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
-Uncertainty in economists about what is money. What are derivatives? Instruments whose value is derived from another asset.
-For 195 years we were on a gold standard, which required so many ounces of gold and silver for every dollar the Federal Reserve and its predecessors held in reserve. That standard was abandoned in 1971. Nothing restraining the Fed from now creating however many dollars they want.
-All Congress can do is borrow money. The Fed gets to create the money which is loaned to Congress.
-77 cents of every tax dollar collected is necessary for debt service. We owe $300 billion in interest every year, plus principal payments. Instead of amortizing over 5 years, Treasury Secretary Mnuchin wants to amortize the debt over 50 years.
-50% of baby boomers have no savings set aside for retirement. 50% of boomers have debt balances of over $25,000, with a median personal income of $30,000. Bankers’ lending criterion is max of 28% income for mortgages and 45% max for all debt.
-We have invisible soup kitchens now. 55 million people getting food aid – imagine all of them in line for food.
-“We can’t just let people do what they want.” Chris Christie, NJ governor.
-President Maduro says Venezuela should just raise the minimum wage and give free housing. Meanwhile the value of the underlying assets plummets. No external demand for Venezuelan currency, so it’s subject to market constraints and the value is undermined. Versus external demand for US dollars gives US more latitude.
-If the Fed raises interest rates, bond values drop. Banks anticipate by shorting bonds. Trading community has bet on an interest rate increase and bought a lot of bonds, which gave the dollar strength. Anticipate volatile markets.
-Mortgages are number one debt, followed by credit card, revolving, auto loans, student loans. We have same amount of credit card debt as in 2008, but delinquencies are low. Student loans can’t be defaulted on, so they are considered a safer form of investment.
-Auditing the Fed would reveal a lot of transactions that don’t show up on the balance sheet. It’s the behind the scenes doings that give the Fed a lot of power.
-Apple has $256 billion in cash. Listener asks: What are the implications of their proposed stock buy-back? Apple is not open source – you need their proprietary phone, charger, apps. Versus PCs are open source. Open source is good for the market, closed source has been profitable but limiting for Apple. Apple looking to expand its market, is venturing into medical device uses.
-Are non-interest bearing accounts good to have? Only short-term. This is an era of passive income generators, which doesn’t throw off income or a 1099. Gives some privacy, but keeping money in the bank is a foolish way to store assets.
-Trump talks about breaking up the big banks, but is really referring to going back to dividing investment from commercial banking functions. After repeal of Glass-Steagall in 1998, which had separated investment banks from commercial banks, banks recombined those functions and grew in size. They loaded up on MBS; when they crashed, the depositors suffered.
-A 10-20% investment in numismatic coins is conservative. An investor can broaden out to collectibiles, which are in the top 5% of asset categories.
-With the US debt ceiling, the only source of funds for the gov is money from existing sources. Acts to curb inflation. Once the ceiling is raised, new instruments will be created again.
-Bruce suggests GDP is so poor because consumers are up against the 45% debt limit and limiting spending. Mortgages are a big part of GDP, also gov spending. Blowing up bombs helps the GDP.
-What happens if the government shuts down? Commercial brick and mortar is the most risky investment now. Municipal bonds are bad news, because there is no increase in return if interest rates increase.
-Le Pen is a nationalist. The Euro and socialist folks want Macron. Hundreds of jobs moving out of Britain with Brexit looming.
-Mnuchin tax proposal to allow deductions only for mortgage interest, charitable deductions, children. Andy says property tax deductions will be added.
-To see what maturities the gov has and when they will mature, go to Treasury.gov and look at the maturities schedule.
-Nancy wants Andy to define Bitcoin. It’s a distributed ledger with an unbacked currency. People buy in because they think it’s going up. It records the rightful owner of every bitcoin in existence. Those transactions are grouped in a block. To create more bitcoin, other community members confirm the transactions in the block and update it on the ledger. Can transfer bitcoins from one address to another without any identification of who did it – it’s a crypto currency. People like the privacy, that transactions can easily cross borders. Underneath the bitcoin is nothing, though.
-Bank of England will do a block chain gold. Gold will be in their vault. Block chain can tie the specific bar to your transaction. Like bitcoin, but backed by actual gold.
-People owe taxes when they sell bitcoin at a profit, but there is no 1099. Gov doesn’t like that it’s easier for people to evade taxes.
-For a criticism of Andrew Jackson, read Lyndon LaRouche. It wasn’t until Jackson that people had gold and silver to trade with.
-Jay asks if any gains from rare coin sales are capital gains that can be offset by capital losses in bonds and stocks? No, income from rare coin sales is personal property.
-Listener asks for a review of how we got put on the vinyl and not the couch. District of Columbia has legislative authority without regard to the constitution. They can put stuff in rules and regulations of D.C. that don’t pay attention to the constitution. As a citizen, we’re subject to the jurisdiction of D.C. That happened with the 1934 Social Security Act, which made us subject to the federal district government. It extended D.C. Jurisdiction throughout the US. We’re no longer sitting on the couch of the constitution, but on the vinyl.
Andrew Gause and The Real World of Money, May 3, 2017 ONE
Andrew Gause and The Real World of Money, May 3, 2017 TWO