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