EP. 9 Global Perspectives: June, 2020 Interview with Alex Stanczyk and special guest Ronnie Stoeferle

Physical Gold Fund Hosts Global Perspectives with Alex Stanczyk and special guest Ronnie Stoeferle June, 2020

Welcome to Global Perspectives, a new podcast featuring some of the sharpest minds in the world. We delve into the key concerns, opportunities, mindset, and practices of some of the most successful professional money managers, entrepreneurs, and world class personalities today.

This episodes special guest is Ronnie Stoeferle.

 

You can download the In Gold We Trust Report here: https://ingoldwetrust.report/

 

Topics Include:

*Monetary policy normalization has failed

*Fed Balance sheet may grow to as high as $20T

*All frameworks of normalcy in managing monetary policy have been sacrificed

*The economic recovery from the economic crash in early 2020 could take years

*MMT is no longer weird theory and is more likely to be implemented

*There has already been massive inflation in asset prices

*Inflation dynamics and psychology

*The wealth disparity gap is driven by our monetary system

*The effect of increased institutional demand for gold, portfolio allocations

*USD Strength and Brent Johnson’s milkshake

*We are entering a phase where the general public is investing in gold

*$14T of debt is trading at negative yield and why a portion of this can move into gold

*Institutional capital moving into gold could have a substantial impact on

*USD/Gold price

*Satoshi Nakamoto created Bitcoin with a mindset of looking at it as digital gold

*Why recessions are not only important but necessary and healthy

*The Gold/Beer Ratio

*High correlation of beer drinkers to people in the gold industry (this is real science here)

*Ronnie’s projection of $4800 gold by 2030

 

You can follow Alex Stanczyk on Twitter @AlexStanczyk

You can follow Duncan Cameron on Twitter @Duncan_ACameron

You can access transcripts of our interviews at: https://www.physicalgoldfund.com/learn/transcripts/

You can subscribe to our Youtube channel to access these interviews and more at: https://www.youtube.com/channel/UCXRW…

 

 

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following. This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

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Transcript of Jim Rickards and Alex Stanczyk – The Gold Chronicles EP 93 May 2020

Jim Rickards and Alex Stanczyk, The Gold Chronicles May 2020

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Topics Include:

*New Book under development on the Pandemic and Depression

*Why Scientists without expert knowledge of the economy may not be the best source for determining economic policy

*Why discernment of the various views of scientists with opposing views on how to deal with Coronavirus is important

*Unemployment Claims have exceeded 38m in the US

*There has never been a time when the stock market does not accurately reflect what is happening in the real economy

*S&P 500 is a cap weighted index where a few major companies dominate the index. Major companies which are doing well do not reflect the stock market as a whole or the rest of the economy

*Algorithms that decide the majority of trading in markets today were written before the Pandemic

*Deflation, Inflation, Hyperinflation

*The psychology of inflation and what leads to increase of velocity of money – quantity theory of money versus phase transitions in psychology

*In a deflationary environment where the Fed has printed close to $10T but still cant get inflation leaves one tool left in the toolkit.. raising the price of gold

*Raising the price of gold would require open market operations in gold – Fed printing money to buy gold or to sell gold in order to maintain a specific price range measured in USD

*Raising the price of gold as a tool to get inflation in the USD during prolonged and massive deflation is not a theory, it has been used in the past

*Expectations of continuing deflation in the short to mid term, but inflation must be created, the trick for the Fed is making sure it sticks the landing

*Scenarios for gold price and inflation numbers if the Fed overshoots and ends up with higher inflation than it wants

*Censorship and deplatforming of people from major media platforms such as YouTube and Twitter

*The polarization of views of people around the world in terms of freedom vs authoritarian approaches to governance, and where it is leading

*The “inner fascist” – #NeoFascistGene

*Essential versus Nonessential Businesses and Occupations

*United States Code: Law enforcement officers, judges, public officials violating Constitutional rights under color of law versus emergency powers granted during threats to national security

*Reparations for China such as seizing/cancelling UST’s or delisting Chinese company stocks on US exchanges

*Will reparations move the US and China closer to kinetic warfare

 

Listen to the original audio of the podcast here

EP. 93 The Gold Chronicles: May 2020 podcast with Jim Rickards and Alex Stanczyk

 

Physical Gold Fund presents The Gold Chronicles with Jim Rickards and Alex Stanczyk offering insights and analysis about economics, geopolitics, global finance, and gold.

 

Alex: Hello. My name is Alex Stanczyk. Welcome to Episode 93 of The Gold Chronicles. Today is
May 21, 2020. I have with me my friend and colleague, Mr. Jim Rickards. Welcome, Jim.

Jim: Thank you, Alex. It’s great to be with you.

Alex: Before we dive into the podcast, I want to let everyone know that they can access an
archive of podcasts and transcripts going back several years at PhysicalGoldFund.com/podcasts.
For those of you who are new to the podcast, Jim Rickards is a bestselling author of numerous
books, and he’s a well-known and respected expert in geopolitics and a number of other subjects.
At different times throughout his life, he’s been a lawyer, an economist, a hedge fund guy, and
he’s been tapped off and on by the U.S. intelligence community for his insights and perspectives.

Jim is one of the smartest guys I know, full stop. He’s been a friend and mentor for many years
now. If you haven’t read Jim’s books, I encourage you to do so. His books include Currency Wars:
The Making of the Next Global Crises, The Death of Money: The Coming Collapse of the
International Monetary System, The Road to Ruin: The Global Elites’ Secret Plan for the Next
Financial Crisis, and Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos. For
those of you who are interested in gold or new to gold and want to know more about it, Jim has
also written The New Case for Gold. Many do not know, but we’ve codeveloped that using
material from these podcasts as well as Jim’s research and his own amazing mind.

We have a lot of topics today, so let’s jump right in. Jim, like me, you’re a lifelong learner, you’re
always doing research, and you’re always reading. If you had to name one topic right now that is
holding your focus, what is it and why?

Jim: I have to say it’s two topics that are joined together; they’re kind of inseparable. And you
could say that they’re obvious ones. It’s the pandemic and the economic depression. Why?
Because they’re big topics you should know about.

I’m actually working on a new book that’ll be coming out. It’s on a very fast track. Often, I take a
year and a half or two years to write these books, but my publisher said, “We want this one
yesterday.” So, we’re working very hard on it and will be announcing it soon. We’ll have an
Amazon page and all that stuff, but I’m working on it.

It’s on the pandemic and depression, the two topics I mentioned, and should be one of the first
books on the topic. When you do research, you think, “Well, how do you research a pandemic if

we’re in the middle of one?” The answer is, there’s a lot out there, but you have to go back to
prior pandemics.

I find that my day consists of waking up in the morning and writing as long as I can write. Usually
after two or three hours, my brain turns to Jell-O. I can’t do a lot more than that, but writing for
two or three hours on the pandemic. For relaxation, I’ll read a book on the pandemic of 1918,
and then I’ll go to bed and dream about pandemics. It’s sort of all-absorbing right now.

It’s a fascinating topic. I certainly don’t claim to be a virologist or epidemiologist, but I’ll point out
some things. Epidemiology is about half medical science and half math. I’m not a doctor, but I’m
pretty good at math. Once you establish a certain number of factors or make assumptions about
the inputs based on the best available information, it’s just super linear mathematics. I’m pretty
comfortable with that. Of course, when you get over to the depression side of it, public policy
and so forth, that’s what I do for a living, that’s what I do all the time.

I’ve read a lot of peer reviewed papers. I can’t raise my hand and say I have two degrees from
Johns Hopkins, so I think that makes me an honorary doctor even though I’m not one. But on a
serious note, the epidemiologists and virologists are saying to people like me and others, “Hey,
shut up. What do you know about virology or epidemiology? We’re in charge here.”

I say, “Well, fine. How come you’re dictating economic outcomes?” In other words, if you want
to say that an economist doesn’t understand epidemiology, I can raise my hand and say what
does an epidemiologist know about the economy?

The answer is what we call team science, people working together and sharing views. I think
we’ve fallen into a trap of letting the scientists dictate economic outcomes without enough
economic input,so I’m not shy about treading on their territory, because they’re treading all over
my territory. Indeed, America’s territory, which is, do we really need to shut this economy down
to the extent that we did?

There’s certainly room for mitigation, nobody really would argue with that. Why don’t we cool it
with the handshakes, there’s a time and place to wear a facemask, and social distancing in line is
not a bad idea. There’s stuff like that, but I’m very doubtful that we needed to go to the extremes
that we did.

Every time they say, “We’re saving lives,” I say, “Okay, you probably are, but you’re also costing
lives. Alcoholism, drug addiction, suicide, domestic violence, so-called deaths of despair.” Let’s
not discount that at all. When you add it all up, I think there are probably some better solutions.
The short answer is, I’m immersed in the research for this and working hard at writing. We’ll have
something for readers and listeners around mid-summer.

Alex: Outstanding. I’m looking forward to that.

You mentioned there’s a lot of talk about listening to the scientists and that type of thing.
Something that concerns me a great deal about that is that there was a time in human history
when the scientists were actually burning people alive for disagreeing with their views. I think we
need to be super careful about that, especially as it affects things like our freedom and liberty,
our ability to earn and feed our kids, and those kinds of things, which we’ll talk more about in a
few minutes.

Jim: I agree with that. It is good to listen to scientists. The problem is, even when you put the
fringe thinkers, the conspiracy theorists, and the people with bad intent to one side – and that’s
not always easy – filtering is an important part of it. You say, “Okay, I’m just going to read peer
reviewed scientific papers or even an interview or an article from someone who’s a well-regarded
epidemiologist” or whatever. What I find is that the scientists don’t agree. It’s not as if the
scientists are all saying one thing and you’re like, “You’re a dope if you don’t listen.” No, I’ve got
a stack of research on my desk here of one guy saying you have to wear a face mask, the other
guy saying they do absolutely no good, they’ll make you sicker because you’re recycling carbon
dioxide.

I’ve got two PhDs telling me opposite things. Yes, I’m all for listening to science, but you need to
kind of fish with a big net, so to speak.

Alex: Absolutely. It’s where discernment comes into play.

We’re three months into varying degrees of stay-at-home, and right now, despite stock markets
being pretty happy based on what the Fed’s doing of basically buying everything in sight, just this
morning there was another 2.4 million unemployment claims filed. This brings the total to over
38 million in just nine weeks.

Credit cards, auto loans, mortgages, and rents aren’t being paid. The media has been remarkably
quiet about how many small businesses are failing. I’d really like to know more about that.
Something I’m curious about is your view on what this looks like moving forward. I know we’re
in a massive sort of deflationary environment. We’re seeing food supply chains having problems.
What does the market psychology have to look like to lead to more inflation and possibly even
hyperinflation versus a massive deflation?

Jim: That’s a five-part question, so let me try to unpack it a little bit. The first thing I would say is
that there’s never been a time when the stock market was less reflective of the economy. Put
differently, the disjoint between what’s going on in the real economy and what’s going on in the
stock market has never been greater.

 

People say, “Come on, Jim. Don’t you know the stock market is a discounting mechanism? It looks
forward. Today’s stock price isn’t about today’s economy, it’s about where the economy is going
to be six months or even a year from now. It’s this great discounting mechanism, so get with the
program.”

I say, number one, I have a rather good idea of what the economy is going to look like six months
or a year from now. It’s going to look awful, so don’t lecture me about the discounting mechanism
of the stock market, because that’s not what the stock market is doing.

Number two, can we please bear in mind that the S&P 500 is a cap weighted index? The Dow
Jones is not. There’s a complicated formula behind the Dow Jones, so it’s a different story. But
the S&P 500 – which most institutions say is our benchmark, our bogey – is a cap weighted index.
This means the larger your market capitalization, the more weight you carry in that index.

It’s not as if they add up the prices of 500 stocks and divide by 500. That’s not what they do. They
take the market capitalization, which might have nothing to do with earnings or anything else.

The S&P 500 is really the S&P 5 or maybe the S&P 6. There are five or six companies. This isn’t
mysterious; we all know who they are. It’s Facebook, Amazon, Netflix, Apple, Google or so-called
Alphabet, and Microsoft. If you add up their market capitalization, they dominate that index.

Whatever they do, the S&P is going to do.

Firstly, don’t tell me that the stock market is discounting the future, because the stock market is
completely detached from the future. Secondly, the stock market is five or six companies. The
other 495 are just treading water or going down. Yes, there are some particular companies that
may be doing well such as Zoom and some pharmaceutical companies. That’s always true.

Why wouldn’t Facebook, Google, Amazon, Netflix, Apple, and Microsoft do well? They’re all
digital. Amazon has physical delivery, but they’ve got that pretty well sorted out. It’s online
execution followed by physical delivery. The rest of them are all online. Google doesn’t ship
anything to my house, it’s a search engine. It’s a lot more than that, it’s a big advertising platform,
of course, and it’s a bunch of other things.

But these companies have not suffered from working from home or from people in quarantine.
In fact, in a lot of ways, they’ve prospered. Should those stocks be going up? I don’t know, I’ll
leave it to investors, but maybe they should. Don’t confuse a cap weighted index where five or
six companies dominate the index and those companies are relatively unaffected by the
pandemic with the health of the stock market as a whole or the health of the economy. They’re
very detached.

One more thing. I believe the correct number is 95%, but I’m certain it’s over 90% that all the
trading on the New York Stock Exchange is done by robots. When I say robots, I’m not talking

about order matching systems where I’m a seller, you’re a buyer, there’s a computer somewhere
that connects us, and you’re done. I’m not talking about that. That’s been around since the ‘90s.
I’m talking about a situation where the computer itself makes the decision. How does it make the
decision? You have algorithms. When were the algorithms written? Probably before the
pandemic. I wish everyone well, but some 27-year-old H-1B visa engineer in Silicon Valley has
never even been to the New York Stock Exchange, and they’re the ones writing these algorithms.
These haven’t been updated for the pandemic or the new depression, but they contain their basic
code, which is buy the dips and read headlines. So, they’re scanning all these headlines, and they
do have a buy the dips buy. When stock prices get low enough and somebody’s got some good
news, okay, buy them, bid them up.

And then the people with the 401(k)s, what are they doing? They’re not trading stocks; they’re
in index funds. They’re along for the ride. So, all this stuff is going up, and I’m looking at what you
mentioned earlier, 38 million unemployed. We’re talking about GDP in the second quarter. I get
100 emails a day from various research services. They’re only the good ones, because I don’t read
a lot of junk. Every time they update, they say it’s worse than we thought.

Second quarter GDP might be down – again, on an annualized basis – 40%. That’s $8 trillion of
annual output if you annualize it. Now, it’s only one quarter, so I don’t know, maybe it’ll be off
the bottom in the next quarter. But even if you divide by four, you’re talking about $1-$2 trillion
of lost output. You can’t tell me that’s not going to have repercussions that go well into the 2020s.

Alex: Just like we were talking about on our last podcast, these are next Great Depression
numbers, right?

Jim: Right.

Alex: Talk to me about the psychology. What causes velocity of money to pick up? We talked
about this a lot in the past, and there are two schools of thought. One school of thought says
money creation leads to inflation, but I think you and I both agree that that sets the foundation
for that, but it won’t happen unless there’s velocity.

In your view, what has to happen psychologically? What are the things we want to be watching
for that will start to lead towards more inflation and then ultimately, if it does happen, some kind
of hyperinflation of the U.S. currency?

Jim: You put your finger on it. It’s psychology, but what kind of psychology? It’s the psychology
of expectations. Inflation will happen when enough people think inflation’s going to happen. I
understand that’s a circular argument, but that’s what recursive functions look like. That’s how
complexity theory works.

So, what’s the expectation today? The answer is deflation. No one’s expecting inflation. There
are a few Milton Friedman followers out there or a few monetarists, a few Neo-Keynesians, who
still think that printing money causes inflation.

I would first suggest that the last 12 years refutes that notion. The fact is printing money causes
inflation if velocity is constant. Yes, the quantity theory of money, if you hold velocity constant
and you expand the money supply at a rate that exceeds the potential real growth of the
economy, then the difference is going to be inflation.

The problem is velocity is not constant. This was Milton Friedman’s great mistake. In fairness,
through a lot of his career from the 1950s to the 1980s, velocity actually was constant. So, if that’s
what you observed and that was your assumption, then Friedman’s notion that inflation is a
monetary phenomenon would be correct except that the input is not correct.

Velocity started to crash in 1998. That’s an important point. This is not a 2008 phenomenon or a
2020 phenomenon. By the way, velocity did decline after 2008 and is declining right now, so I’m
not saying those events had no impact. They continue to drive velocity down, but the steep
decline started in 1998. And guess the other time when velocity crashed: the 1930s.

A blunder I see time and time again with analysts, Wall Streeters, trades, and programmers is,
“I’ve got a time series to do the correlations and regressions.” I’m like, “Yeah, fine. How long is
your time series?” “Oh, 20 years.” “Okay, why don’t you try 80 or 90 years and see what has
happened in the past facing these conditions?”

Velocity is just the turnover of money. Let’s say I have some money and I have a choice. I can put
it in the bank to sit and spend very little. That’s what I’m doing now; I’m not going out a lot. I take
a walk in the sun, but I haven’t been to many restaurants or bars or trips or airports in months.
So, I can put it in the bank or I can go spend it or I can invest it. Those are my choices.

What am I going to do? Well, it depends first on opportunity. Right now, it’s hard to spend money.
We’ve actually been trying to support some local merchants, caterers, and restaurants with
takeout meals just to try to help out a little bit, but you don’t have much opportunity to spend
right now.

Beyond that, and more importantly, what is my expectation for inflation? Well, it’s negative. I
expect deflation. What happens to money in deflation? The value of money goes up. You don’t
get much interest. It’s not like a dividend or interest, but the actual real value of money goes up
in deflation. So, what do people do in deflation? They save money, they save more, and you fall
into what Keynes called the liquidity trap.

How do you get out of the liquidity trap? You have to get people to spend that money. How do
you do that? You have to change their expectations, their psychology. Okay, how do you do that?
Central banks have shown that they don’t know how to do that. If printing $5 trillion and then
printing another $5 trillion – which is what they’re doing; the Fed balance sheet is going to cap
out based on what we know now at around probably $10 trillion – if that doesn’t do it and that’s
all you have in your bag of tricks – interest rates are zero and you’re going to print $10 trillion – if
that doesn’t cause inflation, which it won’t, then I would say you’re worthless. You can’t do what
you say you want to do.

This has been true for 12 years. The Fed’s been trying to get just 2% inflation for 12 years, and
they haven’t been able to do it. Well, how are you going to get 4%-5% inflation? That is what you
need to get out of this debt problem.

There is one way to do it, and only one way that I can see, which is, you have to raise the dollar
price of gold. That gets people’s attention. I’ve said before: If the Board of Governors of the
Federal Reserve System went into a room, closed the door, took a vote, walked out, and Jay
Powell walked up to the microphone and said, “Ladies and gentlemen, as of now, the price of
gold is $5000 an ounce. If you think that’s cheap, we’ll buy it from you and print the money, of
course. If you think that’s expensive, sorry. If you think it’s cheap, come and get it. We’ve got the
gold in Fort Knox. If you think it’s cheap, come and get it, and we’ll deliver the gold. If you think
it’s expensive, sell us the gold, we’ll buy it, and we’ll print money.”

The point is, if you make it a two-way market, your buyer $4995, your seller $5050, gold is $5000
an ounce in that example. The point of doing that would not be to enrich gold holders or owners,
and they don’t care. The point would be to change expectations, exactly what we’ve been talking
about, because the world of $5000 gold is also the world of $400 oil and $20 copper. And there’s
your inflation, because everything would go up.

This has been done twice, by President Roosevelt and President Nixon, so it works.

Alex: Yes, that’s what I was just going to say. This isn’t just theory; this has happened already.

Jim: It happened twice. Roosevelt did it on purpose, and Nixon did it by accident. The result both
times was that we got inflation. I was looking at the numbers. I was kind of familiar with them,
but I went back and checked. From 1933 to 1936 – the Great Depression is usually defined as
1929 to 1940 – in the middle of the Great Depression from ’33-’35, the stock market was going
up 20%-30% a year. One year was 5%, but it was booming.

It had gone down 90%, so when you’re down to 10%, even when you go up 30%, that’s only three
points. You haven’t made it back. It recovered the 1929 high in 1954, so it took 25 years to come
back. We could be looking at that kind of situation, but FDR devalued the dollar against gold not

to enrich gold holders. In fact, he confiscated all the gold first. He did it to change the psychology,
and it worked.

Alex: What could lead to a hyperinflation? Do you see any percentage chance of something like
that happening? What are the odds, and what would have to happen for that to occur?

Jim: I want to be very clear; I see deflation for now and deflation into next year. When I talk
about hyperinflation, don’t expect it to pop up next month. I certainly don’t; I expect deflation.

But you are going to have to get to inflation because of the debt burden. Our debt-to-GDP ratio
is catching up to Italy, and we’re probably not that far behind Lebanon and Greece at this point.

You’re not going to be able to borrow your way out of the problem. You’re not going to be able
to make the U.S. economy productive enough to pay off that debt or even sustain. You don’t
have to pay off the debt, but you do have to roll it over and sustain it, and we’re going to fail
those tests with the kind of productivity we’re capable of.

If you can’t borrow and spend your way out ,and if you can’t grow your way out, what else can
you do? You can inflate your way out, and that’s the American way. America’s been doing that
since the Revolutionary War. That’s what we do. We used to be pretty good at it, but that’s back
when we had gold, so we’re not good at it today.

I don’t know how long it’ll take the Fed to wake up. I’m telling you the answer, and if Jay Powell
were on this call, maybe it’d be nice to have a nice conversation. No central banker, no PhD
economist, nobody in a tenure position at MIT, Harvard, Yale or Chicago wants to talk about gold.

They just don’t. I know a lot of them. I’ve met Fed chairmen, vice chairmen, and governors. I’ve
met them all, and they don’t want to talk about gold. They don’t want to have the conversation
we’re having right now.

We talked earlier about having science on your side. I’ve got history on my side, which is that this
is the only way we’ve ever been able to get inflation. Now, here’s the point. Let’s say that they
do it. Let’s say that we’ve got to get the dollar price of gold up.

Remember, when the dollar price of gold goes up, gold isn’t really going up. What’s happening is
the dollar is devaluing. It takes you more dollars to get your ounce. I think of gold by weight. If it
takes you more dollars to get your ounce, well, that’s a nice win for someone who has gold. But
what you’re really doing is devaluing the dollar, which is inflationary. That’s the whole idea.

They’ll wake up eventually when the damage gets bad enough, but it’s just hard to say when.

Here’s the danger: You can segue from deflation to inflation pretty quickly by doing what I said,
which is getting the dollar price of gold up. But there is the danger that you shoot past the mark.

You’ve got to stick the landing. Six percent inflation would be fine. It would be very damaging to

a lot of investors, and those investors need to look out for that. That’s a separate issue, which is
what kind of portfolio would you have to prepare for this, but you start with gold.

Six percent inflation would wipe out the debt in about 12 years or less. It would cut the value of
the dollar in half. Twelve years is not long, and if you could cut the debt in half, nice job. The
problem is, you try to get to 6% and end up with 12%-14%, which we did see in the 1970s.

People forget that in 1977, the United States issued Swiss franc denominated bonds, because
nobody wanted dollars. They were called Carter bonds. You had U.S. treasury bonds
denominated in Swiss francs, because institutional investors said, “We trust the Swiss franc; we
don’t trust the dollar.” Then inflation peaked at around 15% in 1980. That’s when gold went to
$800 an ounce.

Yes, it’s hard enough to get inflation, although I just told you how to do it, but it might be even
more difficult to fine tune it in such a way that you don’t get into hyperinflation. So, you cannot
rule out hyperinflation.

Alex: So 15%, 1980, $800 an ounce. That was a pretty famous secular bull in gold, and we’re
talking almost a 25-fold increase from the ‘70s.

Jim: That’s right. Again, I’m sure you know this. Let’s say gold hit $2000 an ounce in the next few
months, which I think is entirely possible, maybe even likely. That would top the all-time dollar
price of gold, which was $1900 an ounce in August 2011.

Let’s say it goes to $2000 an ounce. In real terms, that’s less than January 1980. In nominal dollars,
yes, that’s an all-time high, nice going. But in nominal dollars, that $800 an ounce in 1980 looks
closer to $3000 an ounce. It’s going to get closer to $3000; it’s just got to get to $2000 first.

Alex: On to some more edgy topics. There’s been a big discussion lately about censorship,
suppression of discussion, commentary, and deplatforming people from things like YouTube,
Twitter, etc. Just this morning, there was a host on one of the main media outlets pushing to have
the President deplatformed from Twitter.

Jim: Mika Brzezinski?

Alex: I wasn’t going to name any names, but I’ll let you do that.

Jim: I will.

Alex: All right. At the risk of that happening to us, the whole censorship, deplatforming,
whatever, there are certain things that really need to be talked about. I want to ask you some
questions that I think lot of people are hesitant to talk about, but we’re going to do it.

This is my view, and maybe you can put it into your own words or what you think you see
happening here. I think that we’re seeing a polarization of the people. Not just in America, but
I’m talking globally. My view is that it’s not really about political parties but about how people
see the difference between freedom and not freedom.

In other words, some people seem okay with losing it, and others don’t. There are different
personalities, different levels of education and intellect on both sides of the argument, but I’m
seeing this happening more and more. Each side seems to consider the other side as naïve about
everything, maybe ignorant, dumb or whatever you want to fill in the blank with, and that the
other side is wrong.

What I want to know from you is, how do you view this? Do you see this as one side or the other
coming to their senses, or do you see it ending up in a much more difficult, challenging
circumstance?

Jim: I think the latter. First of all, I agree with your overview. There’s a lot more that could be
said, but as kind of a synopsis just to put a finer point on that, I mentioned I’m working on this
new book on the pandemic and the depression. Last fall, I was working on another book, and I
just put that on the shelf. I can’t deal with that right now because this other book is on a fast
track. I’ll come back to it.

Remember what the world looked like last fall before COVID-19, before this virus, before the
pandemic, before the depression. What was going on last September and October? You had riots
in Paris. Remember the yellow jackets. I’m not going to try to say it in French, because I’m not
good at it. There were riots in Barcelona that had to do with separatism. You had riots in Beirut,
kind of the Cedar Revolution 2.0, the secular society pushing back against the warlords,
Hezbollah, and others. You had riots in Santiago, Chile, because they raised the public
transportation fee 4 cents or something, and all of a sudden, they’re burning down every subway
and bus station in Santiago. Oh, and Hong Kong was maybe the biggest tinderbox of all.

I was stepping back and saying, wait a second; riots in Paris, Beirut, Barcelona, Santiago,
Hong Kong, and other places. As Stephen Stills wrote, “Something’s happening here.” There has
to be a thread. It can’t just be coincidence that ten major cities around the world, maybe more,
are rioting all at the same time.

I think it does go to what you’re talking about, which is liberty versus oppressive government and
income inequality. Taxes are a funny thing. They can put a tax on you, and you pay it. Put more
tax on you and you’ll pay it. But there comes a time when you’re like, you know, I’m out of here.
I don’t know what I have to do. Maybe you’ve got to move to Puerto Rico or drop off your
passport on the way out of town or whatever, but there’s a tipping point, a critical threshold, the
straw that breaks the camel’s back. Take whatever metaphor you like.

When you see riots about a four-cent transit fee increase, that’s the tipping point. It wasn’t about
the four cents. It was about 30 years of increasing taxation that finally pushed too far. That was
already there before these shutdowns arrived.

Behind every government bureaucrat is a neo fascist. There’s something in the human DNA that
just wants to tell other people what to do. I personally don’t have it. I have a missing gene. I have
enough trouble keeping myself pointed in the right direction, so I’m not big on telling other
people what to do, but a lot of people are.

When you have a crisis of this kind, the inner fascist comes out. The governors, the mayors, the
Center for Disease Control, the epidemiologists, their kind of inner fascist comes out. They’re not
limited to getting supplies where they’re needed, personal protective gear, ventilators – although
the ventilator thing turned out to be a fiasco that probably killed more people than it saved.
Masks, intensive care units, whatever it was, getting that stuff to people in need is a big deal.
That’s what leadership is about, and that’s what your executive position should be about. Let’s
get help to people who need it as fast as possible. There was a lot of wrestling about that.

Who was it, the governor of Michigan? Gretchen Whitmer. They love coming up with lists of
essential and nonessential businesses. In my opinion, if it’s your job, it’s essential. If it’s what you
do to put food on the table for your family, it’s essential. So, that’s an arbitrary distinction. She
decided they’ll shut down barber shops, hair salons, gyms, all that stuff, but she prohibited the
sale of paint and carpets. Why? It’s not like they’re using lead-based paint, it’s not like there are
noxious fumes, it’s not like carpets are going to spread coronavirus. If you’re working in my house,
come on in and work. It’s not like we’ve got 50 people watching a football game. Why paint and
carpets? The answer is, it’s the inner fascist. She can’t resist bossing people around.

We saw it with the hair salon owner in Dallas, Texas, who was arrested and sentenced to a week
in jail for cutting hair. Okay, you could have given her a $200 summons on what’s called a
violation. Violation is not a crime. When you get a speeding ticket, that’s actually not a crime.

Reckless driving is a crime. A speeding ticket is called a violation. You could have given her a $200
violation and said, mail it in, and she probably would have paid it. But no, they arrested her.

There was this Atilis Gym in New Jersey the other day where they were arresting customers. The
cops were waiting outside and handing out summons. They have to ask your name, and a guy
wouldn’t give his name. Why should he? Have you got a warrant? What’s this all about? Who
gave you the right to stop me on the street and demand my name? It’s like people trying to
escape Nazi Germany when they asked to see your papers. That’s what we’ve come to.

Not to belabor the subject, but this has empowered a lot of political leaders. Their inner fascist
is out, the neo fascist is out. They can’t wait to tell people what to do. And just to make it worse
– and I’ll leave it at this – there’s what I call the liberal progressive ratchet. You know what a

ratchet is. You turn it one way, but it doesn’t turn back. It doesn’t mean you can turn it more the
next minute, but it does mean it never goes back.

Someone said to me the other day, New York City is taking all these streets offline, city streets
are closed to traffic. They will never be reopened. When this thing is over, you’re going to find
that the mayor wanted to close those streets all along. All he needed was an excuse, so don’t
expect them ever to reopen.

That’s the problem with all of this. I can pick on Mayor de Blasio and the streets in New York, but
it’s true across the board. When they start issuing these orders, the virus diminishes, and it’s kind
of safe to go outside, but they’re not going to reverse the orders. Some of them, yes, but a lot of
them you’ll find that they were trying to do it all along. This was their excuse.

That’s the liberal progressive ratchet. I have studied the history of fascism, and you’ll find that it
came from progressives and socialists. Mussolini, who was the father of 20th century fascism,
said that his greatest inspiration was Woodrow Wilson.

Alex: Amazing. Two quick comments on this and we’ll move on to two more things before we’re
done here. For me, number one, the whole concept of allowing a politician to pick winners and
losers economically is extremely dangerous. Basically, what that means is this politician gets to
decide that this business gets to prosper, and this business gets to fail. These people get to feed
their kids, and these people do not. That is a very dangerous slippery slope.

The second thing that I find really interesting, because you know I have a background in the
military and a brief law enforcement background in the military as well, there is a video done by
a police officer talking about how certain actions by governors and also police officers are
violating constitutional rights of U.S. citizens.

I got really curious about this and looked it up. It’s USC Title 18 on the U.S. Department of Justice’s
website. USC Title 18, Section 242, basically says that any law enforcement officer, judge or public
official that denies or infringes on a U.S. citizen’s constitutional rights under color of law –
meaning the governor writes an executive order, they pass some kind of law or whatever that is
contrary to what a United States citizen’s rights are under the constitution – that’s actually a
crime.

Jim: That’s right, but the U.S. Code is a big document. You referred to Title 18, which is the U.S.
Criminal Code, and you’re right about that part of Title 18. But there are other titles in the United
States code that deal with national security, and they’re a lot scarier than the one you’ve just
read. I cover this in Chapters One and Two of my book, The Road to Ruin.

As a side note, I’m regularly active on Twitter and do a lot of public speaking and have been living
on Zoom lately, so I get a lot of questions and answers. One of the things I’m hearing a lot is that
my books, including Currency Wars which came out in 2011, are selling extremely well. Of course,
my publisher is thrilled, and I’m happy about it too, but it’s odd to see a ten-year-old book still
selling almost like a bestseller, not quite. People say, “Jim, I wish I’d read your book two or five
years ago.” Well, Aftermath came out in November 2019 and has only been out six months. Pick
it up and read it now. It tells you everything that has happened in the past six months.

I say, “First, thanks for buying the book. Second, it’s not too late. Maybe you would have been a
little bit ahead of the curve if you’d read it two or five years ago, but it’s not too late, because
this is going to get worse, and these trends are going to continue. It’s not too late to get into
some of the allocations we talked about.”

In my book, The Road to Ruin, that came out in 2016, the first two chapters talked about what
we’re talking about now. A lot of these laws were enacted, and some of them go back to the
Trading with the Enemy Act of 1917, but these laws were enacted in the 1950s as we were
preparing for a nuclear attack.

The question was, what would the United States do in the event of a nuclear attack? It’s called
COG, Continuity of Government. I have a friend who’s working on COE, Continuity of the
Economy. I’m sure we all wish we’d figured that one out a couple years ago. But with Continuity
of Government, they’ll land helicopters on the mall in front of the Capitol, members of congress
will come out to the helicopters, and they will be taken to either Raven Rock or Mount Weather
not too far away in Virginia. Raven Rock is kind of on the Pennsylvania-Maryland border not too
far from Camp David.

They have underground complexes there that can talk to each other and in theory run the
government. So, the government’s figured out how to take care of themselves, but they haven’t
really thought much about taking care of us. Abraham Lincoln declared martial law and
suspended habeas corpus, and that was constitutional, because we have a law that says you can
declare martial law and mobilize the National Guard.

Having said that, Alex, you make a particularly good point. I think the International Emergency
Economic Powers Act of 1977 makes the president a financial dictator in the event of a national
security issue, and I think we’ve got those galore.

The laws that exist that empower government officials to act in an emergency capacity in ways
that we would normally regard as dictatorial are already on the books. You don’t need Nancy
Pelosi or Mitch McConnell to pass these laws. They’re there, but they were done in preparation
for nuclear attack. Well, how about a pandemic? It’s maybe not too far removed.

These executive orders issued by the governors, to the extent that people have been able to
litigate them – and not everyone has the resources or the time – they’re winning almost every
time. I notice the governors are losing these cases in their own state courts. Wisconsin Supreme
Court overruled the governor’s shutdown, and the governor of Texas went the other way and
overruled a local judge who would imprison this lady who runs a salon.

Citizens are winning these cases for exactly the reason you mentioned, which is that the executive
authorities, which would be mayors and governors, are exceeding their authority. They’re just
doing stuff and making stuff up without legal authority. And the police who are executing these
orders are probably breaking the law. I’m sure they just think they’re doing their duty, but they’re
probably breaking the law when carrying out an unconstitutional order.

Alex: My perspective warrior code-wise is that the job of these people is to protect the citizens,
not to mess with people who are just going about their daily lives trying to do their thing.

Jim: I was wrestling with that. As I said, I’m writing this new book, and one of the things I included
in the introduction is that I can’t just write a book. Obviously, you can make money on a book,
but I asked myself, am I doing something that is exploiting the hardship of others?

I said the answer is no if two things are true. Number one, you have to offer advice and guidance
and help people. So, if the book helps people, then I’m very comfortable with that and I’m glad it
can do that.

But I’ve also put in a big thank you. I said there’s a lot of problems to go around, a lot of disaster,
but we have a lot of heroes. Doctors, nurses, emergency medical workers, attendees, people just
cleaning the streets or cleaning rooms, disinfecting, everyday citizens, the National Guard, the
Army Corps of Engineers that built a hospital in the Javits Center like overnight, and Franklin
Graham who put up a tent hospital in Central Park. A lot of heroes.

But I had to hesitate a little bit when I got to the police. I’m like, well, whose side are they on?
Are they doing what the Army Corps and Franklin Graham and many others are doing, or are they
the shock police?

I don’t know. You can’t generalize. I’m sure there are plenty of cops who are heroes, and you
have to say that, but it did make me think. I think both is the right answer.

Alex: I wanted to ask you about the upcoming 2020 presidential election, but we’re going to save
that for the next podcast, because there’s something else I want to hit really quick, and we’re
just about out of time.

There have been some mentions of reparations for China. There are some folks who believe that
China has some responsibility in terms of how damaging this pandemic has been, and there’s talk

of reparations. One theory is that it might take the route of cancelling their treasuries. I don’t
know if that’ll happen. I’d like to get your opinion on that.

The second thing is there’s also been some discussion of delisting Chinese companies on U.S.
stock exchanges.

Ultimately, the third part of this is, does this move us closer to war?

Jim: The answer is yes, yes, and yes. Let me break that down a little bit. First of all, there are
plenty of ways. You know as well as anyone the oldest joke in banking: If I owe you $1 million, I
have a problem, but if I owe you $1 billion, you have a problem, because you have to collect from
me. I can just default and sleep in tomorrow, and it’s your problem.

But what if I owe you $1.4 trillion? I’ve been dealing with this for over a decade. All these national
security forums saying, “China has us over a barrel, we owe them $1.4 trillion, they’ve got us by
the …” Whatever. It’s not true; the opposite is true. If I owe you $1.4 trillion, you’ve got a big
problem, because I’ll think about whether I want to pay you or not.

It is a great resource for the United States to compensate ourselves for Chinese damages. One
scenario would be you’d go into the good old federal district court with probably an 800-page
complaint, maybe a class action, maybe not, maybe there’s some other statutes. And you would
sue China for about, let’s say, $1.4 trillion.

Let me just pick a number out of the hat. The lost wealth is multiple trillions including how much
the stock market went down, the lost output – we’re into the multiple trillions. So, let’s just pick
a nice, round number of $1.4 trillion. You win the case, but now you have to collect. That’s always
the first thing lawyers learn. You might think, oh, you learn how to win a case. No, you learn how
to collect in case you win.

You just basically get a marshal or somebody to serve the Fed and say, “We’d like you to freeze
the Chinese account to pay us the $1.4 trillion they owe us.” Well, that’s technically not a default;
that’s a perfectly legal process. If they let China come in to defend themselves, let them hire
Covington & Burling or one of these deep state law firms, and defend themselves, maybe they’ll
win. But maybe the Plaintiff will win, and they’ll owe us $1.4 trillion.

At that point, you’re not defaulting on the bonds, you’re just collecting. You’re seizing an account
which, by the way, people always ask me what I think about cryptocurrency. I say I love them.

The dollar is the greatest digital cryptocurrency in the world, but the Fed and the Treasury keep
those ledgers. That’s one way to think about it.

Another thing – and the president could do this today with one phone call without litigation – you
could freeze the Chinese account. You don’t have to seize it. You could, but you don’t have to

take it. Just say, “Hey, China, they’re still your bonds, no worries. They’re accruing interest, and
we’ll keep close track of that. Oh, by the way, you can’t sell them until further notice. And we’d
like to see you on your best behavior.”

You could do that. That’s not a default or stealing their property. That’s freezing the account,
which we’ve done. The U.S. is exceptionally good at this. That’s how we got Bayer Aspirin in World
War I. We took it from Bayer AG because they were Germans, and we used the Trading with the
Enemy Act of 1917 to get ourselves an aspirin company. And we did it to Iran. We do it to people
every day.

So, it’s a bigger ticket, but you don’t have to steal the money. You take it. You could just freeze
it, hold it, and not let the Chinese have it until they shape up. People say, no, you can’t do that.
You’ll destroy the U.S. government securities market, you’ll destroy the credit of the United
States.

I was general counsel and Chief Credit Officer at one of the largest government securities dealers
for ten years, so long before I stepped into the hedge fund world and a lot of other things, I spent
my life in the government bond market. So, I would say, wait a second. If the United States has
$22 trillion of debt – which we do – and you take $1.4 trillion away so you don’t have to pay that,
I like your credit better. I think you just improved your credit because you don’t have to pay as
much.

People need to think hard about these things. I think the Chinese need to think hard about these
things. I’ve been to China quite a bit and met with everyday people, peasants, and government
officials. The everyday Chinese people are very nice. I love China, but the government officials
are evil, for want of a better world.

But you say, “Jim, don’t you have the smartest people, the greatest scholars, the greatest
resources and intelligence service? Can’t you figure this out?” The answer is no. They really have
a hard time figuring out Washington. I tell people that Americans have a hard time figuring out
Washington as well, so it’s not just the Chinese.

Things that may seem obvious to you and me are a lot less obvious to the Chinese. It’s not
because they’re dumb, it’s just because there’s a cultural outtrade where they can’t quite bridge
the gap. But if I were China, I would be trying to figure this out, because I think it’s real.

You asked, “Then can that lead to a shooting war?” That was the history of the 1920s and what
my first book, Currency Wars, was about. In the 1920s, you had a knockdown, drag out currency
war. By the 1930s, it had turned into a trade war and the Great Depression, and by 1939, Hitler
invaded Poland.

That sequence of first currency wars, then trade wars, then shooting wars has proved true in the
past. The currency wars started in 2010 and is what I talked about in my book. The trade wars –
pick a date. You could say January 2018 when Trump slapped tariffs on Chinese washing machines
and solar panels, and that got a lot worse.

And now, even that’s going on three years ago. Are we at the stage where a shooting war is on
the table? Well, the President and Secretary Pompeo sent congratulations to the new president
of Taiwan, and they were not treating her like a regional governor of a communist Chinese
providence. They were treating her like a head of state.

That’s the kind of thing that, combined with everything we’re talking about, could set the Chinese
off. I would say, if we did seize or freeze their $1.4 trillion of treasury bonds, which we may end
up doing, do they jump over the straits to Taiwan or do something crazy in the South China Sea
or crash into India? I don’t know, but I don’t think you can rule it out.

Alex: It’s been a great discussion today. I really appreciate it, as always. I know you’re in your
undisclosed location off the grid, so you take care of yourself out there.

Jim: I call it the corona-free mountain.

Alex: Excellent. Stay safe, and until next time, thanks a lot, Jim.

Jim: Thanks, Alex.

 

You have been listening to The Gold Chronicles with Jim Rickards and Alex Stanczyk presented by Physical Gold Fund. Recordings may be found at PhysicalGoldFund.com/podcasts. You can also register there for news of upcoming interviews with Jim Rickards and other world-class thinkers.

 

You can follow Alex Stanczyk on Twitter @alexstanczyk

You can follow Jim Rickards on Twitter @JamesGRickards

You can listen to the Gold Chronicles on iTunes at:
https://itunes.apple.com/us/podcast/the-gold-chronicles/id980027782?mt=2

You can Listen to the Global Perspectives on iTunes at:
https://itunes.apple.com/ca/podcast/physical-gold-fund-podcasts/id1056831476?mt=2

You can access transcripts of our interviews at:
https://physicalgoldfund.com/category/transcripts/

You can subscribe to our Youtube channel to access these interviews and more at:
https://www.youtube.com/channel/UCXRWzw0vaNgCwo7nTMEAwkA

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following.

This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

This material is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind. In particular, information provided by third parties in this Podcast has not independently evaluated or confirmed. Furthermore, we take no responsibility to update this Podcast to reflect any changes in any of the information presented. Physical Hard Assets Fund SPC and Physical Gold Fund, its officers, directors, employees or associated persons will not under any circumstances be liable to you or any other person for any loss or damage (whether direct, indirect, special, incidental, economic, or consequential, exemplary or punitive) arising from, connected with, or relating to the use of, or inability to use, this Podcast or the information herein, or any action or decision made by you or any other person in reliance on this information, or any unauthorized use or reproduction of this Podcast or the information herein.

EP. 93 The Gold Chronicles: May 2020 podcast with Jim Rickards and Alex Stanczyk

Jim Rickards and Alex Stanczyk, The Gold Chronicles May 2020

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Topics Include:

*New Book under development on the Pandemic and Depression

*Why Scientists without expert knowledge of the economy may not be the best source for determining economic policy

*Why discernment of the various views of scientists with opposing views on how to deal with Coronavirus is important

*Unemployment Claims have exceeded 38m in the US

*There has never been a time when the stock market does not accurately reflect what is happening in the real economy

*S&P 500 is a cap weighted index where a few major companies dominate the index. Major companies which are doing well do not reflect the stock market as a whole or the rest of the economy

*Algorithms that decide the majority of trading in markets today were written before the Pandemic

*Deflation, Inflation, Hyperinflation

*The psychology of inflation and what leads to increase of velocity of money – quantity theory of money versus phase transitions in psychology

*In a deflationary environment where the Fed has printed close to $10T but still cant get inflation leaves one tool left in the toolkit.. raising the price of gold

*Raising the price of gold would require open market operations in gold – Fed printing money to buy gold or to sell gold in order to maintain a specific price range measured in USD

*Raising the price of gold as a tool to get inflation in the USD during prolonged and massive deflation is not a theory, it has been used in the past

*Expectations of continuing deflation in the short to mid term, but inflation must be created, the trick for the Fed is making sure it sticks the landing

*Scenarios for gold price and inflation numbers if the Fed overshoots and ends up with higher inflation than it wants

*Censorship and deplatforming of people from major media platforms such as YouTube and Twitter

*The polarization of views of people around the world in terms of freedom vs authoritarian approaches to governance, and where it is leading

*The “inner fascist” – #NeoFascistGene

*Essential versus Nonessential Businesses and Occupations

*United States Code: Law enforcement officers, judges, public officials violating Constitutional rights under color of law versus emergency powers granted during threats to national security

*Reparations for China such as seizing/cancelling UST’s or delisting Chinese company stocks on US exchanges

*Will reparations move the US and China closer to kinetic warfare

 

Books by Jim Rickards:

Currency Wars

The Death of Money

Road to Ruin

The New Case For Gold

Aftermath

 

You can follow Alex Stanczyk on Twitter @alexstanczyk

You can follow Jim Rickards on Twitter @JamesGRickards

You can listen to the Gold Chronicles on iTunes at:
https://itunes.apple.com/us/podcast/the-gold-chronicles/id980027782?mt=2

You can Listen to the Global Perspectives on iTunes at:
https://itunes.apple.com/ca/podcast/physical-gold-fund-podcasts/id1056831476?mt=2

You can access transcripts of our interviews at:
https://www.physicalgoldfund.com/category/transcripts/

You can subscribe to our Youtube channel to access these interviews and more at:
https://www.youtube.com/channel/UCXRWzw0vaNgCwo7nTMEAwkA

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following.

This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

This material is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind. In particular, information provided by third parties in this Podcast has not independently evaluated or confirmed. Furthermore, we take no responsibility to update this Podcast to reflect any changes in any of the information presented. Physical Hard Assets Fund SPC and Physical Gold Fund, its officers, directors, employees or associated persons will not under any circumstances be liable to you or any other person for any loss or damage (whether direct, indirect, special, incidental, economic, or consequential, exemplary or punitive) arising from, connected with, or relating to the use of, or inability to use, this Podcast or the information herein, or any action or decision made by you or any other person in reliance on this information, or any unauthorized use or reproduction of this Podcast or the information herein.

EP. 8 Global Perspectives: April, 2020 Interview with Alex Stanczyk and special guest Duncan Cameron

Physical Gold Fund Hosts Global Perspectives with Alex Stanczyk and special guest Duncan Cameron April, 2020

Welcome to Global Perspectives, a new podcast featuring some of the sharpest minds in the world. We delve into the key concerns, opportunities, mindset, and practices of some of the most successful professional money managers, entrepreneurs, and world class personalities today.

This episodes special guest is Duncan Cameron.

 

Topics Include:

*Covid-19 Stay-At-Home update

*US Unemployment Claims have exceeded 26m over the last 5 weeks

*Why a “V” shaped economic recovery is unlikely

*The first crash (wave down) in equity prices has been the most violent in many years

*If this economic crisis were a baseball game, we would still be in the first inning

*Current equity market rally is likely a “suckers rally”

*Patterns from the last Great Depression include: Destruction of businesses in the middle of the supply chain

*End user prices to rise

*First order producers to fail

*Farmers go bankrupt, lose farms

*Rise and Fall of Empires

*US empire in Decline

*China empire on the rise

*During decline of empires other rising nations test the declining empires strength

*US Warships ordered to open fire on any Iranian vessel coming close to US Vessels

*Why we are on the path to the next worlds reserve currency

*How the coming negotiations for the next currency system will be done by sovereigns, and whoever has the largest stockpiles of physical gold will have the greatest negotiating leverage

*Why central banks shifted from net sales to net buys of physical gold

*How the physical reality of physical markets versus futures markets can diverge during crisis

*How the problem in the oil complex is the opposite of the gold complex – there is not enough storage space for oil, while delivery of gold has been constrained

*Scenario where gold could go no-offer, forcing gap ups in price

*US Energy independance, barring government subsidy, is dependant on an oil price above $35/bbl

 

 

You can follow Alex Stanczyk on Twitter @AlexStanczyk

You can follow Duncan Cameron on Twitter @Duncan_ACameron

You can access transcripts of our interviews at: https://www.physicalgoldfund.com/learn/transcripts/

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Transcript of EP. 7 Global Perspectives: April, 2020 Interview with Alex Stanczyk and Special Guest Duncan Cameron

EP. 7 Global Perspectives April 2020 with Alex Stanczyk and Special Guest Duncan Cameron

Topics Include:

*Gold transfers into China through Russia

*How the US Dollar is moving towards losing its status as the world reserve currency

*The rise and fall of empires *Full spectrum warfare

*Why it may not be not possible to accurately estimate China’s physical gold reserves

*How policies during the French yyperinflation resembles “Modern Monetary Theory”

*The demonization of free speech that disagrees with other ideologies

*How social conditioning is affecting discussions of inflationary consequences

*How the Federal Reserve embarking on a junk bond buying voyage is reminiscent of the French Hyperinflation

*Unemployment numbers are likely higher than reported

*The Federal Reserve publicly saying they can print an unlimited amount of money pushing people towards a loss of trust in the USD

*Break down of supply chains are being projected to cause shortages in food supply and potential civil unrest

*How the economic consequences of the shutdown over coronavirus may be worse than the effects of the disease itself

*MMT violates basic natural laws and disconnects human from labor, removing all incentive

*Honest money versus fiat

 

 

Listen to the original audio of the podcast here

EP. 7 Global Perspectives: April, 2020 Interview with Alex Stanczyk and special guest Duncan Cameron

 

Physical Gold Fund presents Global Perspectives with Alex Stanczyk and invited guests exploring international markets and the complex forces that drive them including geopolitics, economics, and the global monetary system.

Alex:  Hello. I’m Alex Stanczyk, and welcome to Episode 7 of Global Perspectives. Today is April 14, 2020. I have with me my colleague and friend, Duncan Cameron. Welcome, Duncan.

Duncan:  Good day, Alex. How are you doing, mate?

Alex:  Very good, thank you. Duncan is a member of our research team and is a precious metals industry veteran of many years. 

Before we dive in, just a quick note. I know a lot of you watch or listen to our podcasts on YouTube. If you like our material and content, please take a moment to Subscribe and Like the video. It helps a lot with the distribution and circulation which we appreciate a great deal. Also, feel welcome to comment below the video in the Comments area. We love to hear from you and are happy to engage in conversation with you.

Duncan, how is everything going down there in your neck of the woods? Duncan is from New Zealand for those of you who don’t know.

Duncan:  New Zealand is one of the countries that has gone really hard in the lockdown phase. We quickly moved from what we called level two where the elderly should be safe inside and business was still going to a very brief couple of days of level three, and then we went into level four, which was complete isolation, complete lockdown. That’s been running since the 26th of March.

Everyone’s a bit stir-crazy. I go out for a run every day, which is nice, and I’ve been out to a dairy to get a bottle of milk once. That’s the only time I’ve used my car. Yes, everyone’s getting a bit stir-crazy, but the number of deaths and cases is extremely low by international standards. They’re talking about potentially releasing economy back out into the playground within the next two weeks.

Whether that will deal with the bigger issue of the waves of virus that will come back around or whether the damage is greater than the actual disease itself remains to be seen. But essentially, people are really chafing at the bit to get out and start getting the economy back. A huge number of businesses are out of action.

Going down memory lane, Alex, you remember the 2012 China Gold Summit. I went to assist you with Physical Gold Fund. I arrived in Shanghai a couple of days before you did and got scammed as fast as anybody does. The tea scam was quite funny, really. Here I’m not supposed to be scammed, and I was scammed on the first morning, but I got the scammers back. I wanted to go on a guided tour, visit the gold markets, and have someone show me around. After being scammed by these three people and paying some exorbitant amount for a cup of tea, they must have thought I was Duncan Lots-of-Bucks.

Alex:  Yes, you walked into the country and you’re obviously an ATM.

Duncan:  I expressed my desire to want to look at the main gold markets. That’s where we’ve seen many photos popular around that time showing hundreds of people lined up desperately waiting to buy gold.

They proceeded to take me down there and guide me all around, so I got my day’s tour. Then, instead of going to dinner and spending an exorbitant amount of money which is kind of what their real agenda was, I said, “I’m feeling a bit tired now. I want to go back to my hotel.” I got what I wanted.

Again, I arrived a bit earlier than you, and then we had the China Gold Summit where you were a keynote speaker. In fact, your speech was applauded roundly, and you were embraced by one of the senior Chinese hosts of the entire conference. Maybe you can talk a little bit about the actual speech and put it into your own words better afterwards.

Meanwhile, as your trusted steed, I shot off for lunch with a very senior executive of one of the world’s largest security companies. They openly talked about the amount of gold that was coming in via Hong Kong and being shifted across the border. At the time, it was put in the conspiracy category. Everyone was a blogger or writer, and they basically said that China can’t be storing as much gold as they’re storing. 

While China may not be completely candid or may be slow to release data on the amount of gold, they had said some years ago that they wanted 10% of their foreign reserves denominated in gold. That was their big picture goal. They had like 500 tons and then they said they went to 1,000. 

They released it all very slowly, but the real belief behind the system was that gold was being hoarded on a super massive scale. This was done not only by the thousands of people down at the gold markets but by sovereign wealth funds acting on behalf of central banks to effectively squirrel away lots and lots of gold.

Somebody like you and me, we’re at the call phase here, but I’m sitting there with a senior executive who has credibility. We’re just talking as people inside the industry jabbering on about, on the outside, the Physical Gold Fund side or AFE2 and what was happening at the refinery level as gold was leaving the Swiss refineries and being broken down. It was leaving there, and you even told me a story that was talking about apples at the bottom of the barrel in terms of the amount of gold coming out of the place.

But here I was witnessing and hearing the firsthand accounts of someone who is virtually watching the gold coming into the country on the level of hundreds of tons a year, and this was happening year after year after year. He recounted the stories of when I first started getting in the gold mining space and you could buy gold mining stocks for gold mines in China. China, the world’s largest gold producer, right?

In time, they started to bring in a law that said, “Look, you can own shares in these gold mining stocks, but no gold leaves China. All the gold must be sold to China itself, PBOC, whatever you want to call it.” Eventually, of course, all their gold mines were effectively nationalized.

I’m kind of struck by this article from GATA, and I’m going to pose this question in light of what I’ve just talked about. Alasdair Macleod said it is possible that the total is much higher – talking of gold – that the central bank is 20,000 tons and the Chinese people have another 12,000 tons for a total of 32,000 tons. If and when China dumps its $1 trillion in U.S. treasuries and buys more gold and then backs its currency, the yuan, with the gold, the yuan could become the world reserve currency for all of China and associated benefits.

This is something that’s been popped out there for a long time. At some point, as America and in fact the entire world is bursting deep into money printing, what are your thoughts with respect to China playing the gold card? Jim Rickards talked about it in his book, Currency Wars, where he took that position in the war room scenario. What are your thoughts about China playing the gold joker?

Alex:  I think we’re headed towards an inevitable dethroning of the U.S. dollar. Whether China is able to replace that or not as the world’s reserve currency, I don’t know. There are a lot of other factors including all of the treasury markets and whatnot that the U.S. has as part of the world’s reserve currency and are massively deep markets in terms of the ability to absorb capital. I don’t know that the yuan is capable of doing that, but I’m not saying they may not end up being the next. I mean, it’s pretty obvious. 

I saw a really interesting article by Ray Dalio who is the founder of Bridgewater Capital, one of the largest private hedge funds in the world. They run money for sovereigns, sovereign wealth funds, the largest pension funds in the world, etc. He was pointing out the rise and fall of empires and how the U.S. is essentially a waning empire while China is a rising empire. We have that scenario throughout history. This is nothing new, and I’m not trying to say anything critical about the U.S. or promote China or anything like that. It’s just history. China was the world’s leading country in terms of empire something like four different times in history over 3,000 years. They peak and sort of take the lead, then they fall behind, and the lead is passed between empires.

When there’s a waning empire and a rising empire, it inevitably leads to conflict. That’s what happens when the rising empire tests the waning empire. I think those tests are happening and are playing out on the world stage in terms of the financial aspect of it – financial warfare. Jim Rickards and I have talked about full-spectrum warfare for a long time. That is all of the above; it’s kinetic, financial,  cyber, possibly biological, social engineering, and all those types of things. There’s been financial warfare going on between the United States and China for a very long time now.

It’s interesting what you said about the data, what they own, and the gentleman you were sitting next to at that lunch who is a very highly placed director of one of the largest private security companies in the world. It’s fascinating what you learn sitting down and talking to people at lunch or over a cocktail, isn’t it?

Duncan:  It certainly is.

Alex:  My understanding is that he was talking about riding with these trains of tanks coming out of Russia full of gold. There are so many people in the industry, newsletter writers, who have written about this over the years speculating about how much gold China has. The truth is nobody really knows.

I explained this to one of these guys one time and he was like, “Well, how can they get away with not reporting the data? We have import/export figures where it shows how much gold is imported and exported.” I responded, “They’re a sovereign entity. If they’re bringing gold by the People’s Republic Army across the Russian border … Why does that have to be reported on the import/export data?” You understand what I’m saying?

Duncan:  Exactly.

Alex:  What we’ve learned over the years is that China reports what’s in their interest to report. If it’s not good for their public image or whatever it is they’re trying to portray at the time for them to report certain data, guess what? They don’t. They didn’t report their gold reserve data for a long time, then all of a sudden, they reported it. What ended up happening is that one of the sovereign wealth funds that was purchasing physical gold shifted it from their balance sheet onto the PBOC’s balance sheet, and voila – the gold total went up. Who knows how much they’ve got off balance sheet?

In answer to your question, it’s going to change, but I don’t know what it’s going to change into yet. The battle for that is being waged right now.

Duncan:  I’ve reopened one of my favorite books of all time by Andrew Dickson White. It’s a free download called Fiat Money Inflation in France set in the time of the late 1780s. You can get it from the Mises Institute, and I encourage everybody to read it. There are a lot of amazing statements in this book about the history of the time, but I think this is one of the most telling that I have never been able to get out of my head:

“In the municipality of Quillebeuf, a considerable amount of specie being gold, having been found in the possession of a citizen, was seized and sent to the Assembly. The people of that town treated this hoarded gold as the result of unpatriotic wickedness or madness instead of seeing that it was but the sure result of a law working in every land and time when certain causes are present.” 

People were ostracized, because the French government had basically said, “We’re going to print millions and millions of assignats to cover the entire national debt. As Mirabeau gave his speech, the people applauded, shouted, and raved. They saw this as a salvation to what were far more underlying economic problems. They were effectively engaging in what we would regard as modern monetary theory right now.

At PGF, we try and pride ourselves on being ahead of the curve. We tend to be contrary in nature looking for things under the carpet that others don’t. The rising price of gold is something we, in our industry, figured out is inevitable in a world that has just kept printing and printing and creating more money and credit. For us, we’re now watching the manifestation of this with a fascination, but it is not new and is not surprising us.

We start to think ahead about what happens to people who own gold in the form of government creating heavy taxes or vilifying and persecuting because we should all buy into this one world financial system where we’re going to special draw right all from the IMF lots of money, and you’ll get your allocation of money, and how dare you hold gold. Meanwhile, renegade nations like China just say, “No, we’re going to trade gold. You can actually swap our currency for gold,” which is what Alasdair Macleod talks about in his article.

What are your thoughts on a return to life in France where the value of their money became less and less? If you read the book, it talks about how business activity just continued to drop. They pumped in more and more money, but it seemed to have less and less effect. We’re going back through history right now, aren’t we? It is quite scary.

Alex:  It’s eerily familiar to what’s happening right now. You know what’s fascinating to me? People around the world are cheering this money printing. 

There is actually a term for people who say that inflation is dangerous. People like you and I are called inflation truthers by the people who are MMT fans, the people who are, “Yeah, just print it all” fans. Apparently, they’ve come up with a way to demonize our reporting or talking about it. I call it free speech, just sharing our thoughts and opinions on why inflation is dangerous to the common man.

Like all things, I think you pointed out quite succinctly that there’s a war going on for people’s minds right now in terms of getting them to believe certain things about both economics and money. There’s a lot of censorship of speech, and it’s taking the form of social conditioning.

Calling someone an inflation truther is demonizing them and trying to shut down anybody who’s attempting to raise warning bells about potential inflationary consequences. It’s a basic tactic, right? 

Duncan:  When you look at how this all started off, it talked about getting money like in New Zealand. I’ve got a big staff level across three companies, and we got a six figure sum basically to look after people’s salary and a subsidy form. They’ve got a big, fat bank account full of money to pay a subsidy to people for quite some time.

Then you get into the area of companies like a company here in New Zealand where it’s the same thing. I spent the entire weekend studying all the American airlines. In New Zealand, they bailed out Air New Zealand years ago, but they took a 52% stake, and of course, the more you take a stake, the less it becomes a private or capitalist system. This is the battle raging in the United States right now over what degree does America take ownership or take a stake for the sake of the tax holders, people like you and everybody else who has to pay taxes, to bail out private companies. The same argument happened in ’08 with the banks.

Obviously, what we’ve got right now is a situation where the Fed starts off buying investment grade bonds, and now they’re saying they’re going to buy non-investment grade bonds. They’re going to buy ETFs. 

Alex:  They’re buying corporate junk bonds to the tune of $2.2 trillion if I remember correctly.

Duncan:  Yes, that’s right, $2.2 trillion. This is exactly what happened in inflationary France, and it did not go well for them. At the end of the day, you can’t print your way to prosperity. 

Alex:  Did they have a hyperinflationary episode from that particular time?

Duncan:  Absolutely. People hoarded goods and ended up starting to have to barter things. The money had no value, yet they kept printing more and more. The same happened in the Diocletian Crisis of the Third Century in Ancient Rome and has happened in Weimar, Germany.

We talked about this a couple of weeks ago. You talked about the amount of bread on an island, the amount of currency, and what happens when you just print more currency, because there’s only so much bread to go around.

The modern monetary theory is now completely being embraced as it has been in the past. The Fed has gone into total and 100% buying everything. This article I’m reading right here talks about the link between what’s happened and the Lincoln greenback. We call it the Continental. They would say, “Not worth the Continental,” because the currency that was being pumped out wasn’t worth anything.

At the same time, you’re seeing gold jump. Interesting things have happened, as you know, in the separation. You sent out to our chat group the separation and spread between physical gold and paper gold. Every second month on the COMEX, there’s a deliverable month and then a non-deliverable month. April is a deliverable month.

The COMEX raise margins to arrest the rally in gold, forcing longs to liquidate. Now, this has happened many times before in the COMEX over various metals. The official story was there was a shortage of 100-ounce COMEX deliverable bars, and the rules of delivery had to be changed to accept 400-ounce bars instead. Those LBMAs couldn’t be smelted down, and the Swiss gold refinery supposedly shut. That was the official story.

But we know that, and it happened in inflationary France. Gold became worth so much that people hoarded it because the money wasn’t worth anything. The market is already sensing the same thing right now as we see the separation of physical gold to paper gold. They play around with margins, that causes longs to liquidate, and then you have a bit of a drop. In that case, at the time of reading this article, it had been $1,700 and then it dropped back into the $1,630s as we approached the settlement date of the COMEX month.

Yet, here we are today. On my screen, it’s $1,726 and was up to $1,739. In my currency, gold just about hit $2,900 yesterday, and we’re going to hit $3,000. 

Meanwhile, these separations of the paper price and physical price are quite profound. You’ve commented, and I’ve sent you little snips of our physical gold spread. I guess this is something we’re going to see more of – the separation of physical gold to paper gold and the waking up amongst the general markets that you can play with this monopoly paper, but you can’t get gold handed to you in any physical form.

Alex:  I think it depends, being honest. I don’t know that there’s a shortage so much of the metal as there is a shortage of manufacturing capacity at the refineries and farther down the chain. If there’s a mint that doesn’t necessarily refine its own metal, if it gets blanks from a refinery and then they produce, these are all manufacturing processes.

It’s not that there’s enough gold. The question is, what does the price have to be for it to clear?

Duncan:  Exactly.

Alex:  Just a couple of weeks ago, Jim and I talked about if there are bottlenecks in the retail market in particular. When we were talking about clearing out the whole precious metals complex, we were talking about at the retail level, not at the wholesale level. There’s metal, but the question is, who is going to be willing to sell it, and at what price? That’s what it really it comes down to.

I’m curious about something you mentioned just a minute ago. We’ll get back to the whole inflationary topic because I think we should talk more about that, but you had mentioned that you got a subsidy from the government to cover payroll. I know you own three different companies. For those of you who don’t know, Duncan is a very successful business owner in New Zealand with multiple corporations. How many employees would you say you have total at peak? 

Duncan:  It’s a mix of contractors and employees that is probably around about 60 across the three. That’s not big by international standards, but in a country our size, it’s reasonable.

Alex:  They gave you a substantial subsidy to cover payroll. For how long do you think is that going to last?

Duncan:  They gave it for 12 weeks. In fact, the law came out that even if we make people redundant, which we’ve started to do for a couple of individuals in one of the businesses, whatever happens, you are required to pass the subsidy on for the entire 12 weeks. The government is effectively trying to say, “Look, we’re going to give you the money. If you have to let someone go, we understand, but you keep paying them their subsidy so they don’t have to come to government.”

Government wants to eliminate the processes of application. In fact, New Zealand is probably ahead of the curve. I’m watching the slowness with which the U.S. is getting your money up, and Canada is even worse.

Alex:  In the United States, they passed the legislature something like three, almost four weeks ago now, I think.

Duncan:  It’s unbelievable.

Alex:  I and a lot of entrepreneurs have been asking, “Has anybody gotten approvals on any of these loans? Is anything happening here?” They’re like, “No, no, no, no, no.” The first time I heard of one was today. The person received $10,000, and it’s basically $1,000 per employee which is not going to help at all.

I saw something that was really interesting to me the other day. A guy had done a calculation based on the original bailout package they came up with in the United States, and he figured out that for every man, woman, or citizen in the U.S., it was the equivalent of $40,000 per person. They were basically saying, “We’re going to cut a check for $1,200 per individual to help through this process.” His point was that you don’t even need to know where the $38,800 is going to figure out that you’re probably getting shafted there. I thought that was pretty interesting.

Duncan:  As they pumped that money out, we uploaded our application. Within two days, I had $100,000 for about 17 employees. I had $100,000 in my bank account just like that, and that was covering 17 employees, not the contractors. Contractors apply separately and get their money direct from the government.

Here’s another interesting thing you can comment on. Some of those contractors take the money we pay every month and don’t pay tax. Naughty, naughty, naughty. When they try to upload an application for a subsidy, the government says, “We can’t see you in our system.” Then they say, “Well, what can I do?” And they say, “You need to go register for unemployment.” The subsidy is $580 a week, and the unemployment benefit is less.

Suddenly, you have this huge group of people who have operated below the radar of taxation in a situation where they’re being flushed out. Their deeds have found them. They’re reaping what they’ve sown. They just look at them when they phone up saying, “I uploaded my application,” and they get phoned by people in government. We’ve heard various ones had this happen. They get phoned up, and they basically say, “Well look, you’re going to need to apply for just an unemployment benefit.”

Whatever projection countries are doing around the world, it’s one thing if you’re a taxed person following the rules and your subsidy is paid out very quickly, but if you’re working off the grid, which is what a lot of people do, they effectively are going to be flushed out. You’re going to see unemployment numbers a lot larger than is actually official, because the government hasn’t grappled or come to this understanding.

Alex:  This is happening in the United States as well. The last time we talked, we were discussing how unemployment was skyrocketing. The number of unemployment claims in the United States passed 16 million last week. This is historic. 

Duncan:  Yes, I saw that 16 million. They’re talking 30%. The Great Depression was 25%, one in four, and now they’re talking in the U.S. of potentially being 30%. That is a Great Depression. That’s not a recession. A recession is just two negative quarters.

Alex:  The markets are happy. Just like you were saying when the French came out and said that they were going to print, print, print. Well, that’s what’s happening in the U.S. Everybody is excited, markets are buoyant, but people have not figured out that when this Coronavirus lockdown ends, it’s not just going to go back to normal.

Duncan:  Until we have vaccines, people aren’t going to want to go to football stadiums. They’re not going to want to get on planes. They’re not going to want to congregate in large meeting places.

Alex:  There are entire industries that are changing over this. No doubt. 

Duncan:  They’re not going to feel comfortable. You can’t return restaurants and eating places back to normal until people know that if they were to get sick, there’s a guaranteed way they can get better. A lot of people are overweight, obese, and have high blood pressure or underlying health conditions that mean they are in the firing line of a respiratory disease that will drown their lungs.

The reality is vaccines take time to produce. I know because my wife works at Thermo Fisher Scientific as a site leader here in New Zealand. She’s following the epidemiology a lot closer than I am, and I’m understanding that whilst there are lots of breakthroughs that they’re pushing and driving hard as fast as they can, there is the hardcore reality that people will not want to go back to their normal lives even if they financially could until they feel they’re not in a revolver playing roulette, a revolver where there’s one bullet out of every six that’s got their name on it. That will take time.

Meanwhile, the economic effects will start to flow through in the numbers around the world. New Zealand is not alone. This business of a bunch of my guys in the Korea business who keep all their money that’s paid to them and they don’t pay tax is not … There are guys doing cash jobs on building site. There are all sorts.

We’ve got a cleaner that comes around every week here to our house. She insists on being paid cash. That’s not my problem. I have not committed a crime giving her cash. But guess what? Has she and her mate gotten the ability to go to the government and apply for a subsidy when she’s just getting the money paid total and keeping it in her pocket? Suddenly, she’s going to go into those numbers, too.

I don’t think the government has fully factored this in. The economists and all the people who are blasting into all these markets at the moment thinking we’re just going to have a V-shaped recovery, I don’t think they’re realizing that economic systems and supply chain solutions are a complex model. Jim talks about this a lot with you. Systems are complicated. They have layers and layers and layers, and they’re all interconnected.

As an ISP, we’re building towers for the government and connecting all the school kids who can’t get Internet. We’ve been given grant money to build, but even we are constrained by people below us who are not deemed essential. Their businesses close, so I can’t get the parts.

Alex:  That’s something I want to address, but before we go there, let’s talk briefly about what a lot of people have not factored in. One is the fact that there has been a lot of destruction of small and medium businesses that may or may not restart. A lot of them probably won’t.

Duncan:  Not initially. Not for a long time.

Alex:  That’s going to affect supply chains and things like that which I want to talk about more in a minute. But something else has happened recently that was pointed out by Anthony Pompliano. (He goes by Pomp.) He has a podcast, and he said that he’s noticing that because of Coronavirus, people are at home. They’re trying to figure out what’s happening. A lot of people don’t understand why things are going the way they’re going, and they’re learning about the monetary system because they have to right now. They’re watching the Fed. This has never happened before in history, and I think this hasn’t been factored into the equation for a lot of people. In public, the Fed is saying, “We can print an unlimited amount of money,” but they have never done this before.

Duncan:  That’s exactly what Mirabeau told the French, that you can back it all with land. You can print hundreds of millions assignats, and we’ll just back it with the land of France.

Alex:  I think the important part about that is it’s a psychological vector. Jim talks a lot about this. It doesn’t matter how much money is actually created; hyperinflation is a psychological event. In other words, when people lose trust in the currency and decide it’s not worth anything, that’s when hyperinflation occurs, because they try to get rid of it and buy anything of value such as hard assets. Then prices skyrocket. That is hyperinflation. It’s a psychological event, right?

Duncan:  That’s right.

Alex:  The Fed just came out and said in public for the first time in mankind’s history, “We can make unlimited amounts of money,” and you have all these people sitting at home watching this. He pointed out how many people are starting to think, “If they can just make an unlimited amount of money, what’s the point of taxes? What’s the point of paying rent? What’s the point of going to my job? They can just make the money.” That is the kind of thing that could create that sort of effect, and people are starting to wake up to it.

Duncan:  Because economic models are complex, every layer is required to be at an equilibrium in order to keep prices at a sustainable level. Nowhere is that more obvious than in a courier business where we are charging big callouts on top of the normal charge to send a driver to go, because we don’t have synergies of numbers doing the normal number of deliveries.

At the moment, they’ve said food is essential, farms are essential, anyone that’s in the supply chain is essential. But companies like mine still make choices as to whether we’re going to do their job or not. If you want to pay us enough, yeah, we’ll do it. And if you’re not, then we’re not going to bother. We’ll just let the job go.

Alex:  Speaking of which – supply chains, this is super-important, right? Guggenheim just came out with an analysis predicting that there’s going to be shortages of goods and food in emerging economies and markets very soon, which they also said is going to lead to social unrest.

A lot of people don’t realize this is true for not just emerging market economies but for well-developed economies as well. Logistically speaking in most major cities, there’s only three days’ worth of food supply. If those trucks stop rolling in with food, that becomes a problem very quickly, especially for cities with high populations. We’re starting to see the first signs of the U.S. food supply chain breaking down.

The exact same thing happened during the Great Depression. 

Duncan:  Food rotted in the fields.

Alex:  We’re seeing reports of this coming in now where they’re throwing away literally tons of food in some cases, thousands of gallons of milk are just being dumped. The reason is that the companies in the middle – the distribution, logistics, and transport companies – are all failing and there’s no one to buy the food from the farmers to transport it to the cities.

Duncan:  That’s right. You go from a COVID health event, which is an immediate employment event, to a financial event that becomes a social event, and then people get angry and they get out. This is eventually what happened in France. As most people know, it didn’t go so well for the leaders in France, and they started to guillotine a lot of people.

The reality is, people get really angry because they can’t feed their families, they can’t pay their mortgage, they can’t get ahead, they feel trapped. It may start off as a health event, but what becomes an employment event then becomes a financial event, which then becomes a social event.

Alex:  So, the question then becomes, “Is the cure worse than the disease?”

Duncan:  That’s right. That’s what’s being debated among leaders of our country and every country all over the world. 

I wrote about the monetary genie in the latest newsletter that’s just been released to AFE people. I listed all the countries including the Bank of England, Japan, the European Central Bank, and the U.S. If I wrote another newsletter next month, those numbers would be even larger and then larger and then larger.

This is what happened. They tried printing hundreds of millions of assignats in France, and it didn’t work, so they printed more. Then they just printed more and eventually people lost confidence.

Alex:  Yes, it was a psychological event. At one point, people said, “Well, if you can just make unlimited money, then really what’s the point of all of this?”

Duncan:  That’s right. Why bother paying taxes? There’s no need to pay taxes.

People want to call us “gold bugs,” but we’re not gold bugs at all. I don’t call myself a gold bug; I’m just a student of history. I want to understand how history defines financial events and what do people do to cover themselves for situations where there is a margin call? And those margin calls happen regularly.

Warren Buffett has famously said, “Until the tide goes out, you don’t see who’s swimming naked.” In reality, it’s a voyeur’s paradise. Just go down to the beach, and everyone’s naked because the tide has gone out, full stop. In other words, everybody that is levered up to the gills, which is really what people are, are now realizing they’re highly exposed.

At the moment, the government is just trying to put it all on ice by saying, “You can’t be kicked out of your rental house. Landlord, you can’t take your tenant to task for not paying rent. Commercial landlord, you can’t kick your tenant out. Tenant, if you can’t pay your lease, then don’t pay your lease. Employee, you can’t fire or let go your person, or if you do, you’ve still got to keep paying them. We’ll give you money.”

There is an artificial attempt on a massive scale to somehow rescue a system, but the financial system was an unhealthy, obese, fat, overweight, liver-damaged, alcohol-drinking mess.

Alex:  Careful, mate. You’re describing the average American right now.

Duncan:  No, the average Kiwi, the average Australian man, leads. Our Pacific island communication has skewed the obesity rate somewhat higher than is probably fair because we have the highest Polynesian percentage in the world. It’s like 10% of New Zealand is now effectively. They naturally put on weight more so. Look, Australia has high obesity. If you’ve got high blood pressure or high obesity, Corona’s not good. This Coronavirus is not good.

Alex:  No, it’s not. I think America is particularly vulnerable. 

What you just said a minute ago that really stood out to me is the term “gold bug.” People are getting this crash education in honest money right now. I say that because it’s becoming really clear what dishonest money is.

For people in America who the government’s promised them a $1,200 check and $38,800 is going to bail out the people who are closest to the issuance of the currency, the bank owners, the large corporation owners, etc. The 1% basically are getting that much richer and the average American is getting that much poorer. It’s clearly an unjust system, and people are catching on to this.

The word “gold bug” is just like the word “inflation truther.” It’s another way to demonize people who are pointing out the truth and to try to get them to shut up about it. As far as I’m concerned, I know you’re a seeker of truth, I’m a seeker of truth, we have always been. We call gold honest money because you can’t tamper with it.

Duncan:  No, you can’t.

Alex:  Unjust weights and measures are an abomination unto the Lord, right? Whether it’s the dollar, the New Zealand Kiwi, the Euro, whatever it is – if the value of the purchasing power is changing all of the time, how is that a usable unit of measure? If I was a carpenter trying to build a house and I pulled out a slide ruler and the inch or centimeter or whatever you’re going to use as your unit of measure was moving on you all the time in terms of talking about money’s purchasing power, how are you going to build a stable foundation with that?

Duncan:  That plays into the bigger question that the U.S. currency is still the senior and premiere currency to just about all the others. I’m sort of getting the feeling that the U.S. would like to devalue their currency.

Alex:  I think it’s happening, but I don’t know that the U.S. would like it. There’s the saying, “cui bono.” It’s a Latin phrase meaning, “Who benefits?” I say this all the time: In all things “cui bono,” who would benefit from a debased U.S. dollar? Who exactly would benefit from a United States that was second in the world, that was no longer the leader in things like freedom, human rights, and all that other kind of stuff that matters to free people? Who would benefit?

I’m just going to leave it at that. I’m not going to dive into any theories. I’ll let people read between those lines all they like, but there’s definitely something going on as far as terms of debasement of the currency. That is for absolute certain, and there’s a reason why people are buying gold all around the world right now. There is a reason why our business is doing quite a bit more business than normal. There’s a reason for those things, and people are starting to figure it out.

That about uses up our time, Duncan. Is there anything you want to wrap up with?

Duncan:  No, that’s a perfect sign-off note. Obviously, we’re all going to be looking more at how we emerge out of this COVID crisis. 

I find it interesting, that the Bible talks about war and pestilence, and if I look at the Kondratiev wave, as you came out of winter, the people were hungry and angry. Regarding the world’s population at the moment, it’s all very well to hibernate economies like a mean bear that’s gone into hibernation, but basically, they want a pot of honey and milk and food sitting straight out the entrance of the cave. The reality is the bear has to go out and get the food once it’s been hibernating, and the longer you hibernate, the hungrier and meaner you’re going to be.

I’m looking at where we’re heading out of this and how people will be desperate to try and get fed, quite literally in all aspects of their situation. There are going to be a lot of distortions, and the socialism time to think that we can try and look after everybody is going to fail. It’s going to fail really, really poorly like it always has in history. There’s no such thing as not working for your money, and you can’t prosper just by being handed free money.

Alex:  Yes, it’s a disconnection from reality. It breaks us from the natural laws in a way that is simply unsustainable.

Duncan:  As we close off this session, I’m going to flag the possibility that the next stage at some point down the line will involve wars. Famine and pestilence, wars and pestilence, is not a pleasant topic, but it’s going to create its own sort of issues and problems. For posterity’s sake, I’m going to get it out there right now that in history, like coming out of Kondratiev wave bottoms and going into the spring, people are hungry and angry.

Nations are angry. They tend to use that psyche that’s been built up by the people to rally it against others to take the attention and focus off the pain they’re in. If we were being true to ourselves to imagine how we’re positioning and going forward, not only are you going to need to own precious metal, you’re going to need to be very, very aware of the season and the time we’re in. You’re going to have to weather that, because we’re all in it together. 

Alex:  Duncan, thanks a lot. We’ll do this again in a couple of weeks to catch up and see where we are. Be safe.

Duncan:  Good stuff. All right, mate. Catch you later. See you guys.

You have been listening to Global Perspective with Alex Stanczyk presented by Physical Gold Fund. Recordings may be found at PhysicalGoldFund.com/podcasts. You can register there for news of upcoming interviews with Alex Stanczyk and other thought leaders in the fields of geopolitics, economics, and the global monetary system.

 

You can follow Alex Stanczyk on Twitter @alexstanczyk

You can follow Duncan Cameron on Twitter @Duncan_ACameron

You can access transcripts of our interviews at:
https://physicalgoldfund.com/category/transcripts/

You can subscribe to our Youtube channel to access these interviews and more at:
https://www.youtube.com/channel/UCXRWzw0vaNgCwo7nTMEAwkA

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following.

This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

This material is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind. In particular, information provided by third parties in this Podcast has not independently evaluated or confirmed. Furthermore, we take no responsibility to update this Podcast to reflect any changes in any of the information presented. Physical Hard Assets Fund SPC and Physical Gold Fund, its officers, directors, employees or associated persons will not under any circumstances be liable to you or any other person for any loss or damage (whether direct, indirect, special, incidental, economic, or consequential, exemplary or punitive) arising from, connected with, or relating to the use of, or inability to use, this Podcast or the information herein, or any action or decision made by you or any other person in reliance on this information, or any unauthorized use or reproduction of this Podcast or the information herein.

EP. 7 Global Perspectives: April, 2020 Interview with Alex Stanczyk and special guest Duncan Cameron

Physical Gold Fund Hosts Global Perspectives with Alex Stanczyk and special guest Duncan Cameron April, 2020

Welcome to Global Perspectives, a new podcast featuring some of the sharpest minds in the world. We delve into the key concerns, opportunities, mindset, and practices of some of the most successful professional money managers, entrepreneurs, and world class personalities today.

This episodes special guest is Duncan Cameron.

 

Topics Include:

*Gold transfers into China through Russia

*How the US Dollar is moving towards losing its status as the world reserve currency

*The rise and fall of empires *Full spectrum warfare

*Why it may not be not possible to accurately estimate China’s physical gold reserves

*How policies during the French yyperinflation resembles “Modern Monetary Theory”

*The demonization of free speech that disagrees with other ideologies

*How social conditioning is affecting discussions of inflationary consequences

*How the Federal Reserve embarking on a junk bond buying voyage is reminiscent of the French Hyperinflation

*Unemployment numbers are likely higher than reported

*The Federal Reserve publicly saying they can print an unlimited amount of money pushing people towards a loss of trust in the USD

*Break down of supply chains are being projected to cause shortages in food supply and potential civil unrest

*How the economic consequences of the shutdown over coronavirus may be worse than the effects of the disease itself

*MMT violates basic natural laws and disconnects human from labor, removing all incentive

*Honest money versus fiat

 

 

You can follow Alex Stanczyk on Twitter @AlexStanczyk

You can follow Duncan Cameron on Twitter @Duncan_ACameron

You can access transcripts of our interviews at: https://www.physicalgoldfund.com/learn/transcripts/

You can subscribe to our Youtube channel to access these interviews and more at: https://www.youtube.com/channel/UCXRW…

 

 

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following. This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

This material is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind. In particular, information provided by third parties in this Podcast has not independently evaluated or confirmed. Furthermore, we take no responsibility to update this Podcast to reflect any changes in any of the information presented. Physical Hard Assets Fund SPC and Physical Gold Fund, its officers, directors, employees or associated persons will not under any circumstances be liable to you or any other person for any loss or damage (whether direct, indirect, special, incidental, economic, or consequential, exemplary or punitive) arising from, connected with, or relating to the use of, or inability to use, this Podcast or the information herein, or any action or decision made by you or any other person in reliance on this information, or any unauthorized use or reproduction of this Podcast or the information herein.

Transcript of Jim Rickards and Alex Stanczyk – The Gold Chronicles EP 92 March 2020

Jim Rickards and Alex Stanczyk, The Gold Chronicles March 2020

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Topics Include:

*Opening salvos of Global Financial Crisis II (GFCII)

*The entire precious metals complex (gold and silver) has been cleaned out globally

*The best time to act has past, now is the second best time to act

*The global run on precious metals is probably less than 5% of the population, when the majority catches on to damage done to USD the demand could be historic

*Price dis-connect between paper and physical gold price

*How price discovery in the gold market is resolved *What happens when the Swiss refineries open again

*The effect of key relationships with Swiss refineries on access to gold and silver

*Mining output dropping due to mines getting shut down reduces available supply of gold

*US Unemployment Claims hitting record levels, 3.28M claims in one week

*Fed injecting capital into system trying to prevent liquidity freezes (Ice-9)

*Why we are entering the next Great Depression

*In comparison, during “The Great Depression” Dow Jones dropped 89%

*The Great Depression played out over 3 years, we are a third of the way there in 3 weeks

*Consequences of Supply Chain Shutdowns

*Why the US could lose up to 50% of its economic output by the end of the downturn

*The social and political consequences of QEternity *What happens when complex systems collide

*Regarding mass migrations and unrest, watch South Africa and Mexico

*Full Spectrum Warfare – Financial, Biological, Cyber, Social Engineering, Kinetic

*What are the chances we will see kinetic warfare

*Why China could be eyeballing Taiwan during the crisis

*How the Covid-19 numbers out of China are questionable

*CARES Bill – Whats in it

*Whats happens to gold if we see massive deflation (Great Depression II)

*The two ways gold is revalued in a massive deflation

*It took 25 years for US markets to recover from the Great Depression

*Jim: “Be wary of suckers rallies”

*Practical things people can do during this crisis

*Spoiler – Jim’s new call on the US Presidential election and how the crisis has changed the probabilities

 

Listen to the original audio of the podcast here

EP. 92 The Gold Chronicles: March 2020 podcast with Jim Rickards and Alex Stanczyk

 

Physical Gold Fund presents The Gold Chronicles with Jim Rickards and Alex Stanczyk offering insights and analysis about economics, geopolitics, global finance, and gold.

 

Alex: Hello. My name is Alex Stanczyk. Welcome to episode 92 of The Gold Chronicles. Today is March 27, 2020, and I have with me my friend and colleague, Mr. Jim Rickards. Welcome, Jim.

Jim: Alex, it’s great to be with you.

Alex: Before we dive in, I’ll let you know that you may access the archive of our podcast transcripts we have done going back several years at PhysicalGoldFund.com/podcasts. If you watch this podcast on YouTube, please take a moment to Subscribe, Like, and feel welcome to comment. We’d love to hear from you.

For those of you who are new to our podcast, Jim Rickards is a Wall Street Journal and national bestselling author who is a well-known and respected expert in geopolitics and a number of other subjects. He has a ridiculous number of degrees and professional credentials I won’t go into, but you may want to go to jamesrickardsproject.com to learn more about that.

The first time I ran across Jim was around 2010. I think I saw you on Bloomberg talking about gold, and I was thinking to myself, “Who is this guy? This Wall Street pedigreed guy talking about gold. Isn’t that forbidden by Wall Street code? You’re not allowed to talk about gold. What’s going on with that?”

Later, I picked up Jim’s book, Currency Wars, and I realized very quickly that I need to get to know him. If you haven’t read his books, I encourage you to do so. They include Currency Wars: The Making of the Next Global Crises, The Death of Money: The Coming Collapse of the International Monetary System, The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis, Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos, and my personal favorite, The New Case for Gold – yes, I’m biased.

Jim, the audience is by now already familiar with coronavirus as well as that we are probably in the opening salvos of Global Financial Crisis II. I’m just being honest and calling it what it is. We don’t have to rehash a lot about how we got here, so let’s discuss where it goes from here. Seriously, how bad is this?

Jim: It’s bad. I think that’s pretty well known. The questions are: how bad, what’s the right way to think about it, how long will it last, and what will the impact be. Those are all big open questions. We can address all of them to some extent, but I think “bad” is a good place to start.

By the way, Alex, thank you for mentioning my books. I’m very grateful for that, and the readers generally like them. The thing about the books is they include some history, some analysis, and some science, but there is mainly a lot of prediction and warning, i.e., here’s what’s going to happen, here’s how it’s going to happen, here’s the impact, etc.

I do a lot of public speaking, interviews, and so forth, and over the years, one of the questions I get asked most frequently is, “Jim, I hear you and understand what you’re saying. I agree. Could you call me the day before and let me know? I’ll sell my stocks to get some gold and all that.”

My response is, “Well, a couple of things. I’m not going to know the day before. I can tell you what’s coming, give you some idea of the order of magnitude, but I won’t necessarily know that day. If I did somehow know the day, I’d probably be a little busy myself. Beyond that, what are you waiting for?” In other words, if you agree with the analysis that something like this is going to happen, why would you wait until it happens?

It’ll be too late. By the time everyone wakes up, 30% of wealth and stocks will have disappeared, which did happen in the last few weeks, and the price of gold will soar. We’ll get into this a little bit more, but right now, if you’re not the Central Bank of Russia, the price of physical gold doesn’t matter. You can’t get any. I can explain that in a lot of detail, but call a dealer and try getting some right now. You can’t do it unless you’re dealing with a well-established relationship.

The irony is, you warn and you warn, but everyone is like, “Thank you, but I’m going to keep buying stocks.” Then it happens and they’re like, “Oh, gee, I should have listened.” That can’t be helped. Human nature is what it is, meaning you can’t change it. So, when you tell people or suggest to them that they ought to buy gold when it’s $1100, yeah, $1200, yeah, $1300, yeah, $1400, $1500, all of a sudden it hits $1600 and everyone’s like, “Get me some gold.”

Guess what? It’s exactly what I said – dealers are not returning calls, the US mint is backordered and not taking new orders, the Royal Canadian Mint is closed, and Swiss refiners still have some output but can’t ship it to the United States because of all the transportation bans.

Brinks has the vault near JFK that’s one of the largest depots of gold in the world outside of the Federal Reserve or the Bank of England, and they’re working half shifts because of coronavirus. Brinks has an alternate facility in Salt Lake City, but they got hit by an earthquake and closed because they have to assess the damage. So, when it rains, it pours. An earthquake is not correlated to coronavirus, but Murphy’s Law. If I ever catch Murphy, he’s in trouble.

Alex: Let’s strangle this guy Murphy, right?

Jim: Yes, as soon as I find him, he’s in big trouble.

Alex: What’s amazing to me is that we’ve had this global run on metal and the whole system is cleaned out. The fact that Swiss refineries have shut down makes it even worse. We’ll probably talk about that more later, but what is fascinating to me is how small a fraction of the human population understands what’s happening right now to have cleaned out the metal complex.

In my estimation, I’d say it is way less than 5% of the population buying the gold.

Jim: Oh, yes. Maybe 1%.

Alex: If that’s the case and we’ve already cleaned out the metals complex, what happens when we start to have problems in the U.S. dollar and people really get switched on to it? It just blows my mind where that could go.

Jim: You’re absolutely right, Alex. We’ve said this a lot. I said when you most want your gold, you’ll be least able to get it. It won’t be about price anymore.

Another interesting disjunction is that people say the futures price and the physical price have diverged. My response to that is yes and no. The futures price is what it is, but it’s not gold. They’re paper contracts linked to the price of gold somehow, someway, but they kind of set the price of gold. That’s not gold. If you want to get physical bullion, a dealer will do spot plus commission.

For spot, refer to the COMEX. It is what it is. For commission, the discount dealers are kind of 2% and another dealer might be 4%, which is higher, but there may be good reasons to be dealing at the higher commission price. Now the commissions are 10% – 15%.

Alex: Yes, they’ve blown completely out.

Jim: Correct. If gold is $1600 and the commission is 10%, add $160, so that’s $1760 for your gold. Is it two different prices? Well, all in, yes. When you count the commission, it is even though that’s really spot plus commission. The 10% commission is five times the normal commission. There is this disjunction even though the way its quoted is spot plus commission, so check out the commission. That’s a reflection of the fact that you can’t get it at all.

As an interesting legal footnote, if you’re a dealer or the man or anybody selling physical gold, it’s actually illegal to sell it for delivery more than 28 days forward. The reason for that is, if your delivery is more than 28 days forward, you’re classified as a futures contract. That’s the difference between the physical. I can deliver to you in one or two weeks, but if I deliver to you in two months, I’m technically a futures contract off exchange, so I’m probably violating the Commodity Exchange Act. I think people – not me, but some regulars – are turning a blind eye to that for the moment, but even dealers who take your order might tell you that you have to wait a month or longer to get the gold.

Alex: At retail, the whole complex is cleaned out.

Here’s a question that came up from one of our viewers. How do we get back to price discovery? Price discovery in the market is broken. One of our colleagues in the industry recently said it’s discovering the price of something, but it’s not physical gold. What is it? How do we get back to normal?

Jim: Again, any contract you make – whether it’s a futures contract, an ETF, an unallocated forward under the LBMA rules or a phone call when a guy takes your order with “I’ll get back to you” – none of those are gold. None of those are physical bullion. They’re contracts, and contracts can be terminated. People can claim force majeure or people can just not show up.

We’re in an environment where you don’t just have to worry about the price and availability; you’ve got counterparty risk. How do you know the person you’re buying the gold from is going to be there when you give them a credit card number? What if they disappear?
I’m not suggesting that’s widespread. I know some very honest, reliable dealers out there who will tell you the truth. They’re the ones who will say, “Thank you, but there’s no gold.”

The answer is, sometimes you don’t get back to normal price discovery. We’re seeing that right now in the stock market. We all know what the stock market has done this past month; it’s dropped over 30%. There was a little rally a couple of days ago, but it went back down again. You get into these big up days and down days, but even accounting for the rallies, it’s certainly down about 30%.

So, what’s going on there? Well, the stock market is trying to reprice.

Alex: As far as price discovery just in the gold markets, I think people are wondering how we fix this. From my perspective, I’m really curious to see how this is going to work out at the refinery level. In my experience in my entire time in this industry, we’ve never seen the refineries close. In fact, as far as I’m aware, they didn’t close through wars, and they didn’t close through the London Gold Pool. This is a really unique event, so I’m really curious to see what happens when they open.

I suspect it’s all going to be deals based upon people they know they trust, just like you said. I think they’re going to be wondering and looking at whether these people are going to stay solvent or not, their counterparties, and they’re going to be doing direct deals. We’re probably going to end up – when I say we, I mean Physical Gold Fund – with what we call refinery spot pricing that’s going to be based upon their book, not the futures market or any of those kinds of things.

Jim: Correct. PGF is one of the funds that has longstanding, positive relationships, a trusted counterparty. You can pick up the phone and they’ll take your call, but if you’re calling from out of the blue or they don’t know you or you’re a fund that started yesterday, they won’t take your call. They’ll say, why waste our time?

Without mentioning names, you and I met with the head of precious metals at one of the biggest refineries in the world several years ago. What we were told at the time was that this particular refinery was working 24 hours a day. They were working triple shifts and could not meet the demand. China wanted more, but they said, “Okay, we’ll sell a lot to China, but we’ve got our longstanding customers, Rolex or Cartier or whoever needs the gold. We can’t cut them off.”

Three years ago, they were at capacity and turning down orders,. Now, they will not pick up the phone unless it’s you or Central Bank of Russia or some very established account. Even then, it may be hard to get.

As to when things get back to normal, it may not be anytime soon, because this feeds on itself. There’s a recursive function. People who didn’t want gold or turned up their nose at gold for years suddenly want gold. “I can’t get it? Well, now I want it more.” So, it feeds on itself.
Alex: That’s the whole world right now.

Jim: One thing I’ve observed is that mining output is flat. I’m not saying it’s disappearing, but mining output has not increased in six years. It’s running at about the same level of several thousand tons a year, but it’s not going up. When you have a fixed supply and skyrocketing demand, you learn in the first week of economics that that makes the price go up.

Alex: Yes, prices are going to have to rise to clear, especially with miners shutting down. A lot of miners are shutting down because of coronavirus. That’s only going to feed into the lack of supply in the system. It’s basically going to have to come from either scrap or people who own it who are willing to sell it, which means that right now, a lot of people are probably willing to and the only thing that’ll change that is the price.

Jim: Correct. With the liquidity squeeze and seeing as the thing – when I say thing, I mean starting with the pandemic – it runs through the economy.

Capital is scarce. The Fed’s printing trillions upon trillions of dollars just to keep the lights on. You can call this helicopter money if you want, but it isn’t really. They’re just trying to keep the commercial paper market, the muni market, the bond market, the currency swaps at foreign central banks, and the repo market open.

Alex: They’re trying to prevent Ice-9.

Jim: Yes, they’re trying to prevent Ice-9, but this is not like extra money. This is a massive amount of liquidity injection just to keep things from getting worse. Where’s the capital going to come from for miners to expand? They might have very attractive opportunities, but capital’s going to be scarce, coronavirus is an impediment, there’s a transportation shutdown, and borders are closed.

I spoke to a major gold dealer a few days ago. Like yourselves, he’s mainly into a physical gold fund and is a guy who is well regarded and plugged in, so his phone calls do get returned. He told me a lot of the things we’re discussing right now. He said your dealer might have a little bit of inventory, and if he has some, he might sell to you out of inventory, but he’s not replenishing, and they’re all going to run out of inventory very soon.

Alex: Yes, I can see that.

Let’s move on to the next topic I think a lot of people are wondering about. Last week, the unemployment claims came in at 3.38 million for the week. Here’s a serious question: is this the next Great Depression?

Jim: The answer is yes. I think we’re already there. The data is going to trickle in over the months ahead, so April 28 or somewhere around the end of April, we’ll get the first quarter’s GDP. Bear in mind that the first quarter ends on March 31st. It you have an awful March, but January and most of February are okay, that’ll be bad, but it might not look as bad as it’s going to get. April is going to be horrific, and second quarter GDP, but we’re not going to get that number until the end of July.

We’ll have plenty of data between now and then, because it is already coming in. You just mentioned one of the data points. By the way, I forget if it was 3.1 or 3.3 million initial claims last week. The previous high was 700,000. This is not just, “Oh, it got a little worse.” No, this is four or almost five times the worst on record. That’s how bad it is.

You’re going to see GDP drop. These are all estimates, but at least 5% or more in the first quarter – bearing in mind you had a good couple months in that quarter – it’s going to drop. Take your pick, 20% maybe in the second quarter.

We’ve never seen anything like this since the Great Depression. You’ve got to get 2008 out of your head. That’s not the baseline, that’s not what’s going on. This looks like 1929. That’s where you have to go to see anything like this. What happened in 1929? From 1929 to 1932, July of ’32 specifically, the Dow Jones index dropped 89%. Let that sink in. It’s down 30%, but what if there’s another 60 percentage points to go? That’s what happened then.

Unemployment went to the mid-20%, around 25%. World trade shriveled, etc. Banks were closed. The President woke up one day and closed the banks for eight days. I’m not saying those exact things are going to happen, but I’m saying that’s how you have to think about this in terms of what’s going on right now.

There is one big difference, however. The difference is that everything I just described about 1929 played out over about three to four years between 1929 and 1933. What we just saw played out in about three weeks.

Alex: Everything right now is accelerated.

Jim: Right. There’s never been anything like this.

Alex: Speaking of that, let’s talk about what’s happening in logistics supply chains.

There are all kinds of small to medium businesses throughout the U.S. economy and the world economy, but I’m talking right now just about the U.S. as an example. Most of the U.S. is in voluntary lockdown. Everybody’s doing the stay-at-home thing, small businesses are closed, and nothing is being moved around unless it’s essential services, etc. I don’t know how many small and medium business are closer to bankruptcy every day this continues.

A lot of these businesses will not be starting up again when people are back to moving around. We’re going to lose huge portions of logistics supply chains throughout the entire economic system in the United States. What’s the worst-case scenario with all of that?

Jim: There’s a worst case and slightly better case, but I think the worst case deserves a lot of consideration.

I saw an interview the other day with Wolfgang Puck and another famous chef. Of course, they’re pleading on behalf of the restaurant business. They said that what you have to understand about restaurants is it’s not just the bartenders and the servers and the people in the kitchen. Yes, they all get laid off, they close the doors, and revenue goes to zero, but it’s that supply chain – the farmer, the fisherman, the butcher, the truck driver.

All the people who supply the restaurants have gone to zero because the restaurants closed. That’s an important part of the economy, but that’s just one slice. Doctor’s offices are closed, dentists, lawyers, accountants, manufacturers, on and on. There’s no need to recite the list, because the list is basically everything you can think of in the economy.

Alex: Everything and everyone.

Jim: That’s the bad part. Now, here are the questions everyone needs to think about. Number one, how much will it drop? The answer is unprecedented in U.S. history. Number two (and this is important), when will it come back, i.e., how long will this last? That’s a big question. And number three, what will the recovery look like? Will it be the famous V where it goes down sharply but comes back sharply, or will it be what they call a U where it goes down, pokes along at the bottom, and then comes up? Or the worst outcome maybe is the L where it goes down and just stays there so you have some growth but not much and you don’t get back to trend.

Thinking about that, you have to ask yourself further questions. We have huge losses, got it, but are these permanent or temporary? Let me make that distinction.

My wife and I usually go out for dinner on a Friday night. We didn’t go out last Friday, and we’re not going out next Friday, so those dinner bills are lost to the economy. Who knows, but hopefully by May or June or something, things will get back to normal and we’ll feel like going out to dinner. But when we go out to dinner, we’re not going to have three dinners; we’re going to have one dinner. The two dinners are permanently lost. That’s a lost economy that never comes back.

If I was out to buy a car and I decide to put that off until August when things look better, that’s a timing difference. That’s a temporary difference. The GDP still got the car, but it was shifted from the second quarter to the third quarter.

So, what’s the mix? Well, 70% of the U.S. economy is consumption and 70% of that is services rather than manufactured goods. So, 70% of 70% is 49%, 49% of the U.S. economy. Those losses may be permanent. Not all of them will be, but I would weight the losses more to the permanent side than the temporary side even though some of it will be timing differences. That’s the first thing.

Now, the second thing. I love talking to people who are twice as smart as I am, and I just got off the phone with somebody in that category.

Alex: Is that even possible? I didn’t know that was possible.

Jim: They’re around, and I try to find them. You always want to be the dumbest guy in the room if you can.

They’re working on what’s called continuity of the economy, which is a little bit more on the national security side. I was explaining on the phone the same thing we’re explaining to our listeners now in terms of permanent.

Remember 2009 – 2010 and what we were hearing from the government, Larry Kudlow, CNBC and all that. Remember the famous green chutes? We never saw the green chutes. It was more like brown weeds. The U.S. economy never got back to the pre-2008 trend. The trend growth in all recovery since 1980 (which is a particularly favorable period) is 3.2%, but trend growth in the last 11 years since 2009 to 2020 is 2.2%.

This is not Trump versus Obama. There’s actually very little difference between the Obama economy and the Trump economy in terms of what we’re talking about. The 2.2% growth is a full percentage point lower than the pre-2008 trend. We never got back to trend. Yes, we grew, but it was a recovery that was technically the weakest recovery in U.S. history.

If you think a percentage point is not a big deal, try applying it to a $20 trillion economy compounded over ten years, and it’s a very big deal. With one percentage point, we’re talking about $5 trillion of lost wealth. That’s the difference between 3.2% and 2.2%.

Alex: That is nothing in comparison to what’s just been lost and what will probably continue.

Jim: That’s my point. Even when we have a recovery, what do we hear now? They’re not using green chutes anymore. Secretary Mnuchin and Larry Kudlow, who’s now a government official, are now talking about pent-up demand. There is no pent-up demand. Again, use the car example maybe but not the movies, the restaurants, and the concerts, etc. that were skipped.

There’s no pent-up demand for that. You’re not going to get two or three, you’re going to get one when you get back to normal. We could be looking at the kind of recovery where we’ll hit bottom and start growing again, but the growth could be sort of 1.8% or 1.9%, not even the old 2.2%.
We’ll coin a phrase on this podcast: this is the new new normal, which is not great. As far as stimulus is concerned, we’ve seen the Fed blow past the old benchmarks.

Alex: Actually, let’s come back to the Fed balance sheet in the CARES Act, but I want to cover that towards the end of the podcast. We’ll also talk a little bit about what people can actually do, because I know people are really interested in that right now and are very concerned. Some people are angry, some people are frightened, so we’ll get to that.

There are two things I want to cover when we hit all that. One of them is I saw a really cool interview the other day with a guy by the name of Jeff Booth. I believe he’s a technology billionaire of some sort who wrote a book called The Price of Tomorrow: Why Deflation is the Key to an Abundant Future. In this interview, he stepped through some socioeconomic consequences for the way the Fed and the government have been operating; the fact that every time we have a problem, instead of just letting capitalism do its thing, we basically inject all kinds of money and blow the bubble even bigger.

I know you do Twitter, and lot of people who follow us do Twitter. I’ve heard a term coming up more and more on FinTwit called financialism instead of capitalism. The moral hazard of that is basically crony capitalism where central banks print, the people closest to the money get richer, and everybody else gets poorer. That’s step one.

Step two, this further drives the wealth inequality gap and causes a greater divide.

Step three, people end up voting for those politicians who are saying, “It’s not your fault, it’s their fault,” whoever they are. It ends up breaking society because of the polarity, and it leads to possibly revolution or war because people are that upset. Do you have any thoughts on that?

Jim: I think that’s a very good analysis, and I think that is next.

I spent a lot of time working with complexity theory. I didn’t invent it, it was invented in the 1960s, but I’m one of the pioneers in applying it to capital markets where it has not been used. In a complex dynamic system, they’ll throw up what are called emerging properties; things that surprise you. Even if you knew everything in the system – which you never do – you couldn’t infer what comes next.

Sometimes complex systems crash into each other. My model for that is March 2011 and the Fukushima event in Japan. What happened? Tectonic plates are one complex dynamic system, and there was an underwater earthquake. It caused a tsunami, and that energy was transferred to hydrology, which is another complex dynamic system.

It could have hit an isolated island, but it didn’t. It crashed into a nuclear power plant. That’s radioactivity, another complex dynamic system. In that Fukushima plant, there were three meltdowns and two hydrogen explosions. What happened next? The Tokyo Stock Exchange crashed, because they were worried about the shutting down of the Japanese economy at the time.

My point is, tectonic plates or seismology, hydrology, tsunamis, radioactivity in a nuclear power plant, and capital markets are four separate, normally uncorrelated complex dynamic systems, each one of which is extremely challenging to analyze. But here, you had four of them crashing into each other in rapid succession.

We’re seeing something like that right now with the pandemic. Epidemiology is an interesting science. It’s like half biology, but once you get past the biology, it’s really just applied mathematics. I don’t claim to be a biologist, but I can do the math.

That one complex dynamic system crashes into the economy, which is a complex dynamic system, but now that’s affecting politics. This will have an impact on the presidential election, and beyond that.

What’s next? Then you get into social disorder and social collapse. I’m seeing signs. I tell my national security colleagues to watch South Africa and Mexico. They’re big countries with important economies. They’re emerging markets, but they’re important economies uncomfortably close to being failed states.

Venezuela and Syria are failed states, but what about Mexico? It’s already more than halfway there with the cartels and the collapse in the price of oil which they’re utterly dependent on. Now throw in a coronavirus.

Alex: And overwhelmed hospital systems.

Jim: Throw in overwhelming migration from Central America. Now, where are you? There are geopolitical aspects of it, not to mention the whole China/U.S. relationship, which I would say is beyond fractured. I would say there’s a new cold war. There already was, and now that’s made that.

Alex: There are verbal war drums going on right now.

Jim: Correct. Of course, you have to look at the economy, but you can’t stop there. You have to go beyond that. I’ll give a funny-sounding example. I grew up in New Jersey and have a lot of family I go back to visit often. Anyone who’s from New Jersey knows that there are two states, North Jersey and South Jersey, and they’re completely different. They don’t like each other, and everyone’s okay with that.

Coronavirus showed up in Cape May where my family lives, which is as far south as you can get. They did the forensics and found patient zero. Patient zero was a New Yorker who had a summer house and wanted to get out of New York. He went to his summer house and started to spread the virus in an otherwise remote part of the state.

Well, they’re just about ready to get out the pitchforks. They’re like, “Hey, you New Yorkers stay where you are. Don’t bring the virus down here.” They want to close the Egg Harbor Bridge. Now, hold on. You’re talking about different states worried about border-type issues, so I don’t want to overstate it. Maybe it’s partly humorous at this stage, but not really.

Alex: I saw a video where there are all these Syrian migrants moving through Turkey trying to penetrate the Greece border. It looked like a scene out of a medieval movie. Under cover of smoke, they were carrying siege ladders to the wall in groups. When you said Mexico, the image that came to my mind is Mexicans trying to cross the border en masse.

Jim: We’re not that far from that. What’s interesting is that the Syrian migration through Turkey into the European Union predates the coronavirus pandemic. Not by much, kind of contemporaneous, but it wasn’t caused by that. It had to do with Turkey being upset at NATO for not backing them up against the Russians in Syria.

They said, “Okay, if you don’t want to support us clamping down on the Kurds and all that, we’ll just turn on the immigrant faucet.” Now, the Syrians are going to get into Turkey if Turkey lets them, but then Turkey abuts Greece, Bulgaria, and the European Union.

The European Union has the Schengen Agreement that says once you get into an EU state, you can go to any other EU state without border controls. It’s not about getting into Greece; it’s about getting into Germany. Once you get to Greece, you can go to Germany, no questions asked.

It starts out that Turkey wants to threaten to flood the European Union with Syrian immigrants because they’re not happy with the treatment vis-à-vis the Russians. But all of a sudden, hold on. Who’s doing coronavirus tests on the Syrian refugees? By the way, Europe is breaking down in the sense that nationalism is back. The French are saying they’ve got to close the border with Spain, or Germany is saying they’ve got to close the border with Austria.

They’re putting up border walls, at least legally, inside the EU. Leave alone what you’re talking about, which is the way of us here. It’s getting nasty out there. Again, it’s an example of how these response functions and complex dynamics start crashing into each other, and that’s exactly what’s happening.

 

Alex: Switching gears, over the years you and I have talked a lot about Full-Spectrum Warfare. For those not familiar with that term, Full-Spectrum Warfare means financial, biological, cyber, social engineering, and one might say, kinetic warfare – the whole spectrum.

I’ll run a quick scenario by you that’s been bothering me. The United States is in a very vulnerable situation, I’m just going to be straightforward. I know I’m not the only person thinking about this, and I’m sure in the Pentagon, they’ve gone through all these scenarios already.

You’ve got a virus that’s crippling the American population, we’ve got the financial crisis which is crippling America financially, and we’ve got a prolonged shutdown of businesses which is going to wipe out substantial portions of the U.S. logistics system, because once those companies are bankrupt, they’re just out of business.

If I were to create a worst-case scenario, the Russia/OPEC oil war drops the price low enough and the U.S. shale industry is underwater, so they all start going bankrupt. That’s how the U.S. is oil independent, so then the U.S. would no longer be oil independent. Hospitals are completely overwhelmed because of coronavirus, the economy has crashed, and logistic systems are busted.

If I was China, Russia, and maybe even Iran, would that not be a perfect time to go kinetic or maybe even wait until U.S. service members are infected and sick as dogs and then go kinetic? There have been reports of Russian Navy activity near the UK. There’s a lot of heightened movement of troops and whatnot.
It’s a perfect opportunity. It’s probably the weakest the United States has ever been in my lifetime. What are the good reasons China or Russia wouldn’t want to do something like that? Are there good reasons they would or are there good reasons they won’t?

Jim: Kind of both, but a lot of good reasons why they would, and it’s already happening. For example, the other day there was a report about one of our aircraft carriers. This means an entire aircraft carrier group that has all kinds of support vessels, destroyers, cruisers, and submarines, and all kinds of stuff with it.

Forgive me if I get the name wrong, but I think it was the Theodor Roosevelt. If it was another vessel, so be it. We don’t have that many, about 11 aircraft carriers in the Nimitz class. Now we’re getting the new Ford class carriers, although I think there’s only one in service.

We only have about 11 of these aircraft carrier groups. Alex, you’re from the Navy, so you know this better than I do. At any point in time, two or three of them are getting maintenance, in dry dock, laid up or getting maintenance. One or two are on kind of R&R, because you’ve got to give the crews a break.

There are really only about four of them deployed at any one time. You always have one in the Western Pacific, one or two in the Persian Gulf, and one somewhere else, maybe in the Med.

The one that’s in the Western Pacific (I believe it was the Theodor Roosevelt) had a huge outbreak of coronavirus. They sent it first to San Diego and then said, “No, we’ve got to get out of here.” That vessel is going to Guam and is out of service, it’s offline. They have to test the entire crew and clean the entire vessel. Again, these aircraft carriers are so big, you can put the Titanic in the hold.

The point is that our primary aircraft battlegroup for the Western Pacific is offline. I’ll leave it to the Navy to get something else out there, but if you were China, what better time to mess with Taiwan? And you say, why would you do that?

It’s the case that the Chinese have been lying about the impact of coronavirus in China. In economics, but applicable here, is something called Goodhart’s Law that says when a metric becomes the object of policy, it loses meaning as a metric. In other words, once you have a number and that number becomes important to how people perceive you, you start manipulating the number and analysts can no longer rely on it.

That’s the case right now. If you use the John Hopkins Dashboard, China has about 81,000 reported cases of coronavirus. The U.S. just passed them and is around 83,000. I trust the U.S. number. Everyone agrees we have more infected than we know because we haven’t tested everybody. That’s fine, but I think the U.S. number is highly accurate. The Chinese number is just a lie. There is very good reason to believe that that number could be ten times higher; they might have 800,000 cases.

Alex: Sure, or 100 times higher.

Jim: Right. There’s some basis for that, so it’s not just speculation. When you squash the truth in one place, it tends to pop up somewhere else. You just have to be looking.

Take the Chinese Ministry of Telecommunications. You might say, “Who cares? What do they have to do with coronavirus? They report monthly cell phone use.” It’s been reliably reported that Chinese cell phones online went down. Last month, 21 million cell phones went out of service, and the Chinese said, “That’s because people weren’t paying their bills.” No. Those people are either dead, disabled, in hospitals or they’ve been rounded up.

One way or the other, that gives you a better idea of the order of magnitude of this. China has come up with a number, and curiously, it doesn’t go up much. They knew the U.S. would pass them, and now they can point a finger at the United States and say, “Hey, we did a better job than you guys.”

Alex: I don’t know that anybody believes China’s numbers.

Jim: No one believes it. This is how taking intelligence training and bringing it into capital markets can be very valuable. I always say if you had to solve a problem and you had all the data, a smart high school kid could do it. The hard problems are the ones where you don’t have all the data and you have to use inferential methods and other techniques.

The week of February 23rd to the 29th was the first week the stock market really crashed. It went down 3000 DOW points that week. Since then, we’ve seen it go down 3000 in a day, but that was the first shockwave, if you will.

The Sunday before the Monday opening, I sent a Tweet and said, “The stock market has been holding up and going up, which it was prior to that, based on improvement in the Chinese data. But everyone knows the Chinese data is a lie. Which is it?”

Since the data was a lie, it meant the stock market had to crash. I said the stock market is going to have its day of reckoning based on the fact that we were getting good data out of Italy, and it was horrific. I trust the Italian data, not the Chinese. All this to say the market was rallying on Chinese lies, but the lies were being revealed by reliable Italian data. Once that sank in, the market was going to crash, and that’s exactly what happened.

MIT economists don’t like to use anecdotal data. Sorry, but there’s another name for anecdotal data, which is the truth, as in here’s what’s happening at street level. It’s eyewitness data, and just because you can’t put it into an MIT closed-form equation doesn’t mean it doesn’t count.

Alex: It’s not a peer-reviewed paper; it’s somebody who’s seen it with their own eyes.

Jim: Right. That’s what we have to do in highly uncertain times with very imperfect data. Let’s get back to the original thread, which is that China is in much worse shape than anyone realizes or they admit. It’s a tried and true technique of dictators that when you’re in trouble, go start a war, because it gets everyone’s mind off it. Since the U.S. aircraft carrier battlegroup has just been disabled, what better time to start a war?

Alex: Our next topic is the CARES Act. I love this thing. Have you read it?

Jim: They throw these names around. Is this the big $2.2 trillion package?

Alex: Yes. It seems like it’s full of pork, but I’ve only seen parts of it. I haven’t read it.

Jim: It’s 1100 pages. Just to be clear, I haven’t read the actual bill, but I’ve read some very good expert summaries and have a pretty good idea what’s in it. There’s a fair amount of pork, but here’s what I would say: First of all, just a quick footnote. It’s $2.2 trillion, but in that $2.2 trillion is $425 billion to recapitalize the Fed.

In one of my books, The Road to Ruin, that came out in 2016, I describe having dinner with one of the members of the Fed board of governors. I said, “I think your bank is insolvent,” meaning the Federal Reserve, which it was at the time because interest rates were a little higher and meant they had mark-to-market losses on their ten-year notes. They don’t mark-to-market, but if they were a hedge fund that did, they would be insolvent.

This board member said, “No, we’re not. No one’s done that work.” I said, “I’ve done it, and I think others have done it.” She kind of harrumphed and said, “Well, central banks don’t need capital.” Here’s a governor of the Federal Reserve, we’re sitting next to each other at a small dinner, and she said central banks don’t need capital. I said, “Well, tell that to the American people.”

It turns out they do need capital, and they’re getting $425 billion from the Treasury. Here’s the point: because they’re a bank, if you pop in $425 billion of capital, they can leverage it 10:0. That’s $4.2 trillion of additional balance sheet.

Take the $2.2 trillion, knock it down to $1.7 trillion for the Fed money, then add approximately $4.5 trillion for the Fed money printing. This is a $7 trillion helicopter drop, not $2.2 trillion. This is $7 trillion of new money.

Forget stimulus. There’s nothing about this that stimulates. This is just to keep the lights on. It’s filling holes.

The Fed has sequentially guaranteed, propped up or bought out commercial paper, money market funds, corporate bond market, muni market, primary dealers, central bank currency swaps with the ECB, Bank of Japan, etc. They’re doing what they need to do to keep the lights on, but none of it is stimulative. It just keeps it from getting a lot worse.

As far as the money the Treasury is spending under this bill, there’s $50 billion to the airlines and $10 billion to the Postal Service. Go down the list and you’ll see cruise ships, theme parks, auto industry, etc. They’re all getting some money, but it’s just to make up the losses. There’s no stimulus, there’s no net new spending in this. This is, “Oh, well, you closed your business. Here’s some money.”

The Small Business Administration is just handing out money, but there’s a condition. If I give you the money and you fire your workers, you have to pay it back, but if I give you the money and you don’t fire your workers, you can keep the money. It’s a grant.

That makes up for a couple weeks of payroll or maybe so you can pay your rent for the next two months. I’m not saying that’s unimportant, but it’s no more than one to two months of makegood pay. None of it brings the economy to a higher level. It just keeps the economy from sinking to an even worse level.

What happens when that runs out? The V people say it’s down and up, but I don’t see it. One of the reasons I don’t see it is, first of all, what we talked about before, which is a lot of these losses are permanent, not temporary. You’re never going to make them back.

Secondly, and this is where the economists fall down, they don’t take into account the psychological aspects, meaning you can give people money, but what if they don’t spend it? Some people have a high marginal propensity to consume, but a lot of people are going to put the money in the bank. They’re going to save it or pay down debt, which is the same thing. It improves your balance sheet.

What they’re saying is, “Thanks for the money. If I haven’t lost my job, how do I know I’m not going to lose it next month? How do I know there’s not going to be another epidemic? How do I know there’s not going to be a rebound of this epidemic? I better save it.” If they save it, velocity is zero.

I like to remind people that $5 trillion times zero is zero, meaning if you don’t have velocity, you don’t have an economy. All this Austrian, NeoKeynesian Multiplier stuff does not apply. There are also other reasons why it doesn’t apply.

Alex: In that effect, we’re probably looking at L shaped with a really slow recovery after that.

Jim: Maybe an L with a little downward slope. Best case, you’re looking at a recovery maybe in the third quarter with a lower compound annual growth rate than we started with. Call it the new new normal. It’s not good.

Alex: There are two potential scenarios: a really bad deflation depression-like scenario. What happens to gold? The other option is hyperinflation, but let’s talk about that after what happens to gold. You and I have talked about this before, but for people who haven’t heard it before, if they just can’t rescue the thing and have to get inflation, what does the government do? What is the last resort?

Jim: I know the answer. I can get you all the inflation you want in about 15 minutes. The government doesn’t understand how and is not desperate enough to do it, but it can be done.

Before this podcast, I was on a call with my friends in the national security community. We’ve gone through some of the things we’re talking about regarding Taiwan, South Africa, Mexico, and the Great Depression. They’re all relevant. I said the greatest threat to national security might be deflation, because what does deflation do? It increases the value of debt. The real value of debt goes up.

We’ve got $22 trillion of national debt starting out. If they throw on $6 trillion of additional national debt, we’re expanding the national debt by 25% in a matter of months. That’s all the debt since Washington up 25% in a couple of months. Debt to GDP ratio is going up.

Deflation increases the real value of debt. Cash is actually one, because the real value of cash goes up. Now, what about gold? Everyone says, “I understand gold goes up in inflation. Show me some inflation, and I’ll show you a higher price of gold, but surely, the opposite must be true – deflation means a lower dollar price for gold.”

That is not true. The greatest period of sustained deflation in the United States was 1927 to 1933. The price of gold went up 75% from $20 an ounce to $35 an ounce. Gold performs very well in deflation. It obviously does well in inflation, but people don’t understand why it performs well in deflation.

There are two reasons for it. One is if you’re on a gold standard, and the other one is if you’re not on a gold standard, which we’re not at the moment. If you’re on a gold standard when deflation overwhelms you and people are saving, they’re hoarding cash. They’re not spending, they’re not lending, so there’s no velocity. You’re desperate to get prices up, you want prices to go up and they won’t go up, so you can devalue the dollar against gold.

That’s what Franklin Delano Roosevelt did in 1933. When I said the price of gold went up from $20 to $30, it did because he said so. He was the president and we were on a gold standard, so that’s what we did. But that was not a gift to people who owned gold. In fact, he actually confiscated all the gold before he did it.

Alex: Yes, he took the gold first, then he raised the price.

Jim: That’s the ultimate inside trade. Nice going, FDR. The point is, nothing happens in isolation. When the price of gold goes up 75%, guess what? Corn, oil, wheat, energy, agricultural goods, produce, wages, and everything else goes up, because it has to be a blanket across. It worked, by the way. During the middle of the Great Depression, 1933 was one of the best years in the history of the stock market, because what FDR did worked.

He did it on purpose and it worked. Richard Nixon did it by accident, but it also worked. When Nixon broke the convertibility of the dollar to gold on August 15, 1971, the price of gold went from $35 to $800 an ounce by January 1980. In nine years, we had roughly a 2500% increase.

What happened? The price of oil quadrupled, the price of housing doubled, and interest rates went to 15%. In other words, FDR and Nixon – one purposely, one accidentally – grossly devalued the dollar against gold, and we got massive inflation as a result. It wasn’t a response to inflation; it was actually intended to cause inflation, and that’s what happened.

We’re in the grip of deflation right now. The data hasn’t shown up yet, but it’s happening all around and is going to get a lot worse. If we were on a gold standard, somebody would go to the president and say, “You need to devalue the dollar against gold.” Bingo.

We’re not on a gold standard, so what happens? The price of gold also goes up, not because the government is forcing it but because people are looking at the dollar saying, “Get me out of here.” You don’t have a PhD in economics, but the Fed’s balance sheet went from $800 billion to $4.2 trillion between 2008 and 2014. Try $5 trillion, $6 trillion or $7 trillion. That’s what’s happening in front of our eyes, and people are going to say, “Get me out of here. Get me a house, land, commercial real estate, gold.”

Alex: Hard assets.

Jim: “Get me out of the dollar and get me into hard assets. I don’t know what’s happening next, but I don’t want to lose my money.”

Alex: I saw an article from Goldman Sachs where their head of commodities globally was banging the table calling gold the money of last resort and telling everybody to buy it. It’s amazing what’s happening.

Jim: You and I were suggesting people buy it at $1100, so we’re about four years ahead of Goldman.

Alex: It’s amazing. Everything we’ve talked about over the years is all happening right now.

Okay, so practical applications. What can people do? Let’s break this down into chunks. The first chunk is the average person. They’re living paycheck to paycheck and have no assets. All this stuff comes down, everybody is recommended to stay home, and they’re probably thinking, “How do I pay rent? How do I buy food?” Do you have any thoughts for those people?

Jim: Yes. Go down to your local bank and get a Small Business Administration loan right now. They’ve got on the order of $100 billion through the Small Business Administration for small business.

Small business is defined as anyone with less than 500 employees. You don’t have to be a local shipping company. You can be a flower shop or a pizza parlor. A lot of people either don’t know this because they haven’t heard about it, or they don’t think they somehow qualify. You qualify. There’s a little bit of paperwork, but this is literally happening in real time. There are two criteria for it. One is to maintain payroll and two is to pay the rent; the two most important expenses that businesses have. Here’s the deal: you get the loan; if you don’t lay anybody off, you can keep it; you don’t have to pay it back; it’s a grant. If you lay people off anyway, you have to pay it back.

The interest rate is rock bottom. It’s a long-term loan, but as long as you keep your employees, you can keep the money. What are you waiting for? Make sure your bank is an SBA approved lender, but they all are.

Just to be clear, the banks get a 5% origination fee. If you take a $1 million loan from the SBA, the bank gets $50,000 as origination, so they want to give you the money. The government wants you to have the money. People are afraid about it, because it is not like a normal loan. They say, “Oh, they hate me. I’ve got to fill out all these forms,” but they want to give you the money and they want to do it as fast as possible.

Alex: I saw this crazy article last week about a guy who started an airline he called Bailout Flights, and he requested $10 million. There were like 25 new airlines started just last week.

Jim: Look, some people have better lawyers than others, but I’m telling you, I don’t care if you’re a flower shop or a pizza parlor; you qualify based on payroll and rent. And if you don’t fire your employees, you can keep the money. It’s the only kind of loan where the bank’s actually on your side. The banks are guaranteed by the government, so they don’t care about your credit, because they’re backstopped by the government.

Alex: Is there anything else the average person can do? The one living paycheck to paycheck wondering about paying rent and buying food.

Jim: Have a look at your 401-K if you have one. I don’t think the stock market’s hit bottom. A lot of people are nibbling, we’re off the bottom. Of course, your typical financial advisor who’s usually thinking about themselves, not you, is saying, “Hey, ride it out. It’ll come back.”

In 2008, it went down by about 60% or 70%, about two thirds. Did it come back? Yes, but it came back by 2014. Six years is a long time to break even, which is what happened, and there were opportunity costs associated with that, because you could have been in other asset classes.

I said at the beginning of this that this is more like 1929 when the stock market crashed. Do you know when it regained the 1929 level? 1954. It did come back, but it took 25 years, and I guarantee you that a lot of those people in 1929 were dead by then.

You can get out, go to cash, and maybe a slice for gold. I’ve always recommended 10%, so don’t go all in. What if the stock market starts to go up again? Well, watch it. If you really see that and it’s not just a two-day bounce or something, you can still jump in. If you miss a little bit at the beginning, think of it as the price of a put option. You avoided a worse outcome.

Alex: That’s people with some assets, hard assets. Now, small and medium business owners that are not in the USA and can’t go get a loan. Any thoughts?

Jim: SBA loans, yeah, good luck. It depends on the country. Canada is mailing out checks. Some have nothing, and others have programs as good or maybe even better than ours.

Alex: Closing up with our last thoughts, I’m going to open the floor to you. What do you want to talk about?

Jim: People say I’m a doom and gloomer, but I’m not. I’m a realist, a pragmatist, and I have pretty good analytic models. I’ll mention a couple of things.

Number one, you have to reset the outcome of the presidential election at 50-50. That’s a reset. I had Trump as a 74% favorite about six weeks ago, which he was based on the model. I don’t make it up, but it was conditional on no recession. The odds of a recession at that time were less than 20%, so Trump’s odds were 80% or higher or somewhere in that neighborhood.

Well, now the recession’s here. Actually, we’re in a depression. Does that mean Trump has zero chance? No, the reason is that no one blames him for this.

Alex: Some people are blaming him for this.

Jim: Okay, but they were not going to vote for him anyway. Most Americans are a little more fair minded. They’re not going to judge Trump by the fact that this happened, because it wasn’t his fault. They’re going to judge him by his response, by his leadership. I reset at 50-50 and I’m watching it, but that means Biden has a 50% chance.

Number one, the market has not repriced for a President Biden. They’ve kind of repriced for coronavirus, and they’re trying to reprice for the economy, but it’s a moving target. The market has not even had time to think about a President Biden, but that’s another leg down if that gets a little traction, which it is.

Number two, just be wary of what they call sucker rallies. They said the stock market was up three days in a row last week, the greatest three-day rally since 1931. That’s true, but the market bottomed in 1932. Your three-day rallies don’t get you off the bottom necessarily.

Help your neighbors. That’s probably the best thing we can all do. We’re all in this together. It’s a cliché, but it’s more than a cliché; it’s an important reality. Maybe I’ll leave it at that.

Alex: Do you think Biden has dementia?

Jim: Biden has pretty clearly exhibited a cognitive slowdown. That’s not a good thing in a presidential candidate.

Alex: The optics are not good on that, no.

Jim: You can’t think of a more stressful job, and he’s not fit in my view. I’m not a doctor, but it’s pretty obvious.

What’s going on is the democrats didn’t want him, but he powered through against a much weaker field. Then they had to want him because they needed to run Bernie Sanders off the road, which they did. You can’t have a communist as your democratic nominee. Mission accomplished as far as destroying Sanders, but now they’re like, “Oh, this is who we have?”

Here’s a wildcard, but maybe not so wild. Of course, everything on the democratic side is highly manipulated by the Democratic National Committee, superdelegates, and changing the rules. That’s why Tulsi Gabbard couldn’t get on the stage, etc.

This is what they’ll do: they’ll keep Biden on his resuscitator or whatever, but they’ll let Bernie get just enough delegates that, combined with Elizabeth Warren for example, he won’t get the nomination on the first ballot. He’ll have more delegates for sure but fall short of the first ballot.

Once you get to a second ballot, it’s jump all. All the pledged delegates are released. So, 700 superdelegates come in from the sidelines to do whatever they want, and they’ll pick Andrew Cuomo.

Alex: You heard it. Jim, as always, thanks a lot. I really enjoyed today’s conversation. Stay safe up there.

Jim: Thank you, Alex. You, too.

 

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Transcript of EP. 6 Global Perspectives: March, 2020 Interview with Alex Stanczyk and Special Guest Duncan Cameron

EP. 6 Global Perspectives March 2020 with Alex Stanczyk and Special Guest Duncan Cameron

Topics Include:

*Covid-19 Coronavirus and Global Financial Crisis II Update

*How do discern where to find truth

*Why when living history is lost, it is on the current generation to make the same mistakes

*Physical gold and silver metals complex globally is sold out

*Making sense of what assets still make sense

*The current economic meltdown is not because of coronavirus – the system was already in a state ready for an event to cause the meltdown

*Younger people may not have seen real capitalism for the duration of their entire lives

*Kondratieff Wave

*Roughly 50 year crash cycle and debt forgiveness ‘jubilee’- no sowing and reaping and people return to their families

*Socialist policies being put forward during crisis

*World is going into compulsory lockdown

*Why purchasing power of fiat currency goes down over time

*What is hyperinflation

*US Treasury yield curve has dropped below 1pct for first time in history

*Global coordinated central bank easing

*VIX (Fear index) spiking

*Oil price wars, Russia vs OPEC

*Disconnect between gold price and price of gold

*US Treasury Secretary announces checks cut directly to US citizens

*Trillions of USD stimulus announced by the US Federal Reserve

*DOW/Gold Ratio

*Defense Protection Act – US Factories On Wartime Production

*Why US Oil Shale producers will be going bankrupt

*Covid-19 in 148 countries

*Implications of Swiss refineries shutting down for two weeks

*Gold anchoring a portfolio

*Fabrication bottlenecks are not metal shortages

*Swiss refinery shutdown impacting gold availability globally

*Gold/Silver Ratio

*Why people will seek gold and silver to preserve purchasing power as the USD crashes in value

*The velocity at which people realize USD losing value will start out slowly and then increase rapidly

*How the residual anger over covid19 and the GFCII can lead to war

*How the financial system was already in a critical state waiting for a catalyst to set off the chain reaction

*Why capital is rushing into USD and US Treasuries, and will eventually flow into gold

*What is Exter’s Pyramid

*MMT and infinite money creation

*How the entire global financial system is constructed on a base layer of gold

*What could lead to permanent breakdowns in the supply chain of all nations

*Practical steps people can take

 

Listen to the original audio of the podcast here

EP. 6 Global Perspectives: March, 2020 Interview with Alex Stanczyk and special guest Duncan Cameron

 

Physical Gold Fund presents Global Perspectives with Alex Stanczyk and invited guests exploring international markets and the complex forces that drive them including geopolitics, economics, and the global monetary system.

Alex: Hello, I’m Alex Stanczyk, and welcome to Episode 6 of Global Perspectives. Today is March 24, 2020. I have with me my colleague and friend, Duncan Cameron. Duncan is a member of our research team and is a precious metals industry veteran of many years. Duncan, how long have you been in the industry? How long have you been aware of precious metals?

Duncan: I started to acquire it in 2005 back when the price of gold was $450 US and around $650 NZD where I live. I was accumulating through ’05 and got to meet Simon Heapes. He really introduced me to it in a big way, and then I just started to ramp up. In fact, by 2007, I could see we were heading for a big-time crash, so I exited all leverage. I exited my property, I sold things off, I went into gold and silver, and I started to preach the gospel of a crash coming about a year out. People laughed and ridiculed me like they do. I was well prepared for 2008, to be honest, but of course, that has curveballs.

Alex: I had the same experience.

Let me finish introducing you so people know who you are, because this is the first podcast we’ve ever done with you. You’ve been part of our research team, part of our core group, for many years. We’re good friends and have known each other for a long time. I personally very much value your opinions and the research you do.

In addition to working with Physical Gold Fund, Duncan is also a successful entrepreneur. From my understanding, he has launched a handful of companies and currently owns three substantial companies in his home country of New Zealand. So, Duncan, welcome to the podcast.

Duncan: Thanks, mate, I’m looking forward to it. We’re ranting and talking so much, there’s only one way to really do this, and it’s actually to enshrine it in a bit of recorded history. The great thing about being our age – I’m 56 now – is that we’re actually living through history. We’re not just reading it anymore. You’re not reading it or looking at it, but you can remember back in 1981 when Margaret Thatcher took the fleet down to the Falkland Islands. Also, we remember the Berlin Wall coming down and Chernobyl like it was fresh, and we can certainly remember the ’87 crash. I got dealt to; I was a young guy, but I got dealt to. And then of course, we had 2000 and 2008.

It’s interesting as you get older in life, you start reading it and become part of living history. We don’t listen to our older people too much, so I try and tack on to elderly people. I gravitate a lot more to them, because when living history is lost, it’s left over to everyone else to screw it up and do it all over again, isn’t it?

Alex: Yes, it is. Your video is just a bit choppy, and I think that has something to do with the Internet right now because everybody is basically at home because of the coronavirus. The other day I saw a plea bfrom ISPs in the United States to Netflix asking them to start streaming lower quality videos, because everybody is at home watching Netflix and the available bandwidth is just crushed.

Duncan: In our country, when the prime minister announced two days ago that we’re going into level four lockdown, the phone network just crashed, because people were calling each other. You’d have to try ten times to get a phone call out, so people were getting on landlines calling mobiles.

Two of my companies were deemed essential. We own a courier business and an ISP. We do rural broadband Internet, and I’m telling you, everybody is having trouble. The whole world is having trouble.

Alex: For those of you who are watching, now you understand why the video is kind of freezing up a little bit now and then. So, don’t be too critical. If you don’t like it, stop watching Netflix, and we’ll have freer Internet for bandwidth.

A couple of quick things before we dive in. Something I’ve noticed is that right now there’s a lot of misinformation going on around the world both in regard to coronavirus as well as financial matters and what’s going on in the economy. There is all kinds of really strange advice out there.

There’s a saying that in today’s day and age with so much information, people are drowning in information and starving for wisdom. All I’m going to say about that before going any further is that discernment is really important right now. When I was a young man, I heard a saying, and it was that if the person you’re listening to doesn’t have anything you want in their life – they don’t have the finances you want, the spiritual life you want, the relationships you want – don’t listen to them. I mean, listen to them, but you need to take it with a grain of salt and understand that maybe the advice they’re sharing with you isn’t necessarily going to get you where you want in life.

Duncan: This is right. We talked the other day about people stocking up on toilet paper to last them sometime into the next century. Their great-grandchildren will have a special ceremony when they use the last toilet paper roll that their great-grandparents bought. But they’re not buying gold or silver. Well, the doors are closing all over the world.

I have a colleague and associate who is a client of ours, and he has a small amount of gold. He sold his house last year, and while everyone else is buying toilet paper and stocking up on flour, he’s been trying to buy gold. We have two very big dealers in New Zealand, and both of them access Perth Mint, so he managed to get in yesterday and buy the last of the gold.

He wanted about 40 ounces of physical gold as well as the gold he has with us. He couldn’t get what he wanted, but he managed to get about 10 ounces of gold. The rest is on order from Perth Mint, but that is the last order they will be getting from Perth Mint. These are the two biggest dealers in New Zealand, and there’s a queue behind him trying to buy gold.

Maybe you can talk about what’s happening at the Swiss refinery level, but around the world from the farthest of the North Pole down to the penguins in the South Pole and every country in-between, just as we saw in 2008, people are trying to stock up on the wrong thing. They don’t understand that this modern monetary tier that’s creating so much money is a genie that’s out of the bottle and can’t go back. The effects of that, once we’re all through COVID, can’t be unwound.

This is obviously related to a lot of various subjects, but let’s talk about the physical gold stuff for a moment. As I said, people cannot buy it now, because we are running out.

You and I have been to Perth Mint and watched the bars being poured. They can’t get it, so Australians can’t buy it. They’re all going to turn up late, and that is the problem with wisdom and discernment. People tend to stock up on the wrong thing, because they’re more worried about having their grog supply when the country locks down so they can stay happy for the next 12 weeks.

They’re more worried about if they’ve got enough toilet paper to wipe their bottoms than what happens when we’re through COVID and they have to resurrect their businesses or buy assets.

Alex: Something else that’s super important is that the economic consequences unfolding right now are not going to stop. Once we get through the coronavirus issue – even if it were to stop right now and completely disappear from the face of the earth – the economic damage has already been done.

We’re feeling the effects of that now. The point I want to make is that these economic consequences are not because of coronavirus; the system was set up to do this a long time ago. This situation was already baked into the cake in the 2008 global financial crisis when central banks came in and basically subsidized everything.

The funny thing is, there are so many people out there right now in the millennial generation and younger who just don’t believe capitalism works anymore. What they’ve seen in their entire lifetime is not capitalism, so I don’t think they even know what capitalism looks like. True capitalism would be to let those systems and companies fail. Don’t bail them out, and then the market will readjust to that. That’s what capitalism really is. Instead, what they’ve done is bail out those big companies.

Duncan: When I was first trying to gain wisdom in this area, I could feel within my bones from a biblical perspective the concept of Jubilee. I was trying to work out if we can just override big cycles in history. Is there any such thing as boom and bust? Is everything just managed, and we work everything out? How do young people ever get on to a property letter? How do young people get out of debt? Do we just find different ways to leverage them all up?

Simon showed me the Kondratieff wave. Anyone can look it up from the Longwave Group, blow it up into a large PDF or download the PDF. It says essentially that every 15 years, we go through this major crash. The irony is that in the Jubilee cycle of ancient Israel going back thousands of years, debts were cancelled and slaves were set free. Look at students around the world with massive student loans, and they’re supposed to support us as we get old. In ancient Israel, property ownership not paid off during the non-Jubilee years was returned to the original owner. We saw that with jingle mail in 2008.

During Jubilee, there’s no sowing or reaping. Everyone rests, and people return back to their own families. As we speak, airports are shutting down all over the world. The last people are coming back right now to our country, otherwise you’re not coming back and you’ll be stuck wherever you are. In a Jubilee cycle, people went back to their own land and lived off what they had and what they’d saved. Who saves now? This new generation doesn’t save anything, because they figure someone’s just going to give it to them.

The idea is of saving during the years of labor so that you have something left over or something to eat in the year of Jubilee or a period of time when you would rest and reestablish your value system. Well, right now the world is going into compulsory lockdown, and many people are finding out they’ve lived in this perception that there are no cycles in history; there’s no more big booms and busts; that the people who run the Fed, the Bank of England, the European Central Bank, and all the central banks can just come to the rescue of us all.

Guess what? We’re finding out that they can’t. You could almost argue that the Kondratieff cycle downturn in 2000 with .com morphed into an even bigger crisis in 2008 and culminated where we are today. As you pointed out, it’s baked in anyway. That is all the hallmarks of the current wealth season which bottoms out.

Historically, springtime is when countries go to war. Looking back to 1812, the American Civil War, you can go right back through history and see that when people come out of a depression or a recession with nothing, they’re angry, so they turn to socialism. You see very extreme divergent views, countries get angry, and they go to war.

Alex: That’s happening right now. In the United States, there’s a huge push towards socialist policies. It’s part of this trend with the younger generations who are looking at it and saying, “Well, the government’s just going to give us all money.” Secretary Mnuchin, the chairman of the Federal Reserve, announced that they’re going to be cutting checks directly to Americans.

We’ll get into that in a little bit, but the view is that the government will simply give everybody money. People don’t understand the basic economics behind that, so we should probably explain that. For those who have never watched any of our podcasts or studied the kinds of things we’re talking about, I’m going to give you a very basic analogy. There are going to be PhD economists who look at this and say, “It’s a lot more complicated than that,” and that’s true. This is a simple analogy for people to basically understand what inflation is and what it does to money.

The example I was taught that made the most sense to me was if you pretend you’re on a little island and the island is the whole world. It’s got all the world’s people, economy, money, goods, and all the world’s production on this teeny little island. On this island, let’s say there are three dollars, and that’s the whole money supply in our little world, and the whole productive capacity is three loaves of bread.

So, there’s $3 and three loaves of bread. How much does a loaf of bread cost? It costs $1. If there was $1 and one loaf of bread, it would cost $1. If there were $2 and two loaves of bread, each would cost $1. If there were $3 and three loaves of bread, each would cost $1.

Let’s add money to that equation and double it so there is $6 and three loaves of bread. How much is a loaf of bread? Now it’s $2. If you double it again, there’s $12 and three loaves of bread, and each loaf costs $4.

Looking back over the arc of the United States, for example, you might not remember that movie tickets were $1.50 when I was a kid. How much are they now? Quite a bit more than that in the range of $15 – $20. The same thing goes for everything across the spectrum whether it’s homes, cars, clothes, etc. That is the effect of inflation.

There are other factors such as velocity and all kinds of other things, but the point is that right now, we are having the most massive expansion of the money supply possibly in the history of mankind. The end result is that the value or purchasing power of each diminutive currency plummets, and you end up with situations like very rapid inflation. The technical term for it is hyperinflation when you start to see increases in the cost of goods and basic things happening very rapidly. We’ve always known this could occur, because it’s happened many times throughout history. This is not conjecture or theory; we’re not pontificating.

Duncan: No, it’s just what happens. The Sumerians were doing it since the birth of money even with clay tablets. It was easier to bake clay tablets, inscribe the local ruler’s name, and swap them with somebody who was making the real bread. They could just print as many tablets as they needed until eventually nobody wanted them.

Central banks’ increasing of the money supply is best seen as you age and get older. As a child, we had one-cent coins, and I can vaguely remember buying four Jaffas – little chocolate balls – with my one-cent coin. Then it became two Jaffas, then it became one Jaffa, then two cents for one Jaffa, and then four cents for one Jaffa.

Alex: You could actually buy something for a couple of cents.

Duncan: Yes, but then they got rid of the one-cent and then the five-cent in New Zealand. We have a ten-cent, but it won’t even buy you one Jaffa, because the pack of chocolate Jaffas that have been around since I was a small child is no longer a unit that is easily seen. It’s now just a number.

That’s the creation of money at a central bank level. It’s what the world is doing right now; they’re creating trillions. Europeans are dumping €1 trillion, and The Bank of England is doing the same. The Fed, obviously $1.5 trillion went in, but they were pumping hundreds of billions every year into the repo market before Christmas. It started mid-September and escalated.

Fed governor Jerome Powell pumped a pile of money in just before the end of the year, because he didn’t want a crisis during Christmas. It doesn’t matter what pricks the bubble; it matters how big the bubble is. COVID has pricked the bubble, but like Lehman Brothers or Bear Stearns before that – the mortgage-backed securities, the odorous excrement of death – was building up long before we ended up having a crisis.

Something will always prick the bubble, but that is not the cause. The problem is the passing from honest money. The world’s gold supply goes up about 3.5% every year in terms of inflation, and that’s healthy. Back in Roman times, interest rates were 4.5%. That rewarded the borrower and the lender. There was an equilibrium of sorts.

But we live in zero interest rate policy (ZIRP) and negative interest rate policy (NIRP). A third of the world’s bonds are all negatively returned, and all over the world, we’re seeing big problems such as corporate bonds being dumped and the Fed having to buy municipal bonds. The rates for those bonds are climbing up in price.

Alex: Let me run through some of these really interesting events. Ever since around the 9th of March, I began taking notes on things that were happening, because I’ve never seen this stuff in my lifetime. I’m going to read through some of these, and then we can continue our conversation.

The first was that on March 9th, the U.S. yield curve on U.S. treasuries dropped below 1% for the first time in history. Since then, some of the really short-term ones have actually gone negative.
On the 9th of March, the S&P futures limit down started hitting circuit breakers. That’s when PPL started really catching on to what was happening, and we were seeing global coordinated central bank easing. That never happens. What usually happens is that one central bank will ease, then another will do it over here after a bit, and another one over here will do it after a bit. This is coordinated easing; they’re talking to each other and saying, “We need to do this all at the same time.”

On the 12th of March, we started seeing spikes in the VIX. For those who aren’t familiar, the VIX is a measure of volatility also known as the sort of fear index. It’s gone through the roof. Intraday trading was as high as 75 and maybe even higher on some days.

Duncan: Yes, it was definitely up in the 70s.

Alex: On the 13th of March, a number of different things were announced. The Fed announced that it was going to inject $1.5 trillion into the system, and there was a series of coordinated central bank ‘money bombing’ going on. The USA, $1.5 trillion; Sweden, $15 billion; Japan, ¥2 trillion (basically $20 billion); Australia, $5.5 billion; China, $79 billion. That was on the 13th, and since then, it’s completely off the hook.

Duncan: Australia has just literally talked of $300 billion. These numbers are exploding, because they can’t get enough money into the system.

Alex: I’ll get to that here. On the 16th, nations began closing borders because of the coronavirus, COVID-19. I have these trackers that track planes and flights – it’s just a curiosity of mine – and I started noticing that planes in the air began diverting from their filed flight plans. They were literally in the air, changing direction and landing, because nations started closing borders.
In the United States, we began seeing schools, restaurants, and nonessential businesses starting to close. At the same time, European markets were crashing. There’s way more than this. I have three pages, but I’m only going to cover some of the unique highlights here.

Duncan: When I look at the news, I follow a particular website in our country that produces basic facts every day of what’s happening in the market. I had to reread this article twice, because it’s just the world in total panic. Every single line is, “U.S. fires up unlimited monetary action as Congress fiscal action stalls; U.S. still not on lockdown; Germany readies huge fiscal package; long recession feared; Aussie job losses projected to go to 300,000; U.S. ten-year drop point at 7; oil sinks; gold jumps.” And they’re talking about the unemployment lines as people file for unemployment in every country in wave after wave.

In 1929, oil was parked up on the side of the pier. Nobody needed it. Look at the price of oil these days.

Alex: Yes, and there’s a massive glut of gasoline and oil.

Duncan: The oil/gold ratio is at 70. It’s a vertical line, so either oil is underpriced, gold is overpriced or something is overpriced.

Alex: Let me get through the rest of these, and then we’ll continue our discussion. On March 16th, we started to see a disconnect between the gold price and the price of gold. What that means is that the gold price is basically a futures price, and the price of gold is what you have to pay to actually buy physical gold. Those are two different things.

We have talked for years about starting to see disconnects, and lots of people were saying, “That’s just goldbug nonsense; that’s not real.” Well, it’s happening. On the 16th, the disconnect was looking like the futures spot was $1478, but you couldn’t buy an ounce of gold at the retail level for less than $1800, and it’s only progressed since then. We’ll get into more of that in just a minute.

On the 16th, nations were closing borders to noncitizens. On the 17th, Secretary Mnuchin announced checks are going to be cut directly to U.S. citizens. On the 17th, the Fed announced that it was going to do $1 trillion of overnight repo funding every night for that entire week.

Duncan: Behind the scenes, it got to $13.45 within no time at all. No one counts that money or regards that money. They say, “Well, I just care about the Fed balance sheet. It was 4.5, we mail every American $1000, that’ll take it to $5 trillion. We’ll worry about it the following week.”

But behind the scenes, what needs to happen to keep that working is in exponential numbers, and it’s been repeated by every central bank. Your example of bread is bang on about the gold disconnect. If everybody has $1 to buy one loaf of bread and there are three loaves of bread, you can print as much money as you want as long as nobody all wants their bread at the same time.

When everybody wants their bread at the same time, that increased money supply all competes for that bread. That is your gold disconnect right now in the early days. At Physical Gold Fund, we have access at a very high level, but around the world, people are finding out that their money that has been sent to them in the mail to go and buy gold instead of whatever it is that the government would like them to buy (food or something else to stimulate the economy and increase the velocity of money), they’re going to find that whilst the world has created lots of money, we have not managed to somehow magically conjure up 8% or 10% gold production for the year because we’d had a crisis. It doesn’t work like that. More money chases less gold, and that’s your point.

Alex: That is the point, and interestingly enough, in hyperinflation scenarios. We can look back at history, but we can look at current ones. It’s going on in Venezuela right now. What ends up happening is that the value of each unit of currency – in my case the U.S. dollar – drops so quickly that people just try to get rid of it as fast as they can. Like right now, there’s capital destruction on a global level that’s absolutely unprecedented, and people are rushing into U.S. dollars, into U.S. treasuries, etc.

Duncan: Every currency has gone down. We’ve had a currency that sat at 65 NZ and is now down to 55. Australia is the same, they’re down. Every single currency has been depreciating against the USD, so they’re all trying to buy U.S. dollars as if that’s going to save them. You guys are going to print trillions of dollars, but then what happens?

Alex: That’s what I was just getting to. With all of the current stimulus being injected, especially when they start sending money directly to American citizens, this has the potential to accelerate inflation in a way that we have not seen in the United States maybe ever.

Duncan: Right. What happens when people decide they want to take some of that money and buy gold and silver – tangible assets that are in short supply where the futures market is disconnected because nobody has ever stood for delivery? What happens when people say, “You know what? I don’t want to buy food. I think I need to buy some silver coins. I need to buy some gold.” They’re going to find out very quickly what is a store of value.

In Venezuela, it’s 120 million to an ounce of gold. It’s so far removed that you have to do a math equation and start removing all the zeroes off each side of the equation to try and work out the ratio. That is hyperinflation.

Alex: The other thing that happens in a hyperinflationary scenario is not just regarding metal prices. What metal is really doing when you see the price skyrocket is that it’s telling you that the value of currency is plummeting in terms of purchasing power, because gold doesn’t do anything. People get confused about that. They’re looking at gold thinking, “Is that something to invest in?” You invest in things that are going to give you a return. Gold is money and doesn’t do anything; it just sits there.

If you took an ounce of gold and stuck it on your desk, it’s not going to do anything. It’s just going to sit there as an ounce of gold. It’s a stable measurement, and that’s the point we’ve been getting at the whole time. The only thing that happens in hyperinflation is that in the nominal currency terms of the currency, everything starts to go up.

Now, that’s everything – clothes, food, etc. The price of everything skyrockets in that currency, but interestingly enough, against one ounce of gold, what you can buy shifts in the opposite direction. The purchasing power of gold skyrockets. That’s what’s happened in history, and that’s probably what will happen in another hyperinflation if we see it in the U.S. dollar.

The best way to see that is to look at the DOW gold ratio. We have seen and talked about how the ratio goes down to where you can buy the entire DOW, and the measure of the index of the top stocks of the U.S. eventually gives a ratio where the price of the entire DOW will equal one ounce of gold.

People have laughed at that for the last 20 years and said, “We can never get back there. This time, it’s different.” Well, I’ve been tracking the DOW gold ratio as we head back down again. The other day, it was 25,000 then 24,000, and it’s going down 1000 points a day. I know it’s up today at 20,700, but it always has a bounce and then lurches back to the neck.

So we have a day in-between each 1000-point drop. It was 19,173, and gold was $1498 a few days ago. That made the ratio 12.79, and it’s been steadily coming down. Opening up on Monday, the DOW was 18,576 and gold was $1552. That’s 11.96. As it heads down, you get to a point where how do you decide where the DOW will be and how do you decide where gold will be? I can tell you that if gold is $5000 and the DOW is 8000, your ratio is 1.6.

Who can tell me right now that gold couldn’t be $5000? Who can tell me now with absolute certainty like their life bet was upon it that the DOW couldn’t end up at 8000? That would make the ratio 1.6. If I talked to a money manager or anyone on CNBC when we were sitting up there not long ago at a ratio of 20 or 20 plus and tried to say that we could have 1 literally within a few months, I would have been laughed out of the studio.

Some people say, “Coronavirus is a one-in-a-hundred years or one-in-a-thousand years event.” Well, no. Spanish flu was 100 years ago, and it killed between 50 and 100 million people. World War I killed 20 million when the population was 1.5 billion, so that’s roughly 8% of the world’s population.

Tell me, what would happen in the modern world if a virus mutates and kills one in eight? Where will the DOW be, and where will the arrogance and total hubris or disdain for cycles in history be? Five hundred million people got the virus 100 years ago- one-third got the virus 100 years ago.

We’ve had plagues and things all through mankind’s living history where great pestilences wipe out. We haven’t had anything like this for 100 years, and now the world at 7.7 billion is absolutely frightened. They are scared, because they’re watching all their leverage, all their funny money, all their 401k, investing, managed funds, managed indexes, passive indexes, they assume it’ll just go up. There’s no one even making physical trades. This is a dumb idea; we need to get out. It’s a Quantbox doing it.

When we get something like this nonlinear event that comes from nowhere and really changes the landscape, I look at the DOW. If we really start seeing lots of deaths all over the world or we see the virus mutate, we’ll see gold at $5000 or higher or the DOW at 8000. We could see gold at $10,000 just based on monetary creation, because this genie is out of the bottle now and can’t be put back.

If we come right, the monetary inflation that central banks have done will then start to chase assets, so the poor can’t buy food because the assets cost more, and the wealthy that were wise and unleveraged get to reinvest back into inflating assets. That gives rise to socialist-type anger amongst all the poor. Read Andrew Dixon White’s Fiat Money Inflation in France. You can download it on the Internet for free. It’s the history of what happened in the French revolution and the times around that.

As Gerald Celente has often said, when people lose everything, they lose it. Sorry, mate, I’m getting into a rant mode.

Alex: That’s all right. That’s what I want you to do, because that way, people are going to hear things they wouldn’t have heard otherwise.

Okay, on to the next couple of items, and then I’ll be through this list. On March 18th, the president of the United States invoked the Defense Production Act that allows the president to order factories in the United States to produce what the government thinks is important to produce. It’s basically wartime production, so the U.S. is currently under what’s called wartime production.
On the 18th, FEMA (The United States Federal Emergency Management Agency usually called on for natural disasters) was activated nationally at Condition One, which is the highest threat level.

On March 18th, crude oil closed at $20.83. For those familiar with U.S. oil production complex, it’s a great deal of U.S. oil. The thing that got U.S. oil dependent was the shale industry. Shale doesn’t work below – even $35 is breaking the back of the shale industry – so at $30, it’s completely underwater. We’re probably going to see those companies filing for bankruptcy over the next year. Not all of them maybe, but quite a few of them.

As of the 20th of March, COVID-19 was in 148 countries. As of the 21st of March, factories in the U.S. started to convert production lines to making sanitizer, N95 masks, ventilators, and what they call PPE, which is what hospital doctors and healthcare staff wear when they’re dealing with people who have something like the coronavirus.

Here’s the big one, and this is the last thing I’m going to read. Like I said, there are tons more, but we don’t have time to cover them all. On March 23rd, there was an announcement by the big refineries in Switzerland that they’re shutting down operations for two weeks. I’d like to point out that this is completely unprecedented and has not happened even during wars or the London Gold Pool of 1961. There’s never been a time that I’m aware of that the factories in Switzerland shut down.

The timing of it is actually kind of amazing. Goldbugs have been saying, “What if this happens and what if that happens?” There are always really out-there scenarios, but you couldn’t make this up. All at the same time, we have a global virus that’s a lot worse than people thought it was going to be and we have a price war in oil occurring between Russia and OPEC. This is basically the Global Financial Crisis II. We might as well call it what it is; this is GFC 2020.

Duncan: They’re trying to call it a recession like they called 2008 a recession – the COVID recession – but historians will not call this a recession.

COVID-19 is nice and PC, but I’ve seen humorous e-mails go out warning about shutdown procedures and they want to call it as it is; they want to say the Chinese Wuhan bat virus. That’s how they want to refer to it. It may be humorous, but people are going to get angry when the dust settles, and we’re going to see very fervent nationalism. People are not yet thinking through the consequences of how people react when their family members have died. A propaganda war is going on now as China blames the rest of the world for what they are getting back as they quarantine people and try to keep it from coming back. They’ve already accused the U.S. by saying, “It’s a biological weapon.”

The rise of nationalism and nationalist socialism in Nazi Germany happened in a hotbed of the reparations of World War I that left many German people unable to feed themselves. Once again, you saw the hyperinflation of Germany and those who had gold. This is why we’ve been saying for all these years that you should own a store of gold. You should own something, because seasons and times come in a way that you can’t predict. You should just have it. Sit it there. It’s insurance. Just keep it there for when things go really bad. One day, you’ll be able to use that to buy something that will literally be lifechanging for you. It will propel you forward while others are going backwards.

As you said about the Swiss refineries right now, the time to buy that is even becoming in question.

Alex: That’s the whole point, it’s not possible to do it right now. The entire retail complex in precious metals globally has been completely cleaned out. This was happening as much as a week and a half ago. That’s when the whole blowup in the price happened where you have the futures price and then you have the real price. That was happening, and the whole complex got cleaned out. Then I started seeing a backlog of multiple months before any new inventory was going to come in.

This is all old news to us as we’ve seen this happen before. We saw it happen in 2008, and goldbugs were jumping up and down saying, “There’s a metal shortage. You can’t get metal anywhere.” That wasn’t really true at the time. It was a fabrication bottleneck meaning if there’s gold supply sitting there in, let’s call it 400-ounce bars or large form factor or whatever you want to call it or maybe it’s scrap but it hasn’t been converted into small bars or small coin, that’s where the shortage is. It’s a manufacturing process bottleneck that has nothing to do with actual availability of raw metal.

Now it’s different. We’ve never seen this.

Duncan: It’s different. With the price of gold, as the market starts to sniff out value, where can they redeploy money when you sell your U.S. treasury or your share to try and buy something? We’ve got people lining up getting cash out of the banks all over the world. It’s happening here in our country in big, long queues. Trust me, there’s plenty of cash. I’m trying to explain to people to not worry about the cash. You’ve got your eyes on the wrong target, mate. You’re looking at the wrong object.

There’s plenty of cash, because banks are very liquid at every level. But people will start to wake up that there is a physical disconnect, and this is where you look at the gold/silver ratio. The gold/silver ratio hit 128 the other day. I thought we would get to 100, and I’ve written about it through newsletters for years. I’ve covered it off, I said I’d be surprised, and now we’re here, it’s blasted through it.

Silver is a very good look into people’s psyche that they’re not yet moving into this in a manner that we will see when people want to protect their purchasing power and actually want to have a store of value. When they realize their money can’t buy the same bag of Wheaties or bread, they’re going to eventually want to have something that protects that purchasing power.

At the moment, gold is first starting now to sniff it out. In the future market, it’s starting to go as people realize, “Wow, we’re seeing rising prices here.” When that really starts to take off and climb, then silver starts to rise, because people realize silver is too cheap, and then silver starts to rise. Silver will be telling you that inflation is starting to really hit the marketplace. It hasn’t hit the marketplace yet, so people are still living in that bubble of, “Well, look, we’ll get through this. We’ll all get back to normal.”

Alex: Some are, and some are not. My observation is that awareness happens on a curve. If you watch the awareness level of coronavirus, there were people studying this thing back in early January. I started catching on to it towards the end of January and noticed more and more people catching on to it over time.

The thing that bothered me and got me turned on to it was that I couldn’t reconcile in my mind why this country, one of the largest economies in the world by some arguments and the largest depending on how you measure it economically, is willing to lock down close to a billion people and sacrifice their entire economic output. It kept bothering me. Why is that happening?

For the longest time, people were saying, “It’s just another flu. It’s no big deal. It’s just in China.” It started changing in February when more people were catching on to it. I think at some point in February, I had gone out and started making preparations, because I thought this might be a real thing. We went out and stocked up on food, got our respirators, our filters, and all that other kind of stuff.

Even then, people who were ahead of the curve were catching on. We got these half-mask N95 respirators made by 3M, and I called every major 3M distributor in the Northwest United States to get filters. They were all either sold out or were told they weren’t allowed to sell them anymore. That was really interesting to me. That’s when I started catching on, like, “Man, this is really a thing.”

Rolling into March, we saw more and more people catching on. I would say that even as far as a week and a half ago, probably half the population in the United States thought it was a hoax or just a flu. They weren’t really taking it seriously. As the hospital reports catch on that they’re being flooded with new cases and are starting to become overwhelmed, that’s when everybody’s going to realize this is really happening.

I think the exact same pattern is going to play out in terms of currency and people realizing what’s going on with the U.S. dollar. In terms of realizing what the dollar’s going to buy, that is when you’re going to see velocity of money go vertical. I think it’s going to happen very quickly. Velocity of money is going to go vertical, and you’re going to see people spending dollars to buy hard assets, anything that they can get their hands on, real things, whether that be gold, silver, whatever it may be.

Duncan: There are all sorts of permutations, Alex. When I look at what’s been going on in the Spratly Islands, the South China Sea at the moment and for the last year or so, warships kind of bump against each other and sail around each other. But wars have started when people are angry. When people become angry and highly nationalistic, they want to take it out on somebody.
I don’t think many people are starting to factor that we’ll eventually get over COVID, but the residuals will still be left. There are a lot of scenarios to play out in the coming months and years ahead, because this will redefine how people think about borders and control and rights.

Alex: That’s already happening. You’re seeing the whole conversation playing out over social media right now. There’s always been arguing in what we call FinTwit on Twitter. Some of the smartest financial guys in the world are on there talking to each other on a pretty regular basis, and you’re starting to see it play out as we speak. You’re beginning to see all these socialist policies being put forward, and it’s changing everything. It’s almost like a BC kind of date format. There’s going to be before GFC II and after GFC II. BC – before COVID, after COVID. COVID was just the catalyst.

Duncan: The system was already broken. We’ve not fixed a thing.

Alex: It was already in a highly energetic state looking for something to set it off to go into a phase transition. It’s kind of like the snowpack on the mountain is already set as you’ve heard us talk about with Jim Rickards.

Duncan: Jim’s talked about it a lot, and you guys have written articles.

Alex: When I was trying to wrap my brain around complexity theory talking to Jim years ago, I would always be asking him the question, “Do you think this is going to set it off? Do you think that’s going to set it off?” His response was the same at different times until I finally caught on. He said, “It doesn’t matter what snowflake sets it off. What you have to focus on is the state of the system and that it’s in a highly energetic state and on the verge of a phase transition.” That’s a physics thing where like if you have water, it can go from standing water to a boil or it can go to freezing. Those are phase transitions into a different energetic state.

Duncan: Here’s a left field thought for you. I took my family up to stay with our good friends who have a batch up at Big White out of Kelowna. We went skiing, and the kids loved it. They learned how to ski over the week. We got back two weeks before they announced the lockdown, so we were technically inside, because it was at the end of the third week that you had to go into quarantine.

The snowflake thought is that when I’m on the mountain with my family, it’s a controlled environment. They snow groom the slopes and set off managed charges at night to blow up the perceived places where avalanches can form. They basically figure out how to keep everybody safe on the mountain and having a good time. That could be described as the financial system.

Fast forward a month when everyone has left and the ski fields are closed all over Europe and the world. The season’s been canceled. Avalanches are going off randomly now because no one’s there to manage it. They can’t be managed, and no one’s even around to ski the slopes of what’s around should the natural avalanches occur.

You could say that the system is now going back into its natural environment, its natural state. When we figure we’ve got things sorted, we’ll go back up onto the mountain and try to manage it all over again. We’ll try to use it and fashion it to be what we want it to be.

In your snowflake theory, right now you’re looking at everyone having deserted the mountain, because you can’t be there or even be around it. Every week this goes on, every week that countries go into lockdown, you could argue that the cure is greater than the disease.

At some point, countries will have to go, “You know what? If you’re elderly and infirm …” I have elderly parents and they’re all quarantined, but eventually, society has to get on with things. They’ll get on with it, but what will the financial landscape look like after this when we all get back up to the mountain with our snow groomers and try to manage it all again?

For example, I thought I might like to try and buy a little condo up at Big White. That’d be really nice. It’s a very nice place with prices through the roof. I’m guessing I should be able to buy us one of those small condos at a pretty good price, because in 2009 and 2010 when my mate bought his, it was a fraction of that after the GFC.

Reorder happens at every level, everywhere, all through society, all over the place. The new financial landscape is going to look very different. People are leveraged up. They have rental properties, they have this, they have that. They think they’re absolutely in control of everything, but what if one tenant can’t pay the rent? The banks are now saying we can have a six-month mortgage holiday, and they’re announcing all these measures to try and control how everyone can stay at home. We can all just stay still.

Well, even if you do that successfully, at some point, you have to start up again. When that happens, the financial landscape will be completely different under MMT. They said under Modern Monetary Theory that we can print as much money as we want, but now they’re going to find out what happens when you print as much money as you want.

Alex: Exactly. Take a look at Exter’s Pyramid. John Exter was a gentleman who worked with the Federal Reserve and had this pretty famous chart. I know you’re familiar with it, Duncan. It shows that during times of crisis like this, liquidity and capital goes from the top of the pyramid where you’ve got all kinds of derivatives and plows down through those levels of financial instruments eventually reaching treasuries and sovereign bonds, and then ultimately down into cash. Gold is at the very base of the pyramid, because that’s how the whole system is constructed. It’s all constructed on top of a base of gold.

A lot of people have forgotten this. Most people in modern finance today have never heard this stuff, because gold isn’t taught anymore as the base of the pyramid. Everything was constructed on top of it. They have forgotten this, so what’s happening is that globally, as capital destruction occurs and forces its way down through the layers of the pyramid towards gold, it reaches the bottom into cash, U.S. dollars and treasuries for example. People will start to realize that the massive devaluation of the U.S. dollar is going to force down even farther into gold.

Duncan: Yes, that’s correct.

Alex: And that’s just starting. Very few people have caught onto it. The amazing thing is that the gold price is up almost $70 a day with only a small fraction of the population understanding this stuff. As that awareness starts to grow, just imagine global currencies alone. The last time I checked maybe a year ago, so it’s probably larger now, we’re talking $210 trillion U.S. dollars’ worth not including all of the other financial layers of paper instruments that we’ve created and allowed Wall Street to magically produce.

Duncan: They talk in quadrillions now for the total. I did a newsletter years ago where I likened the Twin Towers to the Exter Pyramid, because we know there was a lot of gold in the vault at the base of the Twin Towers. I liked the derivative, the pyramid of unfunded government liabilities at the top floor, and as you worked your way down through nonmonetary commodities, corporate muni bonds, securitized debt, government bonds, treasury bills, finally, you’ve got paper money, and lastly, gold.

When the tower came down, everybody and everything in it was gone but the gold. They went and pulled every single bit of gold out of the basement once they’d taken away all of the rubble above. I likened that pyramid and did the math calculation with my dad’s help, because he’s a very good mathematician. I needed my father to help me in trying to do the derivatives, and I worked out that the pile in the modern world would be somewhere around about the moon if you had to build the Twin Towers again using the derivative example and the gold at the bottom in terms of its percentage to the actual amount of nothing money.

In other words, it’s so tall and so big that it’s not really comprehensible. Even if you’re trying to picture a skyscraper into the sky, what sort of skyscraper goes to the moon?

Alex: The last thing before we start wrapping this up is that you’re a business owner. You’ve got three companies that I’m aware of, and I know you’re wrapping one up now because of everything that’s happening.

Duncan: That’s right. You’ve talked a lot with Jim over the years about complexity theory, chaos, and all the rest of that. So, here’s chaos and complexity theory in action.

One of my businesses is a courier business. Believe it or not, our business is being deemed an essential service by the government as we lock down, because we deliver all sorts of things.

Our customer base is primarily the automotive industry. We look after some very big companies, good companies, public companies. They pay their bills, but many of these automotive companies we look after are not deemed essential even though they supply everything from gaskets to you name it. They are going to be shutting down.

My ISP is also deemed an essential company. Yesterday they needed to buy screws, but they need to buy them from a company that is not deemed essential. So how do we get the screws to keep the tower operating that keeps the Internet going that you and I are streaming over right now?

Everybody is connected to everyone. There is no island, so it’s just a question of how far down the chain. When people say, “We’re going to keep essential services running, like food,” well, food comes from farmers. From the farmer to the table, everybody is involved in the supply chain solution. I’m watching our entire courier company get laid off. Many of those people live hand to mouth week to week. Now they’re going to the government to bail them out, and the government will give them a subsidy.

Other people own cafés and businesses. They’re not going to be able to start up again, because they were reasonably leveraged when they had a café. They’re about to find out that unless someone gives them a whole pile of money, they’re not going to be able to reopen.

I’m talking to you while we’re sitting at home via a Zoom connection on our IT business. There are guys in Australia and New Zealand working virtually for big public companies that use us. When talking with my peers about continuing to look after them, the expression on their CEO’s face was a palpable facial relaxation, because they’re terrorized about what happens if their IT company can’t be supported. But if my IT worker, even in lockdown, for whatever reason, becomes sick …

Everybody is part of a supply chain solution. There’s the stuff at the beginning, the stuff in the middle, and the stuff at the end. You’re just somewhere along the line.

Alex: The interesting thing about that is that the companies in the middle go bankrupt. They have to shut down because they don’t have cash and they don’t have any runway. These are permanent closures, right?

Duncan: Yes, they are.

Alex: That will affect the entire supply chain from start to finish.

Duncan: Absolutely.

Alex: It’s not going to be the same. Everything’s changed. That being said, let’s wrap this up with a couple of thoughts I’ll break into two parts.

What would you say to the average person right now in terms of what they might be able to do to prepare? Actions they can take, like actionable items. After that, let’s talk about somebody who’s got some savings, some dry powder. Maybe they’ve sold some of their assets and now they’re in cash. What are the kinds of things those people can be doing? Talk about the full spectrum as far as preparedness for what’s happening. What are your thoughts on that? Start with the average person first.

Duncan: Right now, the average person in the middle has already been locked down. They’re obviously allowed to go buy food and essential supplies, but they need to be thinking about what the landscape is going to look like after all of this. They now need to be thinking about what assets they have, how are they exposed, and how are they leveraged.

Alex: Most people don’t have assets. This is what I’m talking about.

Duncan: No, they don’t.

Alex: This is that chunk of the population living paycheck to paycheck. When the government says everybody stay at home, the first thing that comes to their mind is, “Okay, how am I going to buy food and pay rent?” Talk to that population first, and then we’ll get into if somebody can actually invest in something. Let’s cover both.

Duncan: All right. If you’re at that extreme end of the spectrum, I’ve got to be very blunt and say you’re going to need to rely on friends and family. You’re going to have to restore relationships with people that maybe for whatever little gripe, you don’t talk with very much. Family and friends are going to be needed to help each other at an intimate level.

If you’re at the far end of the extreme spectrum, you’re going to need help and relationships. Think about if you’ve got poor relationships, broken relationships with people for whatever reason. I phoned someone the other day that I haven’t spoken to for a long time to see how they’re going. I had a little bit of a tiff with them. I imagine they’re actually about to go through a tough time, so I thought, look, I need to be a bigger person and call them, because they could be in trouble.

At a basic level, people are going to have to help each other. If you’re at that far end of the spectrum living paycheck to paycheck, you need to give up your flat and go live with your parents. This happened back in ’08 when we had housing shortages here, because everyone wants a house. I can sell a house to anybody on a demand basis. Go ask all the teenagers at school, “Would you like a house?”

There’s not a supply shortage, because people have lived in close quarters through centuries before. People lived in tight family units, and they’re going to have to be doing that sort of thing. Obviously, when you live tight together, all sorts of families that didn’t have much can’t make it on their own, and they’ll suddenly find they can make it around people that care about them or they care over.

That’s what they’re going to have to do at the far end of the spectrum, because they’re too late to the party now. If they’re living paycheck to paycheck, they’re going to have to think more about their relationships and the people they can help and that can help them.

Now to the middle of the spectrum. It’s amazing how many middle class have rental properties and things and think they’re okay. The government will give them a mortgage holiday, so they’ll be able to keep their rental property. There are articles coming out right now still trying to talk up the property market, and I’m very concerned that people already have too much leverage, because they’ve been used to borrowing at zero interest rates.

Rates are not going to stay zero forever. Regarding the cost of money, you can go back to the Roman empire and see how from the crisis center of Diocletian, you can have peace during Julius Caesar and then have total destruction. They’re going to have to think about realigning their assets and cut down all these things they thought they could make lots of money on by borrowing at zero rates forever.

They probably still have time, because a lot of people think the world’s going to get better quickly. You and I know, however, that there’s a lot more carnage. Once the monetary supply’s being changed, things are going to change.

I’d say to the middle class, if you’re leveraged and own properties, residentials, and things like this, you need to pull your horns in big time. And you need to do it while you still can.

Alex: And people who are in a position where they can invest? What do you think?

Duncan: I shifted money out of a revolving facility I have and put it in a securities account two days ago. I’ve started buying shares. I’ve got six screens and every one is open around the world. It looks like NASA at my office at work. People just walk in and go, “Oh my god.”

Exxon Mobile is paying a dividend. They’ve paid a dividend through all sorts of times, so this is just an example. We’re not stock pickers or anything like that, but do you think the price of oil is going to stay at $20 forever under monetary inflation when all these other shale producers start to die on the vine and they don’t have the money to start up?

What does President Trump do? Nationalize all sorts of industry? They’re talking about nationalizing, so you need to be buying assets that will appreciate. Obviously, people like you and me own precious metals, but there’s also an opportunity. I can see a world in which assets inflate. There are all sorts of equities that are attractive, but they’re going to become even more attractive.

Precious metals have to be the cornerstone. If you can still purchase some through any means possible, you need to take a position in it. You need a core position of gold, and in the future, there’ll be a place for silver as well. Obviously not yet, because we’re still in the fear of deflation, but gold has to be the cornerstone. It is the bottom of the Exter Pyramid. It’s the part that came out of the Twin Towers when all the rubble went off to some landfill. All the gold went out. Every single ounce. They got it all.

People need to be thinking that if they can still buy when the refineries open and COVID passes, they need to be calling people like you and putting in orders. That’s at every level, because they’re going to need to have a cornerstone, and it won’t be the U.S. Treasury. It won’t be some debt instrument from the Bank of Japan or the BoE or the European Central Bank. They’re going to need gold. It’s going to be better than treasuries, because the treasuries are going to be compromised.

People accuse China of being partly behind this at a conspiratorial level. Well, whether you take that view or not, one thing is for sure: the whole world’s financial system including the U.S. dollar hegemony, total power, control, is going to be realigned in the times ahead. Countries are going to have a different form of value.

Alex: Yes, I reckon that’s about true. If you watch the behavior of central banks around the world, they’ve been stockpiling gold for a number of years now. Very few people talk about that or are even aware of it. You’ve got to ask the question, why? It’s because they’re not dumb. They saw how the system was set up, they saw how the debt levels were set up, they saw all the leverage we had in the system. If an event like what is currently unfolding right now happened, it would fundamentally change the way the global monetary system works, and we’re on the doorstep of that right now. We’re on the dawn of that.

Duncan: That’s right. It sounds all very apocalyptic, but society has survived through famines. I still keep coming back to the Kondratieff wave that Simon pointed out to me at all those years ago. Summer, autumn, winter, spring. Cycles go through history. People lived generationally through history, and things will recover again. Things will go forward. Although there are all sorts of subjects we could delve off to in that, the reality is that the world will look different in two years’ time. It will look very different in one year’s time.

People need to be thinking that with what they’ve got now, how can they position themselves to be at the front end of the effects of this monetary inflation? They may have missed the previous wave. I’ve spent many an hour out there in the water, but there are other waves coming through. We have another wave coming through, and you can get on that wave and ride it.

The key thing is, precious metals have to be the cornerstone. You need an amount of precious metals. You need gold. Gold is the money of kings, and the kings have stored it all up lately, big time. The kings have their gold. The question is, do you who are out there in ordinary Internet land? Do you have any gold?

Alex: Duncan, I think that about does it. I appreciate you taking the time today. You take care and be safe down there in New Zealand.

Duncan: All right. It’s nice chatting, and we’ll talk more. As I said, I’ll be in touch with you in the evolving situation.

You have been listening to Global Perspective with Alex Stanczyk presented by Physical Gold Fund. Recordings may be found at PhysicalGoldFund.com/podcasts. You can register there for news of upcoming interviews with Alex Stanczyk and other thought leaders in the fields of geopolitics, economics, and the global monetary system.

 

You can follow Alex Stanczyk on Twitter @alexstanczyk

You can follow Duncan Cameron on Twitter @Duncan_ACameron

You can access transcripts of our interviews at:
https://physicalgoldfund.com/category/transcripts/

You can subscribe to our Youtube channel to access these interviews and more at:
https://www.youtube.com/channel/UCXRWzw0vaNgCwo7nTMEAwkA

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following.

This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

This material is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind. In particular, information provided by third parties in this Podcast has not independently evaluated or confirmed. Furthermore, we take no responsibility to update this Podcast to reflect any changes in any of the information presented. Physical Hard Assets Fund SPC and Physical Gold Fund, its officers, directors, employees or associated persons will not under any circumstances be liable to you or any other person for any loss or damage (whether direct, indirect, special, incidental, economic, or consequential, exemplary or punitive) arising from, connected with, or relating to the use of, or inability to use, this Podcast or the information herein, or any action or decision made by you or any other person in reliance on this information, or any unauthorized use or reproduction of this Podcast or the information herein.

EP. 92 The Gold Chronicles: March 2020 podcast with Jim Rickards and Alex Stanczyk

Jim Rickards and Alex Stanczyk, The Gold Chronicles March 2020

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Topics Include:

*Opening salvos of Global Financial Crisis II (GFCII)

*The entire precious metals complex (gold and silver) has been cleaned out globally

*The best time to act has past, now is the second best time to act

*The global run on precious metals is probably less than 5% of the population, when the majority catches on to damage done to USD the demand could be historic

*Price dis-connect between paper and physical gold price

*How price discovery in the gold market is resolved *What happens when the Swiss refineries open again

*The effect of key relationships with Swiss refineries on access to gold and silver

*Mining output dropping due to mines getting shut down reduces available supply of gold

*US Unemployment Claims hitting record levels, 3.28M claims in one week

*Fed injecting capital into system trying to prevent liquidity freezes (Ice-9)

*Why we are entering the next Great Depression

*In comparison, during “The Great Depression” Dow Jones dropped 89%

*The Great Depression played out over 3 years, we are a third of the way there in 3 weeks

*Consequences of Supply Chain Shutdowns

*Why the US could lose up to 50% of its economic output by the end of the downturn

*The social and political consequences of QEternity *What happens when complex systems collide

*Regarding mass migrations and unrest, watch South Africa and Mexico

*Full Spectrum Warfare – Financial, Biological, Cyber, Social Engineering, Kinetic

*What are the chances we will see kinetic warfare

*Why China could be eyeballing Taiwan during the crisis

*How the Covid-19 numbers out of China are questionable

*CARES Bill – Whats in it

*Whats happens to gold if we see massive deflation (Great Depression II)

*The two ways gold is revalued in a massive deflation

*It took 25 years for US markets to recover from the Great Depression

*Jim: “Be wary of suckers rallies”

*Practical things people can do during this crisis

*Spoiler – Jim’s new call on the US Presidential election and how the crisis has changed the probabilities

 

 

Books by Jim Rickards:

Currency Wars

The Death of Money

Road to Ruin

The New Case For Gold

Aftermath

 

You can follow Alex Stanczyk on Twitter @alexstanczyk

You can follow Jim Rickards on Twitter @JamesGRickards

You can listen to the Gold Chronicles on iTunes at:
https://itunes.apple.com/us/podcast/the-gold-chronicles/id980027782?mt=2

You can Listen to the Global Perspectives on iTunes at:
https://itunes.apple.com/ca/podcast/physical-gold-fund-podcasts/id1056831476?mt=2

You can access transcripts of our interviews at:
https://www.physicalgoldfund.com/category/transcripts/

You can subscribe to our Youtube channel to access these interviews and more at:
https://www.youtube.com/channel/UCXRWzw0vaNgCwo7nTMEAwkA

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following.

This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

This material is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind. In particular, information provided by third parties in this Podcast has not independently evaluated or confirmed. Furthermore, we take no responsibility to update this Podcast to reflect any changes in any of the information presented. Physical Hard Assets Fund SPC and Physical Gold Fund, its officers, directors, employees or associated persons will not under any circumstances be liable to you or any other person for any loss or damage (whether direct, indirect, special, incidental, economic, or consequential, exemplary or punitive) arising from, connected with, or relating to the use of, or inability to use, this Podcast or the information herein, or any action or decision made by you or any other person in reliance on this information, or any unauthorized use or reproduction of this Podcast or the information herein.

EP. 6 Global Perspectives: March, 2020 Interview with Alex Stanczyk and special guest Duncan Cameron

Physical Gold Fund Hosts Global Perspectives with Alex Stanczyk and special guest Duncan Cameron March, 2020

Welcome to Global Perspectives, a new podcast featuring some of the sharpest minds in the world. We delve into the key concerns, opportunities, mindset, and practices of some of the most successful professional money managers, entrepreneurs, and world class personalities today.

This episodes special guest is Duncan Cameron.

 

Topics Include:

*Covid-19 Coronavirus and Global Financial Crisis II Update

*How do discern where to find truth

*Why when living history is lost, it is on the current generation to make the same mistakes

*Physical gold and silver metals complex globally is sold out

*Making sense of what assets still make sense

*The current economic meltdown is not because of coronavirus – the system was already in a state ready for an event to cause the meltdown

*Younger people may not have seen real capitalism for the duration of their entire lives

*Kondratieff Wave

*Roughly 50 year crash cycle and debt forgiveness ‘jubilee’- no sowing and reaping and people return to their families

*Socialist policies being put forward during crisis

*World is going into compulsory lockdown

*Why purchasing power of fiat currency goes down over time

*What is hyperinflation

*US Treasury yield curve has dropped below 1pct for first time in history

*Global coordinated central bank easing

*VIX (Fear index) spiking

*Oil price wars, Russia vs OPEC

*Disconnect between gold price and price of gold

*US Treasury Secretary announces checks cut directly to US citizens

*Trillions of USD stimulus announced by the US Federal Reserve

*DOW/Gold Ratio

*Defense Protection Act – US Factories On Wartime Production

*Why US Oil Shale producers will be going bankrupt

*Covid-19 in 148 countries

*Implications of Swiss refineries shutting down for two weeks

*Gold anchoring a portfolio

*Fabrication bottlenecks are not metal shortages

*Swiss refinery shutdown impacting gold availability globally

*Gold/Silver Ratio

*Why people will seek gold and silver to preserve purchasing power as the USD crashes in value

*The velocity at which people realize USD losing value will start out slowly and then increase rapidly

*How the residual anger over covid19 and the GFCII can lead to war

*How the financial system was already in a critical state waiting for a catalyst to set off the chain reaction

*Why capital is rushing into USD and US Treasuries, and will eventually flow into gold

*What is Exter’s Pyramid

*MMT and infinite money creation

*How the entire global financial system is constructed on a base layer of gold

*What could lead to permanent breakdowns in the supply chain of all nations

*Practical steps people can take

 

 

You can follow Alex Stanczyk on Twitter @AlexStanczyk

You can follow Duncan Cameron on Twitter @Duncan_ACameron

You can access transcripts of our interviews at: https://www.physicalgoldfund.com/lear…

You can subscribe to our Youtube channel to access these interviews and more at: https://www.youtube.com/channel/UCXRW…

 

 

By listening to this podcast or reading its associated transcript (collectively, this “Podcast”), you agree with the following. This Podcast is not an offer to sell, nor a solicitation of an offer to purchase, any security. This Podcast is intended for general education and information purposes only, and may include broad discussions of markets, geopolitics, monetary policy, and geoeconomics. Nothing in this Podcast constitutes investment, legal or tax advice, nor an evaluation of or prospectus for any particular investment or market, including gold. This Podcast should not be relied upon to make any investment decision. You are encouraged to seek the advice of qualified financial, legal and tax advisors before making any investment decisions.

This material is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind. In particular, information provided by third parties in this Podcast has not independently evaluated or confirmed. Furthermore, we take no responsibility to update this Podcast to reflect any changes in any of the information presented. Physical Hard Assets Fund SPC and Physical Gold Fund, its officers, directors, employees or associated persons will not under any circumstances be liable to you or any other person for any loss or damage (whether direct, indirect, special, incidental, economic, or consequential, exemplary or punitive) arising from, connected with, or relating to the use of, or inability to use, this Podcast or the information herein, or any action or decision made by you or any other person in reliance on this information, or any unauthorized use or reproduction of this Podcast or the information herein.

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