THE REAL WORLD OF MONEY
Andrew Gause may just be the top man anywhere for the highest quality analysis into the world of money we all live in. Andrew is a currency historian, an internationally recognized expert on the United States monetary system. He’s written two books, “The Secret World of Money” and “Uncle Sam Cooks the Books”. You can order these books as well as speak to Andrew personally. As a One Radio Network listener, you’ll have highest priority in his phone time. His # is 800.468.2646
-Congress went on vacation without doing anything. No health care reform, no budget, no debt limit increase. Value of dollar is down 10%.
-Meanwhile stock market is surging towards 22,000. 15 trillion dollars in MZM. Gold at 8 week high. A hidden loss in purchasing value – loss is in quality, not quantity of dollars. The dollar value on a statement may not have changed, but the underlying value of the account has diminished.
-To protect oneself, the first step was to move out of the bond market. Now need to move out of the dollar market.
-Alan Greenspan warns of a bond bubble, says the bubble is in bonds, not in stocks, and predicts a rapid rise in interest rates. He was Federal Reserve chairman under 4 presidents, now has Greenspan Associates.
-Tangibles like gold and silver and numismatic coins are the best hedge against inflation.
-In a deflationary depression, money gets sucked out of the market, as happened in 1929. Money is extinguished through retirement of debt. Bullion and numismatic values decline. A half-dollar from 1929 is an unusual thing, because all of them were spent. Versus 1940 half-dollars, which are more plentiful because the money supply expanded then and half-dollars were saved. Now 3 times as much debt as money to pay, and the entire economy is driven on debt.
-If we enter a deflationary depression, Treasury bonds and dollars will be worth a premium. But everything else will be crashing, so we are all doomed anyway.
-Andy’s advice is predicated on the Fed not having the political will to protect the value of the dollar.
-2008 was a deflationary depression. Had a liquidation of mortgage backed securities (MBS), which sold at $.30 on the dollar. Andy believes the central banks will not allow another deflationary depression to occur. Historically these occur cyclically, but American politicians think they’re repealed the business cycle. The Federal Reserve’s job is to lean against the wind. Harry Dent predicts a shortage of money and another depression.
-What to do now? Look at where your dollars are. What will happen to you if there is an inflationary period and interest rates rise rapidly? Historically July and August is slow for investment activity. But even in these doldrums, prices are rising. Can expect a rush to hard assets after the summer. Mitigate counter-party risk. Get maturities short.
-Housing prices in California have doubled since 2005. Andy advises stripping the asset by taking the equity out when the value is high.
-Eli asks about buying a numismatic coin vs. bullion if he only holds it for 2 years. Andy’s advice is to buy a semi-numismatic coin, which has a premium above the value of the gold in it. For numismatic coins, the value is in rarity only. Long-term oriented, hold for dear life. Opportunity to buy rare coins can be as rare as the coin itself. Semi-numismatic coins – bulk of value is in the gold and silver in it, plus an additional numismatic value.
-If you have strong hands, you can test the market with rare coins. Can put the value of a coin well above the market price and might still be able to sell it. Can’t do that with bullion.
-In the absence of a gold standard, there is no way to protect against inflation. If there was anything better than gold to protect against inflation, the government would make that illegal too. We’re entering a tough period of stagflation, which is rising prices, but no economic growth and no growth in jobs. But it would be good for numismatic collectors.
-Treasury is burning through cash. Quarter 4 debt will be half a trillion. By the end of September, the federal government will be broke and also at our debt limit. Can’t borrow any more money. The perfect storm of economic events is upon us. Failure to pay any obligations due could call the dollar into question and trigger stagflation.
-Total government debt is $30 trillion. Is 15-45 times as much total government debt as in 1980, depending on how you define money.
-Juan asks about the inconsistency in the US demanding its borders be respected yet it bombs and invades whatever country it wants. If the US wants its borders to be respected, shouldn’t it also respect the borders of other countries? The US excuse is that when we go in to another country, it doesn’t count, because we’re defending democracy. We have a long history of meddling in others’ affairs.
-Opiod crisis rages and US prosecutions hit 25 year low. More than 1/3 of US adults are on prescribed opiods. Over 50% of drugs on street causing problems are prescribed legally and come from pharmaceutical manufacturers. Over 20,000 deaths last year from opiods.
-Bitcoin exchanges are subject to scrutiny from regulators. Operator of unlawful bitcoin exchange goes to prison for more than 5 years for processing more than $10 million in illegal Bitcoin transactions. Feds fear cryptocurrency is being used to evade taxes. Money laundering laws now being discussed in Congress will treat cryptocurrency as cash.
-Rob says private banks get to use customer money for leverage to gain interest by investing in government bonds. Why can’t the government have its own bank and accept customer accounts? Andy says amen and gives the example of the Bank of North Dakota. But the owners of the Federal Reserve banks would be deprived of their profits from selling government debt, so it won’t happen.
-3/28/17 speech by Governor Jerome Powell about how the Fed was created. Go to https://www.federalreserve.gov/newsevents/speech/powell20170328a.htm
-Bob shares a study about using the bacteria Delftia acidovorans to extract the gold in seawater. http://www.geologyin.com/2016/03/researchers-discover-bacteria-that.html. There will be more efficient methods to extract gold and new gold finds, but they can never extract gold numismatic coins. Peak theory of gold – has it all been discovered? Go to World Gold Council and look at supply and demand statistics. Demand keeps increasing, rate of production is declining. Exploration budgets have been slashed. Extraterrestrial origin of gold?
-JT asks about a 30 year Treasury bond with a face value of $250 billion that was turned in on 9/11/2001. $250 billion in bonds were paid without a lot of paperwork.
-In 1976 Andy was part of National Commission on Legal Reform to make gold legal again. Knew that absent regulatory change, gold would rise in price and dollar would lose value.
-DB asks about Prime Minister Evo Morales of Bolivia saying his country was free and independent of the IMF and World Bank. Hugo Chavez was the last guy to do that, and Venezuela is in chaos right now. Andy predicts Venezuela will be back in the fold of the IMF. Bolivia won’t be dealt with favorably, monetary consequences will be severe.
-If the government won’t have a gold standard, you need to have one yourself. Don’t be the counterparty that loses to a correction. European Union considering measure to stop people from withdrawing funds to prevent bank runs.
-In Ohio in 1980s during Savings & Loan crisis, people were limited in how much they could withdraw from their S&L account.
–Steve compiled a list in a Dropbox file of online directories of thousands of free educational courses. Go to http://tiny.cc/studyfree. Download the file first and then open to view.
-Lori asks, what is your outlook for investing in short term Treasury bills? Will see a little bit higher rate each time you roll them over. But don’t put all your eggs in that basket.
-Can Andy discuss the $21 trillion missing from government accounts? A 911 thing. Most of it is attributed to archaic accounting systems, but it is not accounted for. Maybe not as much as $21 trillion.
-Were does the CIA get the money to fund the terrorists that Trump stopped funding? Off-budget operations, off-book resources, CIA-run businesses. E.g. CIA used money made in the illicit drug industry to fund Iran-Contra. Drug money today is a huge part of the dark operations. Also CIA provides seed money to companies they think will provide a leg up to the intelligence community.
-Are today’s bullion coins tomorrow’s numismatic coins? Unlikely. Plus none are lost to attrition. They’re all new.
Steve’s directory of free educational courses is at http://tiny.cc/studyfree
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Andrew Gause -the Real World of Money and The Coming Financial Tsunami, August 2, 2017 ONE
Andrew Gause -the Real World of Money and The Coming Financial Tsunami, August 2, 2017 TWO