Jim Rickards: Gold Standard vs. Fiat Money, 50 Years Later— Are We Better Off?

[Music] [Music] hi this is daniella camboni for stansberryinvestor.com and welcome back to our summer series today is a really special episode uh commemorating uh a very important event in history uh president richard nixon ended the gold standard and ushered in the fiat money era on august 15 1971 so it's the 50th anniversary that we have officially been off the gold standard i want to talk about where we are at today were we better off before i could not think of a better expert for this conversation than jim rickards author of currency wars and many numerous other bestsellers jim always good to have you on our show welcome back thanks danielle it's great to be with you especially on this uh special anniversary you know the 50th anniversary of anything is the golden anniversary so i think how ironic right at the risk of putting a pun out there we're going to talk about global yes the golden anniversary of nixon going off the gold standard so i want to ask you because you know when we got off the gold standard it was to many economists delight who thought or still think that gold is a barbarous relic and that we are much better off on the fiat money system and in fact our economy would have never thrived had we gone off uh the gold standard were we better off before or today jim well we were much better off actually we were better off before the fed uh you know the united states people hate central banks we had two that we got rid of before the federal reserve was created in 1913 but the first bank of the united states we got rid of in 1812 the second bank we got rid of in 1836 under president andrew jackson from 1836 to 1913 there was no fed and it was the greatest period of prosperity low inflation invention efficiency you know almost in recorded history so we we get along fine without the fed and uh and we're much better off with uh with the gold standard no no doubt about it you know when you said economists criticize gold i would just remind the audience to do things number one economists are wrong about almost everything so if you actually look at their track record in that sense they they sell and get things right certainly the fed uh never gets the forecast right um and i wrote a book uh that which i know you're familiar with the new case for gold but that book is not just another book on goliath i specifically repeat there's seven or eight persistent criticisms of gold that you hear over and over again they're all wrong and i just took them one by one and said here's why it's wrong here's why it's wrong so that's kind of the baseline in terms of understanding why we're better off with the gold standard so the economy thrived better under a gold standard than the fiat fiat monetary system and now would you argue that the greatest point in favor of the gold standard is that the fed wouldn't be able to expand or retract the money uh monetary supply as much or as little as they want well not as much as they want that's a very good point people say well you know the standard criticism is wrong but the standard criticism is you know the great thing about the fed is they can do that they can expand the money supply and contract the money supply as needed to keep inflation under control or to grow with the economy well you can have that with a gold standard in fact we did from 1913 to 1971 in various ways we had a gold standard but we also had discretionary monetary policy the fed was expanding and contracting the money supply from 1913 to 1971 and we had a gold standard so they're not incompatible at all uh but it but it does mean that you can't go you can't go too far so it kind of puts a lid on things until 19 1945 uh the law in the united states was the the base money supply m0 that's what the fed controls could be two and a half times the u.s gold um accord the gold in our possession at the market so taking originally 20.67 cents an ounce later thirty five dollars an hour take the amount of gold times thirty five dollars an ounce and whatever that number was multiplied by two and a half and that's how big the money supply could be but uh so you can't go beyond that but i i actually talked to bernanke about this because i was you hear over and over you know the gold caused the great depression gold was the problem in the great depression and i researched it and actually the leading scholar after milton friedman was ben bernanke and he showed with you know very uh precise detail that the money supply during the great depression never exceeded a hundred percent of the goal uh in other words the money supply could have been two and a half times greater than it was in the great depression with a gold standard so gold was never a constraint the fed screwed it up the fed messed it up badly but had nothing to do with gold because there were nowhere near the ceiling and when i talked to bernanke i said you know mr chairman i said this is my understanding of your research do i have it right do i have a correct understanding he said yes you do so so gold was never a problem in the great depression so you can have both you can have a gold standard and discretionary monetary policy you just can't get crazy so i know we've spoken in past interviews about the likelihood of us returning to a gold standard i know you said it probably very unlikely even though there have been some politicians who have been vocal and pushing forward for this what would a new bretton woods system look like for you is it tied to or is it involving digital currencies then jim what do you think well um you know there's a lot of confusion about digital currencies and people think of bitcoin and and all that but the central banks are moving towards central bank digital currencies which are not cryptocurrencies they're they the message traffic can be encrypted but you know digital dollar is still a dollar a digital euro is still a euro and a digital yen is still a yen and so forth the central banks would still you know have discretionary authority over monetary policy it's just that you probably wouldn't have any paper money um and payments in a digital dollar for example could be faster and cheaper than what we have today you know we all use credit cards that's an electronic payment but there's a merchant acquirer fee of two and a half percent on uh you know when you charge something the merchant gets two and a half percent less than what you pay because they have to pay that amount to a processor to get their money uh well you could probably eliminate that so it would make payment systems cheaper um we might have wallets at the fed we might you know jim and danielle and the artist might have an account at the fed you could just intermediate the banking system but that's not inconsistent with gold in fact i've written recently about how um you know we're going to be walking around with 400 ounce bars in our pockets and purses no obviously probably won't even have a you know a bag or a purse of eight gram coins which was true prior to world war one but why couldn't you have a digital uh gold backed currency uh like some versions of that already exist so all you're doing you put the gold in a safe place outside the banking system you have an account you send the money they buy the gold there it is and then you use your debit card in in gold just entertain us for a second here jim uh let's pretend we were on a gold standard today right what greatest problem would it eliminate well it depends how you do it and this is the problem with gold stand gold standards have failed in the past as we know uh and governments always make the same mistake and it's a mistake you have to avoid which is they get the price wrong when you go on a gold standard you're fixing a parity between say dollars and weight of gold you're you're measuring weight of gold in dollars so it's no different than any other crosstalk you have the euro us dollar cost rate or the dollar yen cross rate this is just going to be a dollar gold cross rate with the gold measured by weight but you got to get the price right so could you do it 1800 an ounce which is about the current price well legally you could that would be a fiasco because it's highly deflationary in other words you people say you can't have a gold standard because there's not enough gold to support commerce and leverage and industrial commercial loans and the whole financial system is not enough gold that's nonsense there's always enough gold it's just a question of price now could you do it eighteen hundred dollars announced no but could you do it at fifteen thousand dollars announced yes so if you said okay you know jim you're in charge of going back to the new gold standard let's uh have to be a convening power and get the g7 and the g20 finance ministers together have a new bretton woods type conference maybe i'm here in new hampshire maybe we could do it up at bretton woods which is just a little bit uproar than that washington hotel but the point is uh the biggest there are a lot of technical issues but the biggest single issue they would face is getting the price right not calculated several different ways and the the low end is 15 000 an ounce that's one of the reasons i make that my forecast because we might have an orderly process the kind of just described where you convene you can be in the session get g20 finance messaging you do it right i don't think that's going to happen i think what's going to happen is the system's going to fall apart there's going to be a panic style loss of confidence in not just dollars but euros and yen and all all central bank command currencies and they're going to have to do it on an emergency basis so you're going to get there either way but the the number one question is what's the price and i can guarantee if there were emergency meeting you'd be the first person they'd call as well hopefully i've already done the math so i can tell you okay uh final thought jim i know you're enjoying family time i don't want to take you away from them uh just last point i said it's the 50th anniversary an important event here i guess a major lesson we should we should learn from from from this or you know from being on the gold standard that we could perhaps apply to today's economy well uh everyone remembers august 15 1971 you know richard nixon entered the gold standard kind of but not exactly what he did he said foreign trading partners can no longer redeem dollars no longer redeem dollars for gold he said but they were the only people who could gold was contraband since 1933 american citizens couldn't own it um and so he said he can no longer and he said it was temporary if you go back and watch that sunday night speech august 15 1971 was a sunday they interrupted bonanza which is the most popular tv show in america at the time um but nixon said it's temporary and i see i spoke to paul walker about it i spoke to kenneth dam who was a dean of the university of chicago law school he was there he was volcker and damn were both in um camp david which is where they they cooked this up with nixon so i got first-hand accounts and they said we thought it was temporary we're gonna have a new bread and woods go back to gold and it just never happened wow so so the lesson is but that happened in stages it started in world war one they said give us all your gold give your paper money but don't worry you can redeem it then they melted it all down into 400 ounce bars and so we're going to leave it in the vaults of the banks then the central banks took it from the commercial banks so there was no more gold for anybody then the treasuries the finance ministries took it from the central banks the the federal reserve has a gold iou on their balance sheets first item on the asset side because the treasury owns the gold everyone thinks the federal was the gold treasury obstacle and then and then uh roosevelt made a contraband americans couldn't have it and then only foreign trading partners could get it nixon ended that 1971 so my point is august 15 1971 a very big deal but the lesson is that happened in stages over about 40 years so that's how the elites operate just to slice the slices slice the slice people are asleep they're complacent and then it's all gone before they know it beast meal yeah exactly exactly fascinating insights jim uh makes me think of the regulation that's coming on board for crypto that it might have one sweeping change right but you'll correct it if there's a name for it you're right it's called piecemail social engineering it's proposed by karl popper and the biggest advocate today is george soros enough said jim rickards go enjoy your family thank you so much for joining me for this special edition here on stansberry investor.com thank you and thank you for watching we'll have much more for you so be sure to stay tuned in the meantime don't forget danielacamboni.com that's the place if you want premier access to videos you won't see anywhere else and special offers sign up today that's it for me thank you for watching i'm daniella cambone [Music] you

Channel: Stansberry Research

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Keywords: Gold, Gold Stocks, Silver, Investing, Investor, Investments, Money, Wealth, Finance, Wall Street, NYSE, Inflation, How to Buy Gold, Stocks, Best Gold Stocks, Stock Market Tips, Digital Currency, Stansberry, Stansberry Research, Daniela Cambone, Best Stock Market Tips, Stock Market Secrets, Investment Research, Personal Finance

Id: wWTr3Bix1lY

Length: 12min 42sec (762 seconds)

Published: Thu Aug 12 2021