Welcome to this week's Market Wrap Podcast, I'm Mike Gleason. During this quiet Thanksgiving week on this trading front, we felt it was an appropriate time to check in again with Guy Christopher to discuss some broader topics on the minds of precious metals buyers. Guy is a featured columnist at MoneyMetals.com and has a real talent and ability in speaking to the everyday investor. Guy is a retired investigative journalist, published author, and former stockbroker, and veteran of the 101st Airborne serving in the Vietnam war. As a result of all those life experiences, he offers a unique perspective to our readers.
He knows what's on people's minds. As a write, he likes to zero in on those moments in life that make you stop and think. He's done just that with a string of popular articles published at MoneyMetals.com over the last few months.
Guy Christopher: Thank you very much sir. Glad to be with you.
Mike Gleason: I'm going to bounce around a little bit here and discuss some of the important topics about what you've written over the last couple of months, which continues to be top-notch stuff by the way, so first let me say thank you very much for the contribution you're making to our site. Now in your most recent article, you wrote about the use of gold and silver as money, and I want to dig into that subject with you here because questions about that come up a lot with our customers. Now one example I've heard before from those who discredit the idea that gold and silver might ever become useful, let alone necessary and a possible currency replacement in a catastrophic scenario is Hurricane Katrina where items like bottled water and generators were in very high demand and you could buy almost anything with those items if you had them.
Now we would be the first to say that you really do need to have an adequate supply of essential items like a good supply of food and water and an alternative power source, etc, but in a long term situation is a society where the currency itself is breaking down, we need a stable currency to function. Is that where you see gold and more likely silver coming into play?
Guy Christopher: I think that's a perfect example. When Hurricane Katrina roared into the Gulf Coast, specifically New Orleans in 2005, a lot of folks don't know this, Mike, but the City of New Orleans, which was partially flooded, lost at least 19 branches of a particular bank. The bank was called Hibernia at the time. It is now Capital One. A lot of folks know the Capital One banking system. Nineteen banks under water for about three months. By the time these banks were finally cleaned out and opened up, it turned out that the safety deposit boxes in those banks were under water of course for that length of time, and everything in those safety deposit boxes was ruined.
That would be stock certificates. That would be cash. That would be anything of paper. Gold and silver would probably have been the right thing to have in there except in the case of those banks, many of them were opened without the owner's present, so the question of hard money as opposed to paper money as opposed to stock certificates I think is answered with that example. The banks were closed. If you had a favorite bank on the corner and you went down to try to do business there and you found that it was closed because it was under water or any reason, you were out of luck for a while. If you didn't have electricity, if you didn't have the computers, if you didn't have a way to draw some of your money, some of your wealth, a pocket full of silver would have done a lot of good.
Most of the folks, over 100,000 of the people in New Orleans left the city and never came back. What did they take with them? Did they take mountains of furniture and mountains of personal belongings? No. They got in their cars and they just started driving. A lot of them ended up in Houston, Texas. When they got to Houston, they had what they had on their backs and in their pockets. I would think that gold and silver would have been an easier thing to carry with them than would tons and tons of supplies that they might have been lucky enough to put away along the way, like bottles of water and stores of food and things like that.
It wouldn't have been any problem at all to take that gold and silver and change it into usable currency. Dollar bills I guess would be useful currency in Houston. It wouldn't have been any trouble to take that and restore some of their chances of survival after having escaped the city.
Mike Gleason: Natural disasters are one thing, but preparing for a financial disaster is simply an imperative, given the economic and monetary environment we live in today. And not only did we come very close to a total financial catastrophe recently, we also might see something worse than the collapse we nearly saw a few years ago based on the response to that near miss. Talk about that situation, because I don't think many Americans know the full story about that fateful weekend in September of 2008.
Guy Christopher: It really is remarkable, Mike, that the date was the 14th of September, 2008. It was a Sunday night. The banking system was imploding. It was over-leveraged. The Federal government was holding non-stop meetings day and night that weekend to try to save some of these banks and they chose to let one called Lehman Brothers, which was a behemoth of a financial institution, they chose to let it go, and worked out a deal where they would just find the cash, print the cash to shore up the banking system. Of course many other banks failed in the following weeks. The problem we had, or the problem the United States government had and the problem the world had was too much debt, so how did they try to solve it? By issuing more debt and they've been issuing that debt to the tune of uncounted trillions of dollars now for the past six years.
Nobody knows how much money is in circulation. I know that governments have computers and statistical analysts and things like that, but I doubt seriously anybody knows how much paper money is floating around out there and so what we have is a problem that we cannot even identify. It's that bad. The debt is mounting. There's no end in sight to it and at some point that debt is going to bring the financial system down, and I mean the global financial system, and it may come down in domino form or it may come down all at once overnight. Who knows? The problem is we don't know how it's going to look because we've never in history had a situation like this before.
It's very dangerous and I wish more folks would pay attention to that danger. Unfortunately they don't hear about that danger day in and day out the way they hear about other news events or other social events, so it's not on their minds. It's very few, very few folks actually take the time to sit down and say to themselves what's going on in the world and how can I protect myself? How can I plan on surviving if in fact things don't go the way the governments tell us they're going? The governments are telling us that the economy is improving. Look at the stock market. The stock market is going up every day.
Now we know from several sources that the Central Banks are buying those stocks. The companies themselves are doing stock buy-backs. The stock market is being held aloft artificially. The value is not there. The value that is supposedly reflected in the very high numbers the stock market is showing, the value is not there. That is a mirage and that mirage one day, it's a bubble that's just going to pop. When it does, financial institutions around the country are going to fail. They're going to come down crashing. Banks are going to close. Disruptions are going to start occurring everywhere.
Transportation, power, and of course financial institutions. When those disruptions occur, lives begin to change, and we've already seen that in this country. Millions and millions of people are on some sort of government handout, some sort of welfare, whether it's food stamps or government assistance of some sort, those lives have been in effect ruined by what happened September 14th, 2008. I say to folks whenever I can, it's important that you sit down and think about what's going to happen if the worst happens, and why would you worry about that? Because history tells us we are at a point we have never been before and we need to be vigilant about surviving financially, spiritually, and in every other way.
Mike Gleason: One of the things we often talk to customers about is that precious metals is almost like a form of insurance. Gold and silver, we don't necessarily like it as much as we do because it's shiny and pretty, it's really a form of protection against the paper collapse or the financial collapse, the banking collapse that you just spoke about, having something that would be usable in one of those types of events. You're going to be darn glad you had it if you needed it versus not needing it and having it.
Guy Christopher: Sure. If you don't need it, that's great. You haven't lost any money. You can always turn around and sell it. Folks like Money Metals Exchange and other bullion dealers, they really are the bankers of the bullion industry and it's very easy to turn that metal into the cash that's used whenever you are, whether it's dollars, whether it's Euros, whether it's pesos or whatever it is you're using. It's very easy to turn that money back into the cash that you would need to get through everyday life. I would think that if we don't have it, we are at a great disadvantage.
Unfortunately as I said and as we all know, so few people are really paying attention to that and that's going to be a terrible, terrible thing for all of us to face when friends and relatives and folks we care about who have not paid attention are suddenly destitute just because they didn't pay a little bit of attention to some insurance of trying to ensure their wealth. They spent their lives building their wealth and they've spent their lives enjoying their wealth, but for some reason protecting that wealth seems to be a problem that they just don't understand.
Mike Gleason: So many people are very quick to get the homeowners insurance or the auto insurance, but they don't seem to have currency insurance so to speak. Everything we're talking about here today, Guy, falls into a category of subjects that the Wall Street and banking elite in this country would rather people just not hear. You examined this subject in one of your other recent articles where you uncovered the reasons why your local stockbroker hates gold. You used to play in that Wall Street world a number or years ago yourself, so you have a unique perspective on the matter, but give our listeners a few reasons metals are pooh-poohed or viewed with just outright disdain in the main stream financial industry.
Guy Christopher: That was fun to write. I actually went to some old stock broker friends and told them I was writing an article about the stockbroker attitudes towards gold and even though they did not want to be named of course, they were pretty open with me. Number one, the biggest problem they had with it is they don't make any recurring commissions on it. Once you buy gold, that's pretty much the end of it. Gold is private wealth. Gold is not listed on an exchange anywhere. You don't have to worry about annual statements. You don't have to worry about CEOs going to jail either. You don't have to worry about gold being perp-walked across the street for television cameras.
Gold is not the type of thing that they're used to selling because it doesn't pay annual commissions. A lot of folks don't understand that even profits that you make from a stock account, when they are reinvested in some contracts, those profits are subject to new commissions and so if you make 10% on your money and that 10% amounts to $10,000, six percent of $10,000 is 600 bucks, which comes off the top, goes into the stock brokers pocket and you get the other $9,400 put back into your stock account. With gold, they can't do that. The other reason that they hate gold is because gold represents independence. Gold represents something that the United States government has tried to drum out of the American psyche for eight decades now ever since FDR went to war against gold owners back in 1933.
The government doesn't want you having wealth. The government prefers you having debt. And in order to make you comfortable with that, the government has been on a very long campaign to convince you that debt is wealth. A lot of Americans, too many Americans have bought into that idea that it's a simple equation. I can spend money with a credit card. I can write a check. What do I need with real wealth to spend? A credit card is really a derivative. You're actually borrowing money into existence whenever you swipe that credit card. You are borrowing money into existence just as a bank loans money into existence when it writes a loan to somebody.
That money doesn't come off the shelf in a back room somewhere. It's instantly created out of thin air. That debt is now in the hundreds of trillions, if not thousands of trillions circulating around the world, and it's an unsustainable system because at some point, someone is going to want to get paid. Someone is going to want wealth for that debt and there isn't enough wealth to cover that wealth, so that brings us right back to the terrible, terrible catastrophe that is looming. I can't say it's coming tomorrow or next week or next year, but it's coming. It's coming one day to this country and it's coming one day to the globe because the debt is unsustainable.
I've been reading for the last couple of days very interesting articles about France. This morning, just today, one of the major political parties in France is now clamoring to have French gold brought back to France from New York, London, Ottawa, places where French gold has been stored. We have a very serious question in Switzerland about gold, which you folks have been writing about. I notice David Smith may have written something about it very recently. The Swiss are actually having an election, a referendum to decide whether or not to force their central bank to return to some sort of semi-gold standard by holding gold and building up their gold reserves.
This is the same thing we've seen in Germany. It's very close to what Venezuela did a few years ago when they demanded that over 100 tons of gold be returned to Venezuela. Folks around the world are starting to pay some attention to this. Unfortunately it's not mainstream news in the United States. It's mainstream news in Europe. It's mainstream news in Asia, but it's not mainstream news in the United States.
Mike Gleason: It's really an issue of national security and I think that's why a lot of these countries are recognizing the dangers in having the gold held outside of their control. We're seeing a tremendous amount of gold from the US stockpiles leave and go to Asia. In another article you wrote titled, “Warning: Three Million People Covet Your Gold”, you paint a very interesting picture of how prevalent gold is in China and I want to read and excerpt from that column and then get your comments. You wrote:
China now seems weary of the paper money it invented over a thousand years ago. Yes, gold goes where it is best loved and most appreciated. That means China has backed up the truck. If you worry who might every buy your gold and silver, talk to the folks with thousands of years more experience with failed governments and failed currencies than we Americans have. Be assured that nearly half of the world's population, over there billion customers happily stand in line to buy your gold and silver with their unwanted dollars. But don't necessarily expect to get those precious metals back!"
What do they know that we don't and what should the average American be thinking about here?
Guy Christopher: That example I think hits the nail on the head, not because I wrote it, but because it's actually very, very telling. China, Vietnam, the Mideast, those nations have thousands of years of history that the United States of America does not have. We have 230 some odd years of history. They have thousands of years, 2300 years of history, ten times as much as we do, and their histories are constant revolutions, constant changes of government, constant changes of borders, changes of flags, changes of leadership, and along the way, those folks have dealt with a lot of blown up currencies, whether they were paper currencies or whether they were something else, those folks woke up one day year after year, decade after decade discovering their money was no good unless that money was gold, silver, or copper, and they have that memory in their DNA.
They are born knowing gold and silver is money. Quoting J.P. Morgan back in 1904, I think it was, “gold is money and nothing else.” Those folks overseas know this stuff. Americans do not. Americans may have known it in the 1800s, the early 1900s, but that's been drummed out of Americans over the past century. The idea of real wealth to hold onto has been drummed out of American psyches, and the reason for that is because the government prefers you be in debt. That's why they issue you money that is clearly debt. That's why they don't want you using gold and silver. The folks overseas understand this. The governments overseas understand this, especially China.
China is very cagy. Those people are not dumb. They're not buying every ounce of gold they can find for just the heck of it. They understand that it is money to at least three billion people, and they understand that it is power, and they understand that governments around the world understand gold even if their people do not understand it. The Chinese, the Middle Eastern countries, many of these countries are our enemies unfortunately. They're not very friendly to us and we're not very friendly with them and while they are amassing all of this gold and other natural resources, oil, timber, what else you can name, there's plenty of things that China is buying, everything from seaports to agricultural property.
China is a very big player in Africa where they are developing gold mines. They're developing agricultural properties. They understand that real wealth is not paper money. They understand that true wealth is physical stuff that you can use, that you can use to live off of, that you can trade, and unfortunately Americans don't understand that for the most part. I would say 1%, 2% or Americans have even held a gold coin in their hands, much less owned one. The idea of gold and silver is very foreign to us. However, I have seen a lot of evidence lately that that is changing. It's slow. It's going to take a while to change, but it is changing.
More and more folks I think are paying some attention to the problems of the United States debt. They're paying attention to the loss of the United States prestige around the world. One of the problems I think we see is that our enemies and our friends don't have the respect for us that they used to have. Our enemies are not afraid of us as they used to be or as they should be, and our friends are abandoning us in great numbers. Every time one of them signs a deal with China, that cuts the United States’ petro dollar out of the equation. Without the world using dollars for international commerce, the United States government is out of business.
The United States government loses all credibility if the dollar loses credibility. That is at play right now, and as you mentioned a minute ago, it's probably one of the greatest dangers to this country that we face right now.
Mike Gleason: I couldn't agree more. Certainly our position as the world's reserve currency is aiding us quite a bit in keeping this whole system afloat longer than many would have expected, but it definitely does have an end in sight I would say. Now it's worth noting that with the holidays now in full tilt, our listeners will probably have a few more opportunities for family interactions and one of the topics that Guy has covered in the past is how to talk to your friends and family about gold and silver so everyone ought to check out that article at MoneyMetals.com, but since we have you here with us Guy, can you give our podcast listeners a couple of pointers on how to broach the subject with loved ones and what kinds of things should they expect when doing so?
Guy Christopher: My Christmas shopping is done because I got my hands on a very small order of quite a few silver rounds and some gold that I intend to use as Christmas presents. I don't think there's a better sales pitch for gold and silver than to let someone use a gold or silver coin in his hand, to look at it, to feel the heft of it, to see the gleam of a gold or silver coin, and so I regularly have for years given gold and silver coins to relatives or friends for Christmas presents, and when I do of course, they say "thank you very much, this is very nice”, and I say I want you to look at it and think about it because you might want to think about buying some of those, a couple of rolls of this or that, for yourself. That sometimes opens up the conversation.
It's like giving someone a puppy. Even if they really want a puppy or they don't, but it's a heck of a surprise when you show up with a puppy and say I'm giving you this dog for a gift, folks just have to be conditioned. They don't have the education. They don't have the history to understand that gold and silver is really important and so it takes a little bit of prodding, a little bit of education to get folks to talk about these things sometimes. It takes a little bit of patience to work with those folks who you care about so that they too might one day see the wisdom, the beauty of precious metals and what those precious metals can do for you.
Mike Gleason: Guy, great stuff. Thanks so much for your insights. Certainly keep up the good work and definitely want to do this with you again real soon.
Guy Christopher: I have enjoyed working with you folks at the Money Metals Exchange a lot and I look forward to working with you a lot more and I think you're a good group of folks.
Mike Gleason: Thank you very much, and yeah, likewise. That will do it for this week. Thanks again to Guy Christopher. Check back next Friday for our next weekly Market Wrap podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great Thanksgiving weekend everybody.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.