Speaker 3: to what it was then. Gold clearly has to be

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Speaker 3: part of the solution. So I wanted to build my

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Speaker 3: next company somewhere in the solution rather than just continue.

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Speaker 3: You know, my default mode would have been another software

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Speaker 3: company at that point. So I founded Monetary Metals. I

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Speaker 3: mean I stayed on word that for a few years

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Speaker 3: to Nortel, and then Avayah bought that particular piece out

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Speaker 3: of bankruptcy. Stayed on at Avyah, had a bit of

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Speaker 3: a stint as a middle manager in a major corporation,

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Speaker 3: and then in twenty twelve left to start monitoring medals

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Speaker 3: and initially we started publishing information. We eventually did a

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Speaker 3: little niche hedge fund that traded the gold silver ratio.

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Speaker 3: It sured out to be a real niche product, but

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Speaker 3: it helped us develop ideas around, for instance, keeping your

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Speaker 3: books in gold. I think a lot of people paid

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Speaker 3: lip service to that. How many people are actually doing that,

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Speaker 3: actually have two columns on their balance sheet, you know,

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Speaker 3: one gap dollars and the other one gold.

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Speaker 1: Similar to gap but.

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Speaker 3: With you know, a couple of key differences, and we

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Speaker 3: in twenty sixteen, you know, pivoted to what I think

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Speaker 3: the real idea is and one that fascinated me from

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Speaker 3: the time of my doctoral work, which is interest on gold.

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Speaker 1: Interest is the key to the whole thing. I used to.

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Speaker 3: When I give talks and presentations. I had a little

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Speaker 3: like piece of a plumbing system on a chart, and

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Speaker 3: you know there's that check valve, which is when it's

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Speaker 3: when the when the arm is parallel to the pipe,

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Speaker 3: you know, the water flows, and when the arm is

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Speaker 3: turning ninety degrees perpendicular to the pipe, then the water stops.

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Speaker 3: And so that was my analogy for the interest rate

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Speaker 3: in gold. And so even suppose you had a working

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Speaker 3: gold standard where gold coins are actually circulating and somehow

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Speaker 3: the interest rate was slammed to zero, Well, at that point,

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Speaker 3: it's no longer possible for people to have conventional savings

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Speaker 3: because they're not getting interest anymore.

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Speaker 1: The only way to.

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Speaker 3: Prepare for the future is to hoard gold rather than

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Speaker 3: save and deposit in a bank.

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Speaker 1: So the gold coins.

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Speaker 3: Would actually be picked out of circulation in that circumstance,

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Speaker 3: and gold would actually cease circulating, and conversely, if the

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Speaker 3: interest rate is raised, then gold would come back into circulation.

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Speaker 3: And there's a quote which I've not been able to

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Speaker 3: find more recently than I had found at the time.

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Speaker 3: So mostly somebody went to JP Morgan, the man at

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Speaker 3: the time, in one of the banking crises. It might

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Speaker 3: have been nineteen oh seven, but it might have been

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Speaker 3: in the eighteen nineties. So mister Morgan, mister Morgan, there's

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Speaker 3: a crisis in New York. There's not gold. What are

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Speaker 3: we going to do? And he said, raise the interest rate.

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Speaker 3: I think he said four percent will draw it off

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Speaker 3: the continent, which in those days was expensive and risky

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Speaker 3: to take a steamship across the ocean. Five percent, he said,

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Speaker 3: we'll pull it down off the moon, which is intended

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Speaker 3: to repair hyperbole. Both that the interest rate would ever

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Speaker 3: have to get as high as five percent, as well

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Speaker 3: as that gold will be coming off the moon to

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Speaker 3: get that kind that much interest.

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Speaker 1: So interesting, which.

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Speaker 3: Was understood at that time, And it's amazing how you

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Speaker 3: know this was understood and then forgotten.

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Speaker 1: The interest rate was regulator a flow of gold, and.

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Speaker 3: So that was that was my idea was, okay, if

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Speaker 3: you want gold to come back into the monetary system.

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Speaker 1: It's not a matter if it's rising price.

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Speaker 3: I mean your rise you know, could rive some two

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Speaker 3: hundred and fifty dollars to twenty five hundred dollars, as

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Speaker 3: it basically has since people have been talking about that

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Speaker 3: since let's say the late nineties. You don't get any circulation.

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Speaker 3: It could drive some twenty five hundred to twenty five

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Speaker 3: or two hundred and fifty thousand, You wouldn't get circulation.

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Speaker 3: But if if gold is actually earning interest, it will

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Speaker 3: pull the interests will pull the gold into the market.

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Speaker 3: It will finance productive enterprises. People will be getting a

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Speaker 3: gold interest on their gold, and suddenly there's now a

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Speaker 3: market for spending gold rather than you know, spending dollars.

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Speaker 3: So that was a vision for it, and that's why

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Speaker 3: monetary medals, you know, essentially got founded.

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Speaker 1: And that's that's that's our vision even today.

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Speaker 2: Have a question about that because I'd like to I

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Speaker 2: like to understand how how interest in aggregate is it?

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Speaker 2: Is it possible that the interest rate on gold could

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Speaker 2: exceed the the inflation rate, meaning like the new supply

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Speaker 2: brought on board. Is that something that can that is sustainable?

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Speaker 2: Or will the the will the interest rate typically be

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Speaker 2: on aggregate always right around the inflation rate, So.

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Speaker 3: I'm not I'm not a fan of defining inflation. It's

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Speaker 3: just simply an increase. I I like to ask people

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Speaker 3: the question, would you suppose that an increase in gold

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Speaker 3: production from gold miners has the same causes and the

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Speaker 3: same effects as an increase in if you I'm currently

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Speaker 3: h you know, issued by the fat and as soon

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Speaker 3: as you realized no, of course that doesn't have the

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Speaker 3: same cause and therefore it probably didn't have the same effect.

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Speaker 3: With that as a starting point, I want to try

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Speaker 3: to wean people off this idea of the quantity theory

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Speaker 3: of money, that the value of a unit of money

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Speaker 3: is one over n we're in as the number of units.

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Speaker 3: I don't believe that gold is diminishing in value as

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Speaker 3: its quantity increases. In fact, I was invited to debate

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Speaker 3: Pierre Rochard at the SOHO Forum, which was hosted at

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Speaker 3: the Mesa's Institute. If it was less, I think that

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Speaker 3: was last summer, and I put up only one chart,

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Speaker 3: and the chart was a picture of the gold price

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Speaker 3: over the last five thousand years, and it was a

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Speaker 3: flatline labeled one ounce, that one ounce has always cost

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Speaker 3: one ounce, And I said, look, this is not just

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Speaker 3: a joke, and this is not just a tautology. This

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Speaker 3: is actually saying something, and that is that each unit

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Speaker 3: at the margin, Right, we taught that marginal utility diminishes

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Speaker 3: as quantity increases. Right, So if you have you know,

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Speaker 3: were walking through the desert, you know here in outside

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Speaker 3: of Phoenix, it's one hundred and fifteen degrees outside, and

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Speaker 3: you're literally dying the thirst, and you come across some

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Speaker 3: guy who's selling water out of the back of his truck.

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Speaker 1: You know, what are you willing to pay for the

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Speaker 1: first leader of water?

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Speaker 3: Well, you'd empty out your wallet, you'd empty out your

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Speaker 3: bank account because you're about to be dead. What would

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Speaker 3: you pay for the second one? Well, that's enough to

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Speaker 3: get you back to civilization. What would you pay for

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Speaker 3: the third one? Well, it's a safety margin. What would

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Speaker 3: you pay for the fourth and the fifth? Pretty soon

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Speaker 3: you get to the point where you're like, I don't

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Speaker 3: even want it, and not even for free would I

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Speaker 3: carry it. So each additional unit of a commodity or

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Speaker 3: good diminishes in value relative to the previous, and gold

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Speaker 3: is the exception to that that we've been accumulating gold

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Speaker 3: for five thousand years.

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Speaker 1: There's no such thing as a glut.

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Speaker 3: And so far as we can tell, the marginal utility

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Speaker 3: the end plus one unit of gold, the N plus

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Speaker 3: one ounce of gold is worth the same as the ns,

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Speaker 3: and that was the same as the end to minus one.

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Speaker 3: You know, all the way back that it doesn't diminish at.

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Speaker 1: Least with conventional production.

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Speaker 3: Now, some seventy five trillion ton gold asteroid somehow a

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Speaker 3: manage to land on Earth and.

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Speaker 1: Being not wipe out everything.

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Speaker 3: You know, it's coming into fifty thousand miles per second

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Speaker 3: and weighing that much, that would wipe out everything as

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Speaker 3: we know it. But somehow it manages to parachute and

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Speaker 3: land gently down on land. Then obviously gold would you know,

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Speaker 3: there'll be a change to the equation somehow. But in

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Speaker 3: the normal course, the gold miners have always been looking

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Speaker 3: from other loads so far as we know, going back

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Speaker 3: five thousand years, and they occasionally find relatively big loads.

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Speaker 3: But gold has this unique geological circumstance that it's hard

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Speaker 3: to find, and people desiring more of it doesn't necessarily

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Speaker 3: create more, you know, more discovered, proven you know, reserves

220
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Speaker 3: out there, and so I would argue that, no, it

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Speaker 3: doesn't matter that the amount of gold is going up

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Speaker 3: as an estimated two percent of total outstanding stocks. I

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Speaker 3: would also argue that the official estimates of how much

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Speaker 3: gold outstanding is actually way underestimated.

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Speaker 1: And there's very simple proof of that.

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Speaker 3: People have been hiding gold from their governments and from

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Speaker 3: their nosy neighbors for five thousand years. Like they don't

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Speaker 3: even tell their kids sometimes, you know, told they're on

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Speaker 3: their deathbed and then bring my eldest son to me,

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Speaker 3: you know, and then just when his last breath is

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Speaker 3: croaking out, you know, there's gold buried under the stove

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Speaker 3: or whatever. So I tell the story in a lot

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Speaker 3: of places. I'm sitting in this guy's office who's in

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Speaker 3: the gold business, and he has a safe in the corner,

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Speaker 3: like most people in the gold business do, and it's

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Speaker 3: not my business to ask, you know, what's in the

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Speaker 3: safe or whatever. I tell that story and he just

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Speaker 3: starts laughing and he says, you see that safe over there.

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Speaker 3: It kind of points us tom. I said, yeah. He said,

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Speaker 3: my kid don't know what's in there. He said, there's

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Speaker 3: a lot of gold in there, and then he looks

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Speaker 3: at me over his bifocals. I mean a lot of

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Speaker 3: gold in there. I'm looking at this thing. It's the

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Speaker 3: size of not like a college cube fridge, but more

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Speaker 3: like a mini freezer. It's like, you know, probably a

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Speaker 3: meter tall, a bit over and almost as deep. And

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Speaker 3: if that thing was told with gold, there'd be a

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Speaker 3: ton in there. And basically that's gold that's off the grid.

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Speaker 3: You know, nobody knows about it. His kids don't even

250
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Speaker 3: know about it, and you know, if you talk to him,

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Speaker 3: his plan is for his kids to find out about it,

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Speaker 3: basically when he departs this mortal earth.

253
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Speaker 1: So how do you inventory it?

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Speaker 3: How do you add it all up and say, yes,

255
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Speaker 3: we know definitively that there is two hundred and three thousand,

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Speaker 3: seven hundred and forty.

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Speaker 1: Two point sixty five tons out there. You can't.

258
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Speaker 3: Yeah, I think the actual stock of gold is much bigger,

259
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Speaker 3: and therefore the total mining put today as a percentage

260
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Speaker 3: of that's much lower. But what I will tell you

261
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Speaker 3: is that in gold, nobody, nobody is forced to lend.

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Speaker 3: The gold only comes out if you satisfy the time

263
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Speaker 3: preference of the savior. True it puts it puts the

264
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Speaker 3: control in the in the hands of the Savior, which

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Speaker 3: is where it should be. As one of the fatal

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Speaker 3: flaws of our of our monetary assistant today, I disenfranchise everybody.

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Speaker 2: I have so many, so many questions. But I'll try

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Speaker 2: and I'll try and go at this in a in

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Speaker 2: an order that is that makes sense. So you're talking

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Speaker 2: about how gold is the exception too. If the supply increases,

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Speaker 2: then it diminishes the value. Gold is the exception to that.

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Speaker 2: And does that have anything to do with the the

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Speaker 2: fact that in order to increase the supply of gold,

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Speaker 2: it there's there's a real cost to that, there's the

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Speaker 2: there's the resources, and so in order for the supply

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Speaker 2: to increase, that new supply must be more valuable than

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Speaker 2: buying supply that's already in existence.

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Speaker 3: So I would stay to slightly differently that. And of

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Speaker 3: course each miner has a different cost. So we just

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Speaker 3: financed a mine. It's a mining company called the Cobo Minerals,

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Speaker 3: which is publicly traded in Norway, and the mine is

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Speaker 3: in Ethiopia. Their cost is in the vicinity of two

283
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Speaker 3: hundred and fifty dollars an ounce. So even if the

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Speaker 3: price of gold would absolutely creater from where it is now.

285
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Speaker 3: Those guys will still be making money. So I would

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Speaker 3: say that that no minor will produce if their cost

287
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Speaker 3: of production is greater than one ounce of their production.

288
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Speaker 3: And you know, if you look at all the miners

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Speaker 3: and aggregate, you know, as the price of gold is

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Speaker 3: changing on the market, that's bringing on marginal suppliers if

291
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Speaker 3: the price is going up, or turning off marginal suppliers

292
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Speaker 3: if the price is going down. And there's kind of

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Speaker 3: a curious you know, I said earlier goals is in

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Speaker 3: unique geological circumstances. It's also unique economic circumstances that at

295
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Speaker 3: the margin, the cost of producing an ounce has always

296
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Speaker 3: tended to be a round an ounce forwo thousands of years.

297
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Speaker 3: That condition is held true. And you could say that, okay,

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Speaker 3: the quality of the resources we're finding today are much lower.

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Speaker 3: You know, there used to be big nuggets and stream beds,

300
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Speaker 3: and today you have to dig pretty hard, and you

301
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Speaker 3: know you're getting less than one gram a ton in

302
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Speaker 3: a lot of cases. But on the other hand, the

303
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Speaker 3: technology has improved diesel power obviously is improved methods for

304
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Speaker 3: finding it. It's less risky to look for it because

305
00:16:45,040 --> 00:16:46,880
Speaker 3: you have geomagnetics and all kinds of other things that

306
00:16:47,000 --> 00:16:50,240
Speaker 3: use today, and so it's always tended to be around

307
00:16:50,280 --> 00:16:52,880
Speaker 3: announce to produce announce, and when it goes under than

308
00:16:52,960 --> 00:16:56,640
Speaker 3: people produce more. When it goes over, you know, they

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Speaker 3: tend to produce less.

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Speaker 2: That makes a lot of sense. Now, the other thing

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Speaker 2: that you mentioned regarding regarding interest is, you know, I

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Speaker 2: have a question about there there's a there's a there's

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Speaker 2: an explanation out there that basically, the the interest rate

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Speaker 2: on dollars is going to communicate to the to the

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Speaker 2: market what the cost of acquiring new money is. And

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Speaker 2: so if the savings pool is large, the natural interest

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Speaker 2: rate would be very low because you have a lot

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Speaker 2: of savers competing to lend. And if you have a

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Speaker 2: very small savings pool, then the natural interest rate would

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Speaker 2: be high because you have very few lenders competing, few

321
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Speaker 2: savers competing to lend, and that interest rates then would

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Speaker 2: naturally increase and decrease along with the aggregate spending and

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Speaker 2: saving and risk taking and debt taking of society. When

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Speaker 2: you mentioned the story earlier about JP Morgan talking about

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Speaker 2: raising interest rates on gold in order to bring new

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Speaker 2: gold into supply. Does this does this dynamic change with gold?

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Speaker 2: Does it? Is it amplified with gold? Or is that

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Speaker 2: explanation just completely false.

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Speaker 3: I would say that that explanation is basically how it

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Speaker 3: works in gold. But in the dollar, what they've done

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Speaker 3: is they've disenfranchised the saver. So if you have dollars

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Speaker 3: that you don't think you're lending, I think again, there

333
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Speaker 3: is no way to have a dollar without being a

334
00:18:37,119 --> 00:18:40,040
Speaker 3: lending That's true. Your only choice who the borrower is.

335
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Speaker 3: So so if you have a piece of paper, you

336
00:18:43,119 --> 00:18:45,520
Speaker 3: know you have a dollar bill. Bill is a word

337
00:18:45,560 --> 00:18:47,879
Speaker 3: for credit, and of course if you look at it

338
00:18:47,880 --> 00:18:50,520
Speaker 3: doesn't say bill on the piece of paper, it says

339
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Speaker 3: Federal Reserve note.

340
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Speaker 1: Well, note is a word for credit.

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Speaker 3: So you are a creditor to the Federal Reserve, who

342
00:18:56,880 --> 00:19:01,200
Speaker 3: issues all these notes in order to help finances portfolio

343
00:19:01,440 --> 00:19:06,320
Speaker 3: of lending to banks and to the Treasury. So you're

344
00:19:06,320 --> 00:19:09,119
Speaker 3: a lender to the Fed and from there onward to

345
00:19:09,160 --> 00:19:11,640
Speaker 3: the banking system and the government. Now you might say

346
00:19:11,640 --> 00:19:13,040
Speaker 3: I don't want to be a lender to the Fed.

347
00:19:13,560 --> 00:19:16,520
Speaker 3: You could be a lender to the Treasury directly by

348
00:19:16,520 --> 00:19:20,200
Speaker 3: buying T bills. He notes ta bonds or you could.

349
00:19:20,320 --> 00:19:22,439
Speaker 3: Most people just choose to be a lender to a bank,

350
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Speaker 3: and they think of it as having money in the bank.

351
00:19:25,800 --> 00:19:27,400
Speaker 1: Actually they have a credit to the bank.

352
00:19:27,400 --> 00:19:31,040
Speaker 3: They're a lender, right, and so now you are a

353
00:19:31,119 --> 00:19:33,600
Speaker 3: lender period that's to have a dollar is to be

354
00:19:33,640 --> 00:19:37,680
Speaker 3: a lender. And now some company comes along and says

355
00:19:37,680 --> 00:19:40,400
Speaker 3: we want to borrow. You're really only making a decision

356
00:19:40,520 --> 00:19:46,679
Speaker 3: to change who you're lending to. And so the private

357
00:19:46,720 --> 00:19:50,920
Speaker 3: borrower only has to give you relative good rates relative

358
00:19:50,960 --> 00:19:53,440
Speaker 3: to what you're getting by setting in what you think

359
00:19:53,480 --> 00:19:56,320
Speaker 3: is cash but actually is already a credit relationship anyway.

360
00:19:56,680 --> 00:20:00,159
Speaker 3: So as the entire interest rate structure falls into the

361
00:20:00,160 --> 00:20:02,919
Speaker 3: black hole of zero, which it's been doing since nineteen

362
00:20:02,960 --> 00:20:07,040
Speaker 3: maybe one, and I don't think the fed's current purge

363
00:20:07,040 --> 00:20:11,520
Speaker 3: cycle it's gonna be able to alter that. You know,

364
00:20:11,760 --> 00:20:14,240
Speaker 3: everybody who borrows is able to borrow a cheaper and

365
00:20:14,320 --> 00:20:17,600
Speaker 3: cheaper rates because there's just a spread between any given

366
00:20:17,640 --> 00:20:21,719
Speaker 3: business and the treasury bond of the same maturity. So

367
00:20:21,760 --> 00:20:24,760
Speaker 3: the whole thing is falling. Words in gold, the saver

368
00:20:25,000 --> 00:20:28,879
Speaker 3: is in control, and if the saver has you know, gold,

369
00:20:29,040 --> 00:20:31,719
Speaker 3: he can either hold it and not be a lender.

370
00:20:32,320 --> 00:20:35,000
Speaker 3: He just has physical gold. There's not a credit. It's

371
00:20:35,000 --> 00:20:37,639
Speaker 3: a piece of metal, which everybody derides as being a

372
00:20:37,640 --> 00:20:39,920
Speaker 3: piece of metal and laugh at how useless it is.

373
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Speaker 1: But it's your metal. That's it.

374
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Speaker 3: There's no counterparty, and you bring that and lend that,

375
00:20:46,119 --> 00:20:49,240
Speaker 3: release that or whatever, only if the interest rate is

376
00:20:50,440 --> 00:20:55,000
Speaker 3: sufficient to, you know, motivate you to do so.

377
00:20:55,000 --> 00:20:59,280
Speaker 2: So if you hold dollars, it is not possible to

378
00:20:59,560 --> 00:21:02,480
Speaker 2: not be a lender. And this is evident right now

379
00:21:02,520 --> 00:21:04,960
Speaker 2: with you know, Silicon Valley bank collapse. It's like everybody

380
00:21:05,000 --> 00:21:07,400
Speaker 2: had their dollars there, but guess what, they weren't actually there.

381
00:21:07,440 --> 00:21:11,440
Speaker 2: They were lent out, and then those loans became worthless,

382
00:21:11,480 --> 00:21:13,199
Speaker 2: and then the bank had to try and sell them

383
00:21:13,240 --> 00:21:15,240
Speaker 2: and didn't have enough to cover the deposits. And so

384
00:21:15,640 --> 00:21:17,639
Speaker 2: with dollars, you're left with no choice. You're going to

385
00:21:17,640 --> 00:21:19,359
Speaker 2: be lending either way, which is driving a lot of

386
00:21:19,359 --> 00:21:22,360
Speaker 2: people right now to just lend directly, and they're going

387
00:21:22,359 --> 00:21:24,600
Speaker 2: to buy T bills because if that's what the bank

388
00:21:24,640 --> 00:21:26,920
Speaker 2: is doing ending anyway, might as well do that myself

389
00:21:26,920 --> 00:21:30,280
Speaker 2: and not have the bank be a middleman. Extra layer

390
00:21:30,280 --> 00:21:34,119
Speaker 2: of risk. But with something like gold, you're saying you

391
00:21:34,160 --> 00:21:36,120
Speaker 2: have you do have the choice, because if you pull

392
00:21:36,160 --> 00:21:39,080
Speaker 2: it out of circulation and hold it now, there's no

393
00:21:39,880 --> 00:21:41,679
Speaker 2: there's nobody on the other side. You're not lending it

394
00:21:41,680 --> 00:21:44,040
Speaker 2: out to somebody. You're not you're not a creditor.

395
00:21:46,000 --> 00:21:48,440
Speaker 3: That's right, and that's that's the key difference. And therefore

396
00:21:48,840 --> 00:21:52,359
Speaker 3: you are in power rather than disenfranchise. And so yes,

397
00:21:52,440 --> 00:21:55,640
Speaker 3: then if if people are savers and accumulating large pots,

398
00:21:55,960 --> 00:21:58,560
Speaker 3: they're going to be keen to lend, and they'll lend

399
00:21:58,560 --> 00:22:01,680
Speaker 3: at least some of it at lower rates. The more

400
00:22:01,720 --> 00:22:03,679
Speaker 3: you want to borrow the more the more that you

401
00:22:03,800 --> 00:22:08,080
Speaker 3: drive up, you bid up the rate effectively. And so

402
00:22:08,119 --> 00:22:10,840
Speaker 3: in the gold standard, there's a simple floor under the

403
00:22:10,880 --> 00:22:13,280
Speaker 3: interest rate and a simple sealing over the interest rate.

404
00:22:13,760 --> 00:22:16,800
Speaker 3: The floor is a marginal time preference. There's a point

405
00:22:16,880 --> 00:22:19,919
Speaker 3: at which people are like, I'm not giving you my gold.

406
00:22:20,280 --> 00:22:23,320
Speaker 3: If I'm not getting x percent, just isn't worth it

407
00:22:23,359 --> 00:22:26,920
Speaker 3: to me, because owning the gold is not only that's

408
00:22:26,960 --> 00:22:29,520
Speaker 3: the next best thing, but that's actually sufficiently good thing.

409
00:22:30,119 --> 00:22:32,200
Speaker 3: It's not bad to own the gold. You know, as

410
00:22:32,200 --> 00:22:35,280
Speaker 3: a gold owner, you're fine. You know, you don't need

411
00:22:35,320 --> 00:22:37,640
Speaker 3: to be a lender unless you're doing better than that.

412
00:22:38,040 --> 00:22:41,000
Speaker 3: And so whatever marginal time preference is, the interest rate

413
00:22:41,000 --> 00:22:43,560
Speaker 3: can never really go below that. And you know, time

414
00:22:43,600 --> 00:22:47,440
Speaker 3: preference can change, as you know, unless they trust develops

415
00:22:47,440 --> 00:22:50,120
Speaker 3: in a society, time preference may fall a little bit.

416
00:22:51,840 --> 00:22:54,680
Speaker 3: And anyway, there's a ceiling over the interest rate, which

417
00:22:54,800 --> 00:22:58,000
Speaker 3: is the marginal return on capital, of the marginal productivity

418
00:22:58,000 --> 00:23:01,760
Speaker 3: of the entrepreneur. You can't borrow ten percent to finance

419
00:23:01,760 --> 00:23:04,479
Speaker 3: a hamburger business that generates eight percent return on capital,

420
00:23:05,320 --> 00:23:07,520
Speaker 3: that is, that is a formula for destruction. And in fact,

421
00:23:07,520 --> 00:23:09,880
Speaker 3: if the interest rate goes above your return on capital,

422
00:23:10,320 --> 00:23:13,159
Speaker 3: you want to sell all your capital stock, and to

423
00:23:13,200 --> 00:23:15,800
Speaker 3: the extent you have any cash left over, you actually

424
00:23:15,800 --> 00:23:18,400
Speaker 3: want to be an investor. Isn't it easier to own

425
00:23:18,400 --> 00:23:20,919
Speaker 3: a bond to a coupon for ten percent than to

426
00:23:20,960 --> 00:23:22,480
Speaker 3: work your ass off and get up at five in

427
00:23:22,520 --> 00:23:25,960
Speaker 3: the morning every day running a hamburger shop to make

428
00:23:26,040 --> 00:23:31,000
Speaker 3: only eight percent. So that's the ceiling, and the interest

429
00:23:31,080 --> 00:23:33,640
Speaker 3: rate can freely move between the floor and the ceiling.

430
00:23:34,080 --> 00:23:40,320
Speaker 3: But under the gold standard, markets tend to converge pretty quickly,

431
00:23:40,320 --> 00:23:42,600
Speaker 3: and that's a pretty narrow band. And if you look

432
00:23:42,640 --> 00:23:45,560
Speaker 3: at the interest rate. Going back to seventeen ninety through

433
00:23:46,119 --> 00:23:48,800
Speaker 3: nineteen thirteen, let's call it, you had some pretty big

434
00:23:48,840 --> 00:23:51,879
Speaker 3: diess locations, like you had an existential war in eighteen twelve,

435
00:23:52,240 --> 00:23:56,440
Speaker 3: another existential war in the eighteen sixties, and then some

436
00:23:56,680 --> 00:23:58,960
Speaker 3: very bizarre monitoring policy e from before we had a

437
00:23:58,960 --> 00:24:04,719
Speaker 3: central bank, you know, post civil war. But you can

438
00:24:04,760 --> 00:24:06,920
Speaker 3: see a couple of bands that the interest rate settles

439
00:24:06,920 --> 00:24:10,800
Speaker 3: into aside from the spikes during those existential crises. It's

440
00:24:10,880 --> 00:24:14,280
Speaker 3: it's almost a flat line. It's absolutely amazing. The FED

441
00:24:14,400 --> 00:24:17,560
Speaker 3: was created not I mean, this idea of the dual

442
00:24:17,600 --> 00:24:21,679
Speaker 3: mandate of inflation and unemployment was created by was the

443
00:24:21,720 --> 00:24:27,080
Speaker 3: Humphrey Hawkins they Act in the nineteen seventies nineteen thirteen.

444
00:24:27,080 --> 00:24:29,280
Speaker 3: It created the FED to smooth out the business alleged

445
00:24:29,320 --> 00:24:32,879
Speaker 3: business cycle, and by every measure, everything goes off the

446
00:24:32,920 --> 00:24:34,720
Speaker 3: rails at the moment they try to smooth it out,

447
00:24:35,400 --> 00:24:37,680
Speaker 3: and the interest rate goes unhinged. All kinds of things

448
00:24:37,720 --> 00:24:42,200
Speaker 3: just go completely off the rails and bringing us to

449
00:24:42,240 --> 00:24:44,960
Speaker 3: this destabilized, you know system we have today.

450
00:24:45,720 --> 00:24:51,880
Speaker 2: So what with savers are our lenders in today's environment,

451
00:24:52,240 --> 00:24:55,800
Speaker 2: and we know that inflation transfers purchasing power from the

452
00:24:55,880 --> 00:25:00,199
Speaker 2: lender to the barrower as long as the interest rate

453
00:25:00,280 --> 00:25:05,760
Speaker 2: is below the rate of inflation. And so many people

454
00:25:05,800 --> 00:25:08,879
Speaker 2: today are you know, spending more and more and borrowing

455
00:25:08,880 --> 00:25:11,280
Speaker 2: more and more so that they don't so that they're

456
00:25:11,280 --> 00:25:14,440
Speaker 2: not on that on that side of the trade where

457
00:25:14,480 --> 00:25:18,399
Speaker 2: they're getting their purchsing power pulled away from them. And

458
00:25:18,480 --> 00:25:23,840
Speaker 2: so saving your money in gold, even without a price change,

459
00:25:24,320 --> 00:25:27,840
Speaker 2: pulls you out of that system where where you can save,

460
00:25:27,920 --> 00:25:31,120
Speaker 2: and you can you don't have to be you don't

461
00:25:31,119 --> 00:25:34,400
Speaker 2: have to be worrying about that inflation eroding your you're

462
00:25:34,440 --> 00:25:40,879
Speaker 2: purchasing power because you don't have to participate in the lending.

463
00:25:43,240 --> 00:25:43,600
Speaker 1: That's right.

464
00:25:43,640 --> 00:25:46,359
Speaker 3: You're opting out of the credit risk, the counterparty risk,

465
00:25:47,000 --> 00:25:50,320
Speaker 3: and Silkon Valley Bank proved the counter party risk is

466
00:25:50,320 --> 00:25:54,720
Speaker 3: almost imponderable, right, I mean, how can we really if

467
00:25:54,760 --> 00:25:56,920
Speaker 3: even the big boys in the room couldn't really figure

468
00:25:56,920 --> 00:25:59,959
Speaker 3: the risks out, you know, and the regulators aren't stupid.

469
00:26:00,000 --> 00:26:01,880
Speaker 3: I'm gonna have a lot of criticisms with the regulators,

470
00:26:01,880 --> 00:26:06,119
Speaker 3: with them probably pretty smart people and subject matter experts

471
00:26:06,160 --> 00:26:10,040
Speaker 3: and all that. Fitch I think maintained an investment grade

472
00:26:10,080 --> 00:26:13,160
Speaker 3: rating on Silicon Valley Bank up until the moment that

473
00:26:13,200 --> 00:26:18,720
Speaker 3: the regulators declared that it was insolvent and shut it down.

474
00:26:19,200 --> 00:26:21,920
Speaker 3: The regulators on Wednesday, and we shot down on Friday.

475
00:26:22,040 --> 00:26:24,720
Speaker 3: The regulators on Wednesday said it was fine, able, a

476
00:26:24,720 --> 00:26:25,600
Speaker 3: clean bill of health.

477
00:26:26,960 --> 00:26:27,280
Speaker 1: Now.

478
00:26:27,760 --> 00:26:30,479
Speaker 3: So when it went down on that Friday, they said, okay, well,

479
00:26:30,520 --> 00:26:33,320
Speaker 3: anybody with less than two hundred and fifty thousand dollars deposit.

480
00:26:33,080 --> 00:26:35,040
Speaker 1: Is covered by FDIC insurance.

481
00:26:35,240 --> 00:26:37,880
Speaker 3: Anybody over that, well, we're going to give you some

482
00:26:37,960 --> 00:26:39,800
Speaker 3: advance against that, but you're going to have to wait

483
00:26:39,800 --> 00:26:42,520
Speaker 3: for the full liquidation process to figure out how much

484
00:26:42,560 --> 00:26:45,000
Speaker 3: you get. Then by Sunday they said, oh, by the way,

485
00:26:45,000 --> 00:26:47,160
Speaker 3: another bank failed. It was Signature Bank in New York.

486
00:26:47,840 --> 00:26:50,480
Speaker 3: And oh, by the way, we're going to make good

487
00:26:50,520 --> 00:26:52,840
Speaker 3: on everybody's deposit, even if you're more than two hundred

488
00:26:52,840 --> 00:26:56,320
Speaker 3: and fifty thousand dollars. Now, if you're a large deposit

489
00:26:56,400 --> 00:26:59,320
Speaker 3: or can you count on that going forward? No, Jennet

490
00:26:59,359 --> 00:27:02,560
Speaker 3: Yellen said, well, it's only because in this particular case

491
00:27:02,880 --> 00:27:05,840
Speaker 3: we see the systemic risks. But we're going to make

492
00:27:05,880 --> 00:27:07,360
Speaker 3: it up as we go along. And if your bank

493
00:27:07,400 --> 00:27:10,560
Speaker 3: fails and you have a million dollar deposit. Maybe we

494
00:27:10,600 --> 00:27:13,240
Speaker 3: will make you whole, and maybe we won't, and maybe

495
00:27:13,280 --> 00:27:16,120
Speaker 3: your bank is solvent and maybe it isn't, and how

496
00:27:16,119 --> 00:27:19,679
Speaker 3: do you know? Yeah, so, which is obviously why the

497
00:27:19,680 --> 00:27:23,240
Speaker 3: goal price is tending to rise, even though nobody loves

498
00:27:23,280 --> 00:27:23,800
Speaker 3: that right.

499
00:27:23,640 --> 00:27:29,600
Speaker 2: Now now, so basically there you're it's the fact. Is

500
00:27:29,800 --> 00:27:33,600
Speaker 2: the reason why regulators, why the fdi C they have

501
00:27:33,640 --> 00:27:36,280
Speaker 2: to come in and they have to guarantee deposits, is

502
00:27:36,320 --> 00:27:39,320
Speaker 2: because they're not there to begin with. The money is

503
00:27:39,440 --> 00:27:42,000
Speaker 2: just it's not there. It's already been it's already been

504
00:27:42,040 --> 00:27:44,719
Speaker 2: loaned out. If the money was actually there, you wouldn't

505
00:27:44,800 --> 00:27:46,520
Speaker 2: need any sort of a guarantee or any sort of

506
00:27:46,560 --> 00:27:49,960
Speaker 2: insurance or any sort of uh, you know, a bailout,

507
00:27:49,960 --> 00:27:51,320
Speaker 2: because it would just be like, yeah, if you want

508
00:27:51,320 --> 00:27:54,280
Speaker 2: to withdraw your money, withdraw your money because it's there.

509
00:27:54,560 --> 00:27:57,520
Speaker 2: And so that's that's clearly not clearly not the case,

510
00:27:57,560 --> 00:28:03,440
Speaker 2: which is uh gets into some deeper issues with our

511
00:28:03,440 --> 00:28:07,680
Speaker 2: banking system today. I would like to ask you about

512
00:28:07,720 --> 00:28:11,800
Speaker 2: one more argument about the interest rate. There's an argument

513
00:28:11,840 --> 00:28:16,760
Speaker 2: that's made about sound money when you don't have a

514
00:28:16,800 --> 00:28:21,920
Speaker 2: money supply that can be increased or decreased by decree.

515
00:28:23,600 --> 00:28:27,119
Speaker 2: The argument is that the interest rate then, on average,

516
00:28:27,119 --> 00:28:33,440
Speaker 2: would approach zero due to the fact that increased productivity

517
00:28:33,600 --> 00:28:37,520
Speaker 2: and a growth in the total stock of wealth over

518
00:28:37,600 --> 00:28:42,240
Speaker 2: time would show up in prices as deflation over time,

519
00:28:42,480 --> 00:28:45,240
Speaker 2: similar to the period between eighteen seventy and like nineteen ten.

520
00:28:45,280 --> 00:28:51,000
Speaker 2: How there is natural deflation, and so interest rates would

521
00:28:51,000 --> 00:28:55,520
Speaker 2: approach zero because even yielding zero percent, your purchasing power

522
00:28:55,760 --> 00:28:57,440
Speaker 2: would increase over time.

523
00:28:59,400 --> 00:29:00,720
Speaker 1: Yeah, why lend?

524
00:29:01,600 --> 00:29:03,760
Speaker 3: I mean if if first of all, there's a finite

525
00:29:03,840 --> 00:29:07,280
Speaker 3: risk in lending, and there's several risks, one of which

526
00:29:07,360 --> 00:29:09,600
Speaker 3: is the default risk, right, I mean the bar where

527
00:29:10,040 --> 00:29:13,280
Speaker 3: says that he has a sound business plan, but you know,

528
00:29:13,320 --> 00:29:16,040
Speaker 3: either misestimates the market, or a competitor that he didn't

529
00:29:16,080 --> 00:29:20,520
Speaker 3: couldn't ever seen comes in and blindsides him, or he

530
00:29:20,680 --> 00:29:23,440
Speaker 3: just wasn't very good at calculating his costs.

531
00:29:23,600 --> 00:29:28,840
Speaker 1: And so he defaults. There's one risk. Another is liquidity risk.

532
00:29:29,400 --> 00:29:32,200
Speaker 3: You think, okay, yeah, you know, I'm young, I'm gonna

533
00:29:32,520 --> 00:29:34,880
Speaker 3: say for a long time I'm going to lend, and

534
00:29:34,920 --> 00:29:37,320
Speaker 3: then something happens, you know, you get cancer, you get

535
00:29:37,320 --> 00:29:40,280
Speaker 3: a great business opportunity, and you're like, I need the cash.

536
00:29:40,680 --> 00:29:44,880
Speaker 3: And if you've made a ten year loan, you know

537
00:29:44,920 --> 00:29:48,160
Speaker 3: you can't necessarily demand your money early. So you know,

538
00:29:48,200 --> 00:29:50,760
Speaker 3: it's the variety of risks of being a lender. Nobody

539
00:29:51,160 --> 00:29:54,000
Speaker 3: nobody is going to make that decision to lend unless

540
00:29:54,000 --> 00:29:56,800
Speaker 3: there's a minimum interest rate which is greater than their

541
00:29:56,840 --> 00:30:00,720
Speaker 3: time preference. You know, period, it does matter what happens

542
00:30:00,720 --> 00:30:03,800
Speaker 3: to productivity. Now, the other point I want to make

543
00:30:03,800 --> 00:30:10,200
Speaker 3: about that is we define inflation as rising prices, regardless

544
00:30:10,240 --> 00:30:12,720
Speaker 3: of the cause of those rising prices. And I've spent

545
00:30:12,800 --> 00:30:16,920
Speaker 3: a lot of words talking about what I call useless ingredients,

546
00:30:17,600 --> 00:30:19,920
Speaker 3: and that term. I had the idea for that term

547
00:30:19,960 --> 00:30:24,520
Speaker 3: when I was thinking about ethanol and then MBTE methyl

548
00:30:24,760 --> 00:30:27,480
Speaker 3: butta tetrathylene or whatever it is they add to gasoline,

549
00:30:28,040 --> 00:30:33,320
Speaker 3: I think in the summer. And this is an ingredient

550
00:30:33,360 --> 00:30:35,560
Speaker 3: that is useless. It certainly doesn't do anything good for

551
00:30:35,640 --> 00:30:38,440
Speaker 3: your car. In fact, it reduces your fuel economy, but

552
00:30:38,520 --> 00:30:41,120
Speaker 3: it has a cost. And so I coin this from

553
00:30:41,200 --> 00:30:45,680
Speaker 3: useless ingredients as anything that the regulators forced the company

554
00:30:45,720 --> 00:30:48,720
Speaker 3: to add to their products which add costs, but which

555
00:30:48,720 --> 00:30:52,040
Speaker 3: the consumers don't value. And usually I mean MPTE. Every

556
00:30:52,040 --> 00:30:54,880
Speaker 3: gas pump has a sticker that talks about that. So

557
00:30:54,920 --> 00:30:57,200
Speaker 3: I imagine most people while they're standing their pumping their

558
00:30:57,240 --> 00:31:00,240
Speaker 3: gas probably read that. Most people probably know there's bet

559
00:31:00,480 --> 00:31:03,719
Speaker 3: and their guests, but in most cases, the useless ingredients,

560
00:31:04,160 --> 00:31:08,000
Speaker 3: there's no you know, label, there's nothing that says that

561
00:31:08,080 --> 00:31:11,680
Speaker 3: this was added because of a regulation. It just is added.

562
00:31:11,720 --> 00:31:14,120
Speaker 3: And so prices keep going up because they keep forcing

563
00:31:14,160 --> 00:31:18,320
Speaker 3: more and more and more and more useless ingredients. And

564
00:31:18,360 --> 00:31:22,480
Speaker 3: then people attribute that to the money and blame the FED,

565
00:31:22,920 --> 00:31:25,760
Speaker 3: which I think is a perfect I think the powers

566
00:31:25,760 --> 00:31:28,560
Speaker 3: that belove that because it diverts all the attention away

567
00:31:28,560 --> 00:31:31,320
Speaker 3: from the regulators that are driving costs of living up,

568
00:31:31,640 --> 00:31:34,040
Speaker 3: and everybody focuses on the FED. And as soon as

569
00:31:34,040 --> 00:31:36,840
Speaker 3: you focused on the FED, it becomes very complicated, and

570
00:31:36,880 --> 00:31:40,000
Speaker 3: there's a lot of well, you know, the FED has

571
00:31:40,040 --> 00:31:43,800
Speaker 3: to accommodate multiple different interests, and gas prices are rising,

572
00:31:43,880 --> 00:31:46,760
Speaker 3: but they're only rising within this band which is deemed

573
00:31:46,800 --> 00:31:49,520
Speaker 3: to be optimal by economists, and then the whole argument

574
00:31:49,560 --> 00:31:54,360
Speaker 3: gets dive, you know, diluted and diffused into you know,

575
00:31:54,440 --> 00:31:58,640
Speaker 3: he said, she said, of modern macroeconomics. But I think

576
00:32:00,080 --> 00:32:04,640
Speaker 3: green energy restrictions, you know, add a lot to two prices,

577
00:32:05,120 --> 00:32:09,160
Speaker 3: tariffs and trade war. You know, onshoring and reshoring, And

578
00:32:09,480 --> 00:32:11,479
Speaker 3: there's a lot of different forces that that make prices

579
00:32:11,480 --> 00:32:13,959
Speaker 3: go up, and there's two different forces that make prices

580
00:32:14,000 --> 00:32:18,800
Speaker 3: go down. One is relentless efficiency improvements. So I wrote

581
00:32:18,800 --> 00:32:21,360
Speaker 3: an article for Forbes, or I got some great data

582
00:32:21,400 --> 00:32:24,400
Speaker 3: from the Wisconsin Dairy Association that let me kind of

583
00:32:24,440 --> 00:32:27,719
Speaker 3: look at between nineteen sixty five and twenty twelve. When

584
00:32:27,720 --> 00:32:30,200
Speaker 3: I wrote the article that I estimated there was about

585
00:32:30,240 --> 00:32:33,440
Speaker 3: a ninety percent reduction and the real resources that went

586
00:32:33,480 --> 00:32:37,200
Speaker 3: into producing a gallon of milk between how much labor

587
00:32:37,280 --> 00:32:41,280
Speaker 3: per cow, how much land per cow, how much milk

588
00:32:41,320 --> 00:32:43,160
Speaker 3: you got per cow, and then you know, and so

589
00:32:43,200 --> 00:32:46,520
Speaker 3: on and so forth. About a ninety percent reduction just

590
00:32:46,520 --> 00:32:49,920
Speaker 3: because of the efficiency increases in the dairy industry during

591
00:32:49,920 --> 00:32:50,320
Speaker 3: that period.

592
00:32:50,360 --> 00:32:51,960
Speaker 1: And I don't think that period is remarkable.

593
00:32:52,200 --> 00:32:54,120
Speaker 3: I'm sure that if you looked at, you know, nineteen

594
00:32:54,120 --> 00:32:56,840
Speaker 3: twenty to nineteen sixty five, you'd see a big reduction.

595
00:32:57,120 --> 00:32:59,160
Speaker 3: And I'm sure if you look at twenty twelve to today,

596
00:32:59,480 --> 00:33:04,480
Speaker 3: you'd see reduction as well. So efficiency gains in every

597
00:33:04,480 --> 00:33:08,080
Speaker 3: industry are driving down costs and prices, and then the

598
00:33:08,080 --> 00:33:12,240
Speaker 3: other thing that can drive prices downwards is a credit collapse,

599
00:33:12,760 --> 00:33:17,760
Speaker 3: when suddenly everybody's defaulting, everybody's getting laid off, you know, bankruptcies, ruin,

600
00:33:18,760 --> 00:33:21,040
Speaker 3: you know, the horrible events of a two thousand and eight.

601
00:33:21,360 --> 00:33:24,760
Speaker 3: Then prices collapse. And I argue, and I have a

602
00:33:24,840 --> 00:33:27,920
Speaker 3: series coming out pretty soon, build the anti concepts of money.

603
00:33:28,760 --> 00:33:31,120
Speaker 3: I argue that one should not use the same word

604
00:33:31,280 --> 00:33:35,120
Speaker 3: to describe a superficially similar phenomenon that as prices are

605
00:33:35,200 --> 00:33:41,320
Speaker 3: dropping because of two completely different causes with two different mechanisms.

606
00:33:42,360 --> 00:33:44,720
Speaker 3: And so if prices are going down because industry is

607
00:33:44,760 --> 00:33:47,480
Speaker 3: becoming more efficient, I said, first of all, that's good.

608
00:33:47,840 --> 00:33:50,080
Speaker 1: Everybody should celebrate that. That means we're getting richer.

609
00:33:50,680 --> 00:33:53,120
Speaker 3: It means it doesn't take as much resources to produce food,

610
00:33:53,360 --> 00:33:55,520
Speaker 3: and now we free up all these people that used

611
00:33:55,560 --> 00:33:57,480
Speaker 3: to be required to be on the farm that can

612
00:33:57,520 --> 00:34:01,520
Speaker 3: now produce you know, computers and podcasts, software and you know,

613
00:34:01,560 --> 00:34:06,280
Speaker 3: all that kind of stuff. And I don't think that

614
00:34:06,960 --> 00:34:10,120
Speaker 3: has any adverse effect on the interest rate. That has

615
00:34:10,160 --> 00:34:13,239
Speaker 3: a positive effect on prices, as in prices fall, but

616
00:34:13,360 --> 00:34:14,239
Speaker 3: not on the interest rate.

617
00:34:15,280 --> 00:34:22,319
Speaker 2: So essentially we have we're describing a symptom and using

618
00:34:22,360 --> 00:34:26,000
Speaker 2: the same word for just the symptom, and that causes

619
00:34:26,040 --> 00:34:28,320
Speaker 2: people to focus on the wrong things when if we're

620
00:34:28,560 --> 00:34:31,239
Speaker 2: focusing more on the root causes, we'll recognize, hey, there

621
00:34:31,239 --> 00:34:35,520
Speaker 2: are multiple root causes there. There is monetary policy, but

622
00:34:35,520 --> 00:34:39,560
Speaker 2: there's also, like you mentioned, you this ingredients regulations that

623
00:34:39,600 --> 00:34:44,120
Speaker 2: increase the cost. Are are you a This is going

624
00:34:44,160 --> 00:34:45,600
Speaker 2: to sound like a question out of left field. I

625
00:34:45,600 --> 00:34:47,640
Speaker 2: promise it's relevant. Are you a fan of white clause

626
00:34:48,000 --> 00:34:49,520
Speaker 2: or truly hard Seltzers.

627
00:34:52,640 --> 00:34:56,640
Speaker 3: I've never actually drank a white claw I be a

628
00:34:56,680 --> 00:35:00,959
Speaker 3: craft beer drinker, and if I go for the hard stuff,

629
00:35:00,960 --> 00:35:02,200
Speaker 3: would be your single malt Scotch.

630
00:35:02,280 --> 00:35:03,040
Speaker 1: Gotcha? Okay?

631
00:35:03,160 --> 00:35:06,560
Speaker 2: All right, Well, if you if you were to try

632
00:35:06,800 --> 00:35:09,399
Speaker 2: a hard seltzer one of the main ones that are

633
00:35:09,560 --> 00:35:12,399
Speaker 2: you know, on the on the shelves today, they all

634
00:35:12,440 --> 00:35:15,640
Speaker 2: have like a slightly odd taste to them. And if

635
00:35:15,680 --> 00:35:17,720
Speaker 2: you look at the ingredients how they're made, they're all

636
00:35:17,880 --> 00:35:22,360
Speaker 2: malt beverages. And if you make one yourself, you're gonna

637
00:35:22,360 --> 00:35:25,680
Speaker 2: take some sparkling water, maybe a lime lemon, and some vodka.

638
00:35:25,880 --> 00:35:29,000
Speaker 2: You're gonna use hard alcohol to make one yourself. And

639
00:35:29,040 --> 00:35:33,120
Speaker 2: the reason why companies don't do This is because hard

640
00:35:33,120 --> 00:35:36,080
Speaker 2: alcohol is more expensive, right, But then when you trace

641
00:35:36,120 --> 00:35:38,400
Speaker 2: that back one more step and ask why it's expensive,

642
00:35:38,760 --> 00:35:42,960
Speaker 2: there's a higher tariff on liquor than there is on

643
00:35:43,680 --> 00:35:48,799
Speaker 2: malt beverages classified as beer, and so the tariffs on

644
00:35:49,320 --> 00:35:53,160
Speaker 2: White Claws are much cheaper than the tariffs on something

645
00:35:53,200 --> 00:35:55,680
Speaker 2: like a different brand is called high Noon. They actually

646
00:35:55,800 --> 00:36:00,000
Speaker 2: use vodka, so the price is way different simply because

647
00:36:00,000 --> 00:36:02,440
Speaker 2: because of a tariffs. So people are left with a

648
00:36:02,480 --> 00:36:07,560
Speaker 2: substandard product or paying artificially higher prices for the thing

649
00:36:07,600 --> 00:36:13,319
Speaker 2: that they may actually prefer. And it, like you mentioned gas,

650
00:36:13,360 --> 00:36:15,600
Speaker 2: this happens everywhere. The camera that I'm using right now

651
00:36:15,880 --> 00:36:18,480
Speaker 2: is more expensive a couple hundred dollars more expensive because

652
00:36:18,520 --> 00:36:23,200
Speaker 2: it doesn't automatically shut off recording at thirty minutes. If

653
00:36:23,239 --> 00:36:25,600
Speaker 2: a camera stops recording at thirty minutes, it's a camera,

654
00:36:25,640 --> 00:36:28,439
Speaker 2: so it has lower tariffs. If it can record longer

655
00:36:28,480 --> 00:36:31,799
Speaker 2: than thirty minutes, it's a camcorder, has higher tariffs, same technology.

656
00:36:31,840 --> 00:36:34,440
Speaker 2: It's artificially imposed so that they can get away with

657
00:36:34,480 --> 00:36:37,279
Speaker 2: the lower And so all of these are leaving consumers

658
00:36:37,280 --> 00:36:41,240
Speaker 2: with worse products and or higher prices as a result

659
00:36:41,280 --> 00:36:43,759
Speaker 2: of all of these useless ingredients.

660
00:36:44,520 --> 00:36:46,800
Speaker 1: And therefore blaming the fab for too much money print.

661
00:36:47,080 --> 00:36:50,080
Speaker 2: Which yes, we could blame that, but it's not all that.

662
00:36:50,160 --> 00:36:52,120
Speaker 2: You know, there's there's problems with that, but there's other

663
00:36:52,160 --> 00:36:52,799
Speaker 2: problems too.

664
00:36:54,080 --> 00:36:56,600
Speaker 3: That's right, there's a room in the universe or more

665
00:36:56,640 --> 00:36:58,000
Speaker 3: than one problem at the same.

666
00:36:57,840 --> 00:37:01,560
Speaker 2: Time, exactly right. Okay, all right, So let's bring this

667
00:37:01,680 --> 00:37:03,759
Speaker 2: back around because so we've talked a lot about saving.

668
00:37:03,800 --> 00:37:05,480
Speaker 2: You talked a lot about interest rates, We've talked a

669
00:37:05,520 --> 00:37:09,280
Speaker 2: lot about you know, economics that I could I literally

670
00:37:09,280 --> 00:37:11,279
Speaker 2: I could sit here you know, with you for for

671
00:37:11,440 --> 00:37:14,480
Speaker 2: hours and go into these topics is fascinating for me.

672
00:37:14,520 --> 00:37:15,920
Speaker 2: But I want to get into the nuts and bolts

673
00:37:15,920 --> 00:37:20,200
Speaker 2: about what people can actually do because monetary metals provides

674
00:37:20,440 --> 00:37:24,360
Speaker 2: a solution that before I knew about monetary metals, I

675
00:37:24,400 --> 00:37:27,520
Speaker 2: did not know was even legal, let alone did not

676
00:37:27,640 --> 00:37:30,359
Speaker 2: know that there was a company actually doing it. And

677
00:37:31,440 --> 00:37:33,360
Speaker 2: i've you know, in the past, when I first actually

678
00:37:33,400 --> 00:37:37,160
Speaker 2: got started on my YouTube channel, I talked about kind

679
00:37:37,160 --> 00:37:41,440
Speaker 2: of creating your own gold standard for yourself and regardless

680
00:37:41,480 --> 00:37:43,640
Speaker 2: of what the rest of the world does, we can

681
00:37:43,760 --> 00:37:47,560
Speaker 2: you can spend your dollars, you can save in gold

682
00:37:47,800 --> 00:37:49,960
Speaker 2: and I talked about how lenders you're you know, you're

683
00:37:50,040 --> 00:37:52,560
Speaker 2: you're taking on that risk you're not getting compensated for,

684
00:37:52,760 --> 00:37:55,080
Speaker 2: you know, inflation, and so you don't want to be

685
00:37:55,120 --> 00:37:57,239
Speaker 2: a lender of dollars, but you would want to be

686
00:37:57,239 --> 00:37:59,160
Speaker 2: a lender of gold. And actually I had a bunch

687
00:37:59,160 --> 00:38:01,600
Speaker 2: of people asking me, Hey, like, how do I do that?

688
00:38:01,680 --> 00:38:04,279
Speaker 2: And I was like, I don't know. I don't know

689
00:38:04,320 --> 00:38:06,319
Speaker 2: if it's I don't know if it's possible, because I,

690
00:38:06,480 --> 00:38:09,560
Speaker 2: you know, I hadn't heard about this. So explain to

691
00:38:09,600 --> 00:38:12,360
Speaker 2: me that that crazy thing that I think is so

692
00:38:12,640 --> 00:38:15,120
Speaker 2: brilliant that monetary metals allows people to do.

693
00:38:17,000 --> 00:38:20,720
Speaker 3: I mean, in short, it's like so many businesses today.

694
00:38:21,200 --> 00:38:22,920
Speaker 3: I don't know whether you call us fintech or not,

695
00:38:23,040 --> 00:38:25,840
Speaker 3: but I think if it's as a marketplace platform, like

696
00:38:25,880 --> 00:38:28,360
Speaker 3: so many others, you know, you've got two sides of

697
00:38:28,400 --> 00:38:31,839
Speaker 3: the trade, and both of them are steamy because there's

698
00:38:31,880 --> 00:38:35,239
Speaker 3: no there's no way for them to meet each other

699
00:38:35,280 --> 00:38:39,440
Speaker 3: and do business without such absurdly high friction that it

700
00:38:39,520 --> 00:38:42,400
Speaker 3: basically just prevents it from happening in the first place. So,

701
00:38:42,440 --> 00:38:43,960
Speaker 3: in the one hand, you've got a lot of people

702
00:38:44,000 --> 00:38:46,080
Speaker 3: with gold that are like, hey, I would love to

703
00:38:46,080 --> 00:38:48,680
Speaker 3: get interest on my goal. It sure beats paying for

704
00:38:48,719 --> 00:38:53,560
Speaker 3: storage fees. Sure it beats the sharp stick in the eye.

705
00:38:53,880 --> 00:38:56,120
Speaker 3: And on the other hand, you've got businesses that use

706
00:38:56,200 --> 00:38:59,000
Speaker 3: gold as inventory. I'll just talk about leasing. We have

707
00:38:59,000 --> 00:39:02,200
Speaker 3: two programs and leasing is one of them. You think

708
00:39:02,200 --> 00:39:05,759
Speaker 3: of every jeweler, every mint, every refiner is obliged to

709
00:39:05,800 --> 00:39:09,320
Speaker 3: have a certain amount of gold as inventory or partially

710
00:39:09,360 --> 00:39:16,839
Speaker 3: completed work in progress, and you know, so what they do, right,

711
00:39:16,880 --> 00:39:20,439
Speaker 3: So before milet of three medals, there wasn't a low

712
00:39:20,440 --> 00:39:22,960
Speaker 3: friction way for them to get together. So the people

713
00:39:22,960 --> 00:39:26,120
Speaker 3: with the gold just pay for the storage. And paying

714
00:39:26,120 --> 00:39:28,279
Speaker 3: the storage fees gets old, especially when the gold price

715
00:39:28,320 --> 00:39:31,160
Speaker 3: isn't rising that much a sideways the down market that

716
00:39:31,160 --> 00:39:33,600
Speaker 3: gets really annoying. The gold is going up twenty percent

717
00:39:33,640 --> 00:39:36,480
Speaker 3: a year, I mean, most people can be pretty philosophical

718
00:39:36,560 --> 00:39:40,080
Speaker 3: about paying for storage. The gold is going nowhere, then

719
00:39:40,239 --> 00:39:43,920
Speaker 3: that gets annoying. And the businesses that need gold as inventory,

720
00:39:44,400 --> 00:39:46,680
Speaker 3: it always begins with whether they do it themselves or

721
00:39:46,719 --> 00:39:49,800
Speaker 3: whether they go to a bank or a boutique finance

722
00:39:49,800 --> 00:39:53,840
Speaker 3: shop of some sort. Step one is borrow dollars. Step

723
00:39:53,880 --> 00:39:57,239
Speaker 3: two is by the gold asset or gold inventory. But

724
00:39:57,360 --> 00:39:59,719
Speaker 3: now you have a mismatch. So bose you borrow a

725
00:39:59,760 --> 00:40:02,760
Speaker 3: million dollars, you buy a million dollars worth of gold,

726
00:40:03,239 --> 00:40:05,279
Speaker 3: and here at a gold price of I didn't see

727
00:40:05,320 --> 00:40:07,920
Speaker 3: the screen today, but what is it twenty thirty or

728
00:40:07,920 --> 00:40:10,560
Speaker 3: something like that, So both the gold price would have

729
00:40:10,600 --> 00:40:14,440
Speaker 3: dropp two hundred bucks a ten percent drop, which could happen.

730
00:40:14,520 --> 00:40:17,040
Speaker 3: I mean, right now, I think we're in a bullish trend,

731
00:40:17,080 --> 00:40:19,759
Speaker 3: but certainly doesn't mean that there couldn't be some Oh

732
00:40:19,760 --> 00:40:22,400
Speaker 3: my god, you know, Jay Powell just said, you know,

733
00:40:22,520 --> 00:40:26,359
Speaker 3: on on Monday when markets reopen, something could happen. Now

734
00:40:26,440 --> 00:40:28,080
Speaker 3: you have if you still owe a million dollars, the

735
00:40:28,160 --> 00:40:31,400
Speaker 3: liability never goes away, but the asset goes down. Now

736
00:40:31,440 --> 00:40:33,840
Speaker 3: you have nine hundred thousand dollars worth of asset and

737
00:40:33,880 --> 00:40:36,720
Speaker 3: a million dollars worth of liability. You are the technical

738
00:40:36,800 --> 00:40:42,520
Speaker 3: term is insolvent. So you you have to hedge. So

739
00:40:42,520 --> 00:40:45,600
Speaker 3: step one is borrow dollars, a step two is buy

740
00:40:45,640 --> 00:40:49,319
Speaker 3: the gold asset, and step three is hedge. And that

741
00:40:49,520 --> 00:40:56,319
Speaker 3: is a inefficient frictional. It doesn't make a lot of

742
00:40:56,360 --> 00:40:58,799
Speaker 3: sense if you think about it, wouldn't it make more

743
00:40:58,840 --> 00:41:01,359
Speaker 3: sense if you just simply got the gold from people

744
00:41:01,400 --> 00:41:03,560
Speaker 3: who had the gold and then you return the gold

745
00:41:03,800 --> 00:41:06,320
Speaker 3: at the end of the term or you know whatever,

746
00:41:06,760 --> 00:41:09,839
Speaker 3: rather than borrowing dollars and going through all these girations

747
00:41:10,080 --> 00:41:14,720
Speaker 3: with extra moving parts, extra you know, risk and cost complexity.

748
00:41:15,360 --> 00:41:18,560
Speaker 3: Now you have audits and supervision and you know, think

749
00:41:18,560 --> 00:41:22,560
Speaker 3: about it. You know, to tread the hedges. Instead of

750
00:41:22,560 --> 00:41:25,040
Speaker 3: borrowing a million dollars, you're borrowing a million and a quarter.

751
00:41:25,480 --> 00:41:27,279
Speaker 3: You buy a million dollars worth of gold, you put

752
00:41:27,280 --> 00:41:30,840
Speaker 3: a quarter million dollars into a Chicago brokerage account, and

753
00:41:30,880 --> 00:41:34,359
Speaker 3: you're trading gold futures. Yeah, and now, which means you're

754
00:41:34,360 --> 00:41:38,880
Speaker 3: probably hiring an employee with an account that allows twenty

755
00:41:38,920 --> 00:41:41,799
Speaker 3: to one leverage and saying, now, I trust you to

756
00:41:41,840 --> 00:41:44,640
Speaker 3: just do the trades that I want and don't do

757
00:41:44,719 --> 00:41:47,640
Speaker 3: anything else that I wouldn't do. It's kind of like

758
00:41:47,800 --> 00:41:50,799
Speaker 3: you buy a brand new Lamborghini and you go out

759
00:41:50,800 --> 00:41:52,479
Speaker 3: to eat with your wife and then you just gives

760
00:41:52,520 --> 00:41:56,040
Speaker 3: the keys to this seven hundred horse power monster to

761
00:41:56,160 --> 00:41:58,040
Speaker 3: a sixteen year old kid who is working as a

762
00:41:58,040 --> 00:42:01,640
Speaker 3: parking lot attendant and said, don't don't do any whole

763
00:42:01,640 --> 00:42:05,080
Speaker 3: shots with us. You know when you come back and

764
00:42:05,080 --> 00:42:06,760
Speaker 3: you're like, geez, I thought I had new tires.

765
00:42:06,840 --> 00:42:08,120
Speaker 1: What happened? Right?

766
00:42:08,920 --> 00:42:11,600
Speaker 3: You know, the same thing happens with you know, traders

767
00:42:11,600 --> 00:42:13,800
Speaker 3: go rogue and all kinds of things. So it suddenly

768
00:42:13,800 --> 00:42:17,040
Speaker 3: becomes a very complicated management thing with all these risks

769
00:42:17,080 --> 00:42:21,160
Speaker 3: and costs and everything else. And so we're just simplifying it.

770
00:42:21,239 --> 00:42:24,239
Speaker 3: We're just as Uber did. There's a person who's got

771
00:42:24,239 --> 00:42:26,520
Speaker 3: a car who wants to drive it and make a buck.

772
00:42:26,840 --> 00:42:28,960
Speaker 3: There's a person who needs needs a ride from point

773
00:42:29,000 --> 00:42:31,520
Speaker 3: A to point B, and there are more efficient platform

774
00:42:32,040 --> 00:42:35,160
Speaker 3: versus waiting on the corner for a yellow taxi or

775
00:42:35,200 --> 00:42:38,120
Speaker 3: calling out the eight hundred number for yellow cab, and

776
00:42:38,920 --> 00:42:40,600
Speaker 3: you know, the we'll have a guy there in half

777
00:42:40,640 --> 00:42:43,000
Speaker 3: an hour and maybe he comes, and maybe he does

778
00:42:43,080 --> 00:42:45,600
Speaker 3: en it's raining, and you know, it's just a more

779
00:42:45,600 --> 00:42:48,600
Speaker 3: efficient way to bring the two parties together.

780
00:42:49,760 --> 00:42:51,839
Speaker 2: I'm really glad you brought up that example of Uber.

781
00:42:51,920 --> 00:42:54,120
Speaker 2: I was I wrote it down on my notes as

782
00:42:54,120 --> 00:42:57,319
Speaker 2: you were talking as as a perfect example of what

783
00:42:57,360 --> 00:43:00,600
Speaker 2: you're doing. Because you have people with cars and time,

784
00:43:00,920 --> 00:43:03,280
Speaker 2: and then you had people who needed rides, and before

785
00:43:03,400 --> 00:43:06,879
Speaker 2: Uber came along, those resources and those needs were still there,

786
00:43:07,400 --> 00:43:10,799
Speaker 2: and the solution, the the that existed at the time

787
00:43:11,000 --> 00:43:16,560
Speaker 2: was a high cost, low efficiency solution and and all

788
00:43:16,640 --> 00:43:18,960
Speaker 2: you had to do is have somebody bridge the gap

789
00:43:19,000 --> 00:43:23,360
Speaker 2: between the the resources and the and the demand. And

790
00:43:23,440 --> 00:43:26,120
Speaker 2: so that's that's what you're doing here with you know,

791
00:43:26,680 --> 00:43:31,000
Speaker 2: connecting those to those two sides. Now, who are I'm

792
00:43:31,040 --> 00:43:35,320
Speaker 2: curious what are the types of companies that that need

793
00:43:35,440 --> 00:43:38,600
Speaker 2: to borrow gold because I'm assuming at some scale that

794
00:43:38,680 --> 00:43:42,960
Speaker 2: it does become more efficient to you know, use use

795
00:43:43,000 --> 00:43:45,440
Speaker 2: futures and and do hedging. So what what kind of

796
00:43:45,440 --> 00:43:47,800
Speaker 2: businesses are are are borrowing gold?

797
00:43:49,400 --> 00:43:51,200
Speaker 3: As not a matter of scale, the same thing I

798
00:43:51,320 --> 00:43:53,239
Speaker 3: just said would apply it was one hundred million dollars

799
00:43:53,280 --> 00:43:56,600
Speaker 3: of gold versus a million. So there's a variety of

800
00:43:56,680 --> 00:44:00,720
Speaker 3: verticals and the obvious ones would be refiners every day.

801
00:44:01,120 --> 00:44:03,560
Speaker 3: So in these businesses there's generally a flow. I mean,

802
00:44:03,600 --> 00:44:06,520
Speaker 3: it's not just the gold that's just sitting there, otherwise

803
00:44:06,560 --> 00:44:09,000
Speaker 3: it's not productive, it's not generating revenue for the business.

804
00:44:09,760 --> 00:44:12,160
Speaker 3: There's a flow where every day they're buying fresh raw

805
00:44:12,239 --> 00:44:17,520
Speaker 3: material gold and they're selling finished product gold and then

806
00:44:17,560 --> 00:44:20,160
Speaker 3: it goes through the shop or it goes through the

807
00:44:20,200 --> 00:44:23,200
Speaker 3: business through a series of steps that adds some value

808
00:44:23,200 --> 00:44:25,520
Speaker 3: at each h one. It takes a finite amount of time,

809
00:44:25,880 --> 00:44:27,520
Speaker 3: and so the amount of time that it takes. Think

810
00:44:27,520 --> 00:44:30,399
Speaker 3: of like flowing oil through a pipeline. It doesn't matter

811
00:44:30,400 --> 00:44:32,960
Speaker 3: how fast the oil is flowing. The amount of oil

812
00:44:33,000 --> 00:44:36,640
Speaker 3: contained in the pipeline is just governed by geometry. It's

813
00:44:36,640 --> 00:44:38,920
Speaker 3: the length of the pipe times the diameter of the

814
00:44:39,000 --> 00:44:42,319
Speaker 3: pipe times pie that's how much volume of oil is

815
00:44:42,320 --> 00:44:44,799
Speaker 3: contained in the pipe. And so you can think of

816
00:44:44,840 --> 00:44:48,840
Speaker 3: a refiner, a mint, a jewelry manufacturer, a jewelry retailer,

817
00:44:48,920 --> 00:44:52,440
Speaker 3: a bullion dealer, recycler. You know, there's a bunch of

818
00:44:52,480 --> 00:44:56,239
Speaker 3: different vertical industries that have this gold flow, and every

819
00:44:56,239 --> 00:44:58,040
Speaker 3: one of them, based on the scale of the business,

820
00:44:58,080 --> 00:45:00,560
Speaker 3: has a certain need for a certain amount of gold

821
00:45:01,000 --> 00:45:07,120
Speaker 3: inventory and or work in progress. And you know, it's

822
00:45:07,120 --> 00:45:09,160
Speaker 3: a side. I mean, it's a niche market as things go.

823
00:45:09,640 --> 00:45:12,200
Speaker 3: This is not the treasury bond market by any means,

824
00:45:13,520 --> 00:45:16,920
Speaker 3: you know, I mean, worldwide, there's a couple tens of

825
00:45:16,960 --> 00:45:22,279
Speaker 3: billions of dollars and uh, you know in gold that's

826
00:45:22,360 --> 00:45:26,960
Speaker 3: that's being used in process by various you know, industries

827
00:45:27,000 --> 00:45:30,320
Speaker 3: and various businesses and and all that needs to be financed.

828
00:45:30,360 --> 00:45:32,920
Speaker 3: I mean, if it was if it was copper or sand,

829
00:45:33,400 --> 00:45:34,799
Speaker 3: you would just buy it and not worry about it

830
00:45:34,840 --> 00:45:37,239
Speaker 3: too much. But at two thousand dollars an ounce, it

831
00:45:37,280 --> 00:45:38,480
Speaker 3: has to be financed.

832
00:45:39,239 --> 00:45:43,200
Speaker 2: Yeah. So if I have a bunch of gold ounces

833
00:45:43,520 --> 00:45:46,920
Speaker 2: in my safe, I am.

834
00:45:47,040 --> 00:45:47,359
Speaker 1: I am.

835
00:45:47,560 --> 00:45:50,080
Speaker 2: Like we talked about earlier, the saver who has said,

836
00:45:50,320 --> 00:45:53,880
Speaker 2: you know, I am waiting until there's a yield that

837
00:45:54,000 --> 00:45:57,520
Speaker 2: is attractive for me, you know, to compensate for that

838
00:45:58,120 --> 00:46:01,280
Speaker 2: for that risk, rather than being a dollar saver forced

839
00:46:01,280 --> 00:46:06,359
Speaker 2: into lending and monetary metals allows somebody to take take

840
00:46:06,400 --> 00:46:08,480
Speaker 2: those ounces that they want and say, okay, yeah, I'm

841
00:46:08,480 --> 00:46:11,240
Speaker 2: gonna lend this out. And not only am I getting

842
00:46:11,880 --> 00:46:14,280
Speaker 2: you know, an interest rate on this, but the yield

843
00:46:14,360 --> 00:46:17,560
Speaker 2: is if correct me if I'm wrong, it's denominated in

844
00:46:17,719 --> 00:46:20,480
Speaker 2: and paid in ounces.

845
00:46:20,520 --> 00:46:22,239
Speaker 1: Correct, God's right.

846
00:46:23,000 --> 00:46:26,640
Speaker 2: So we're completely bypassing the whole dollar system here, Like

847
00:46:26,640 --> 00:46:28,839
Speaker 2: you talked about, you know, borrowing dollars and then using

848
00:46:28,840 --> 00:46:31,280
Speaker 2: that to buy gold, and then using dollars to hedge

849
00:46:31,320 --> 00:46:33,920
Speaker 2: and trade futures with you know, paper gold. It's like

850
00:46:34,200 --> 00:46:38,319
Speaker 2: just bypassing that I have gold you need gold temporarily,

851
00:46:38,760 --> 00:46:40,440
Speaker 2: they let you use my gold, and then when I

852
00:46:40,480 --> 00:46:42,200
Speaker 2: get my gold back from you, I have a little

853
00:46:42,200 --> 00:46:43,799
Speaker 2: bit more gold that you gave back to me than

854
00:46:43,800 --> 00:46:45,040
Speaker 2: what I originally gave to you.

855
00:46:46,800 --> 00:46:50,279
Speaker 1: That's the magic, very simple, it's brilliant. I love it.

856
00:46:51,480 --> 00:46:53,920
Speaker 2: What else? What else would you like people to know

857
00:46:53,960 --> 00:46:56,799
Speaker 2: about monetary metals before you wrap it up here?

858
00:46:58,360 --> 00:47:01,560
Speaker 3: So I actually said, there's two programs. There's a leasing program,

859
00:47:01,600 --> 00:47:04,880
Speaker 3: which is not lending. A lease is a lease because

860
00:47:05,440 --> 00:47:07,920
Speaker 3: the gold is physically present. We can go on site

861
00:47:08,239 --> 00:47:10,400
Speaker 3: and we have a contractual right to do so. We

862
00:47:10,440 --> 00:47:13,400
Speaker 3: could scrape all the gold, put it on a scale,

863
00:47:13,920 --> 00:47:17,080
Speaker 3: and it weighs more than the lease amount. It's not

864
00:47:17,200 --> 00:47:19,200
Speaker 3: an asset of the less It does not go on

865
00:47:19,239 --> 00:47:21,759
Speaker 3: their balance sheet. It's not available to their creditors if

866
00:47:21,800 --> 00:47:24,799
Speaker 3: they should declare bankruptcy. It's like leasing a car from GM.

867
00:47:24,880 --> 00:47:27,560
Speaker 3: If you go bankrupt, the creditors don't get the car,

868
00:47:27,680 --> 00:47:31,640
Speaker 3: GM to simply repossesses it. It's like we also have

869
00:47:31,680 --> 00:47:35,200
Speaker 3: a lending program, and the lending program is for companies

870
00:47:35,280 --> 00:47:38,760
Speaker 3: that have not a gold inventory but a gold income.

871
00:47:39,160 --> 00:47:40,359
Speaker 1: So I think the obvious.

872
00:47:40,120 --> 00:47:43,560
Speaker 3: One is mining companies, but there are others that need

873
00:47:43,600 --> 00:47:45,480
Speaker 3: a loan in order to buy the plant and get

874
00:47:45,520 --> 00:47:50,440
Speaker 3: into production, and so that is an on balance sheet asset.

875
00:47:50,800 --> 00:47:53,719
Speaker 3: There is a credit risk there. The interest rates tend

876
00:47:53,719 --> 00:47:56,000
Speaker 3: to be much higher as a result, are certainly higher

877
00:47:56,080 --> 00:47:59,560
Speaker 3: as a result of that risk. The lease is not

878
00:47:59,600 --> 00:48:02,680
Speaker 3: a secure already's offering because it's just a rental of

879
00:48:02,719 --> 00:48:07,319
Speaker 3: tangible property. When we do a gold loan, so let's

880
00:48:07,320 --> 00:48:09,360
Speaker 3: say a mining company, we parceled it out, that is

881
00:48:09,360 --> 00:48:10,280
Speaker 3: a securities offering.

882
00:48:10,360 --> 00:48:13,759
Speaker 1: We call that a gold bond. We've we've brought back

883
00:48:13,800 --> 00:48:14,319
Speaker 1: the gold bond.

884
00:48:14,520 --> 00:48:17,200
Speaker 3: It hasn't been gold bond since nineteen thirty three when

885
00:48:17,200 --> 00:48:20,200
Speaker 3: President Roosevelt broke the gold standard, while we issued the

886
00:48:20,200 --> 00:48:26,040
Speaker 3: first one eighty seven years later in twenty twenty. So

887
00:48:26,120 --> 00:48:31,200
Speaker 3: to put us in perspective, interest rates on leasing expect

888
00:48:31,200 --> 00:48:34,200
Speaker 3: two to four percent net to the investor. So that is,

889
00:48:34,239 --> 00:48:36,000
Speaker 3: if you give us one hundred ounces at the end

890
00:48:36,000 --> 00:48:38,000
Speaker 3: of the year, you have one hundred and two to

891
00:48:38,000 --> 00:48:42,320
Speaker 3: one hundred and four. In the case of the bonds,

892
00:48:42,760 --> 00:48:45,439
Speaker 3: we will probably have bonds in the four or five

893
00:48:45,440 --> 00:48:48,200
Speaker 3: percent range. The bonds we've done so far have been

894
00:48:48,600 --> 00:48:51,680
Speaker 3: mining companies, and there's a higher risk there, So those

895
00:48:51,719 --> 00:48:54,360
Speaker 3: who have been in the range of thirteen to nineteen

896
00:48:54,440 --> 00:48:58,960
Speaker 3: percent net to the investor in gold in gold.

897
00:48:59,040 --> 00:49:02,880
Speaker 2: And so if we go back to the FED printing money,

898
00:49:03,280 --> 00:49:06,200
Speaker 2: and that's one of the causes of prices going up

899
00:49:06,200 --> 00:49:08,520
Speaker 2: and people piloto gold and the price of gold goes up,

900
00:49:09,120 --> 00:49:11,319
Speaker 2: or the opposite happens in the price of gold goes down.

901
00:49:11,680 --> 00:49:15,480
Speaker 2: This is a difference in the weight of metal that

902
00:49:15,520 --> 00:49:17,480
Speaker 2: you're getting, not the dollars that you're getting.

903
00:49:19,120 --> 00:49:19,560
Speaker 1: That's right.

904
00:49:19,600 --> 00:49:21,680
Speaker 3: You get an increase in the weight of the metal

905
00:49:21,719 --> 00:49:24,640
Speaker 3: and what the dollar value that metal is, that's up

906
00:49:24,680 --> 00:49:26,120
Speaker 3: to you. And in fact, that's part of the value

907
00:49:26,160 --> 00:49:29,279
Speaker 3: that we're providing to the businesses that are releasing borrowing it.

908
00:49:29,760 --> 00:49:32,920
Speaker 3: They want to shift that price risk away. So if

909
00:49:32,960 --> 00:49:35,680
Speaker 3: you're an investor or a saver that has some gold,

910
00:49:36,440 --> 00:49:40,480
Speaker 3: and you know, even amongst the most hardcore gold community,

911
00:49:41,080 --> 00:49:44,759
Speaker 3: most people don't have the whole portfolio and gold, and

912
00:49:44,800 --> 00:49:47,600
Speaker 3: it would be a percentage and I think our typical

913
00:49:47,640 --> 00:49:51,359
Speaker 3: client is probably three to five percent. It actually goes

914
00:49:51,400 --> 00:49:53,440
Speaker 3: up when they're getting interested. So if gold is an

915
00:49:53,480 --> 00:49:56,239
Speaker 3: asset that costs you to store, people say, okay, I

916
00:49:56,280 --> 00:49:58,400
Speaker 3: want three percent of my portfolio and gold. When they

917
00:49:58,440 --> 00:50:00,760
Speaker 3: realize they're getting a return on it, they that naturally

918
00:50:00,760 --> 00:50:04,040
Speaker 3: increases the exposure a bit, but let's call it five percent.

919
00:50:05,000 --> 00:50:07,440
Speaker 3: If the gold price drops ten percent or twenty percent,

920
00:50:07,800 --> 00:50:10,120
Speaker 3: and you know, try percent of your portfolio and gold,

921
00:50:10,280 --> 00:50:13,640
Speaker 3: that is not an existential risk. You still have food

922
00:50:13,680 --> 00:50:15,759
Speaker 3: on the table, you still sleep at night, you're still

923
00:50:15,760 --> 00:50:18,560
Speaker 3: taking care of your family, you're still planning for vacations

924
00:50:18,560 --> 00:50:22,880
Speaker 3: and whatever. To a business, because they're so concentrated it

925
00:50:22,920 --> 00:50:24,799
Speaker 3: with such a huge amount of gold relative to their

926
00:50:24,800 --> 00:50:29,480
Speaker 3: equity capital, that would be an existential risk. So part

927
00:50:29,520 --> 00:50:33,360
Speaker 3: of the value that we provide in this equation is

928
00:50:33,360 --> 00:50:36,240
Speaker 3: we're shifting the price risk off the business who doesn't

929
00:50:36,280 --> 00:50:38,440
Speaker 3: want it. They want to operate on a spread day

930
00:50:38,520 --> 00:50:40,920
Speaker 3: by raw gold at the spot price of gold, they

931
00:50:40,920 --> 00:50:43,759
Speaker 3: add some value to it, manufacturing to jewelry, they sell

932
00:50:43,800 --> 00:50:46,560
Speaker 3: that jewelry at a wholesale price of whatever gold plus

933
00:50:46,600 --> 00:50:49,040
Speaker 3: twenty percent. They just want to make that twenty percent.

934
00:50:49,040 --> 00:50:51,560
Speaker 3: They don't want to be speculators whether the gold price

935
00:50:51,600 --> 00:50:53,799
Speaker 3: goes up or the gold price goes down. And so

936
00:50:53,880 --> 00:50:57,880
Speaker 3: we're shifting that from the business to the to the investor.

937
00:50:58,680 --> 00:50:59,400
Speaker 2: That's brilliant.

938
00:50:59,640 --> 00:50:59,960
Speaker 1: I love it.

939
00:51:00,400 --> 00:51:03,879
Speaker 2: Full disclosure, I am a client and so I will

940
00:51:03,880 --> 00:51:06,080
Speaker 2: also have a link in the show notes for anybody

941
00:51:06,080 --> 00:51:09,960
Speaker 2: who is interested in taking a look into this and

942
00:51:10,000 --> 00:51:12,799
Speaker 2: signing up as well. Thank you so much, Keith. We're

943
00:51:12,840 --> 00:51:17,000
Speaker 2: going to have to do this again sometime because your

944
00:51:17,040 --> 00:51:21,480
Speaker 2: wealth of knowledge about economics is fascinating as well. So

945
00:51:21,640 --> 00:51:23,160
Speaker 2: thank you so much for coming on the show today.

946
00:51:24,280 --> 00:51:25,160
Speaker 1: Thanks for having me