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[Music] you are listening to mining stock education where you'll learn from the top leaders in the natural resource sector and uncover quality mining investment opportunities you know one thing i'd like to say is that i've met a number of central bankers not just here in the us but but around the world but i i'm interested in their thought processes and and the first thing that has to be said is that none of them have any with a few exceptions because they're kind of austrian school guys but and and their austrian views by the way are on their own time in their own personal opinion the views of their banks definitely aren't but it's a more senior levels there's no interest in goals there's no understanding of it there's no expectations around it there's no oh well we all know that we're destroying our currencies and so we're all going to privately stock up on gold and then when everything blows up we're going to be the rich fat cats there's none of that thought process you know whatever you can point out that's going on with their currencies they all have these glib answers that as far as i can tell they believe you know they're smoking their own stash i guess this is mining stock education and i am your host bill powers thank you for tuning in if you'd like to engage the show you can email me at bill mining stock education dot com well silver and gold have been roaring even as the average worker has been in their house under lockdown in much of the world including the united states and michigan where i live yet even as unemployment numbers are going through the roof i'm looking at my finance app and the dow and the s p seem to not care that the engine economic engine of the united states isn't roaring like it has in the past well i reached out to an expert when it comes to the federal reserve precious metals and the economy mr keith weiner actually dr keith weiner he's the ceo and founder of monetary metals you can find more information at monetary hyphen metals keith thanks for coming on mining stock education to provide your commentary and i'm wondering as i look at the landscape of what's going on in the macro situation do you think the federal reserve can actually save the economy hi bill thanks for having me on the show can the federal reserve which is the central planning agency save the economy um i'll give the too long don't read version no and uh you know follow that up with um it should be clear when i say clear i mean like to a sixth grader who's you know at all intelligent or thoughtful that in order to consume something you first have to produce it you know if you go to the grocery store and you buy a can of coke or um a steak right somebody has to work to produce that and the whole premise of having a central bank is that somehow we can boost wealth and the economy and hence consumption um you know by so-called money printing but that that's a contradiction that would seem to violate what any sixth grader would know you can't and so it turns out what the answer is is that even if even if you're not producing more and the central bank somehow engineers it so you feel wealthier and you consume more you are consuming something that was previously produced it's just not produced by you and so we have a term economics for when people produce something and then they they save and accumulate it it's not meant for consumption right away it's meant to ultimately enhance future production and hence increased future consumption and that's called capital or capital goods so the only thing the fed can really do is find ways to engineer the conversion and use that word knowing that there's a legal overtoned conversion it's like an illicit taking of property it's it's engineering a conversion of of capital that belongs to somebody converting it into income to be received by somebody else and then consumed and so the fed um you know has been good at engineering that and they've developed a whole um you know they would call toolbox i guess maybe a better word is bag of tricks for for doing that and so that's what they do and then people say oh yay the economy has been saved and gdp is up but at the root of it it's always finding a way to convert capital to income to be consumed keith i was speaking with a friend who is a fiscal conservative and an investor and who believes in capitalism but he commented to me that he thinks it would have been better for this situation if student loans would have been erased and they would have gone the path of a cancellation cancellation of debts rather than issuance of new money uh what are your thoughts here most people when they talk about canceling student debts are not really talking about dealing devastating blows to the lenders they're talking about the government for giving it in which case it isn't really cancelling it it's just shifting it from the student's balance sheet to the government's balance sheet just onboarding the debt and saying well now the government will owe it so you know it's like there's a lump under the rug and you were all debating whether it's better to have the lump you know on the left side of the rug towards the tv rather than on the right side towards the sofa and you know which side of the of the rug is better for the lump and um when you see it that way then you realize wait a minute is either side really better do you think the us dollar will survive this crisis um yeah i think okay so my my view is um all irreducible currencies are guaranteed to collapse in the end and people use the word fiat fiat means force and yes you know these this is a fiat currency but economically what's important about it is that it's irredeemable and so what irredeemable means is that you can't uh go to the bank with your 20 bill and and cash it in and get money out the the the note which is the word for credit stands for itself and isn't redeemable anymore so we paid debts using this iou using this debt and so you can never extinguish a debt and that means the debt must grow exponentially it must grow every year by the accumulated interest and so at the end of the day the data is growing faster and faster and faster and at some point it consumes everything so in the in the 2016 uh in the lead up to the 2016 election i said assuming that trump is in office for eight years they'll call him 20 trillion trump um and and that would be true for for anybody in office by the way it's not a particular criticism of him although he seems to embrace it with abandon um but that the debt is doubling about every year about every eight years and so um we now see with you know a baseline deficit of the 12 months ending march 31 of about 1.7 trillion dollars that's the baseline and there's a there's a great website put out by the u.s treasury called debts of the penny that you can put in whatever dates you want i'll show you the um the debt every day so a baseline deficit of 1.7 trillion then they passed the cares act which is another 2.3 trillion of spending on top of that then there was a supplement to the cares act i don't even know what they called it but it was half a trillion so we're at four and a half trillion dollars of deficit and that's assuming that they don't do any more which everyone knows they will um and no one's asking the question yet how much tax revenues have dropped um and i let's estimate a trillion dollars so we're looking at a five and a half trillion dollar deficit uh before they spend any more which they will and so obviously that's not hard to add up to 20 trillion in eight years if you're doing five and a half trillion a year so absolutely all all these paper currencies are going to come to an end that said they come to an end when i think it was margaret thatcher who said the problem with socialism is eventually you run out of other people's money so this this process of what people call money printing which i call borrowing as a process of consuming other people's capital and and the system and or the whole thing collapses when you run out of other people's capital um so in the united states um we're not running out of capital yet and because the way the world's monetary system is wired people in the rest of the world are eagerly putting their capital into us dollars they don't understand this in these terms of course but they're donating their capital to continue it and so what's going to happen is all the other currencies will fail first and then the us dollar will fail in the end so i don't think the current crisis is the failure of the us dollar um but at this point i would start to look at peripheral currencies uh first you know for signs of failure um there's no question that what's what's happened and i mean specifically i mean the response to the virus has been enormously destructive but i don't think the dollar comes to an end as yet we'll be right back after this word from our sponsor oran resources is a junior exploration company with the appetite of a major focused on finding the next globally significant discovery to create enormous potential upside for shareholders it's one of the most aggressive exploration companies pursuing high grade scalable gold and copper deposits and has a premier seven project portfolio including its two flagships committee bay in the arctic and sombrero in peru with oren's unparalleled technical team and highly experienced management with a history of success in advancing and monetizing exploration assets oren has been called one of the best in the junior exploration sector orange trades on the tsx and nysc under the ticker aug to learn more go to orenresources.com that's a-u-r-y-n resources.com as you know there's been a lot of talk in the precious metals community over the years of the stockpiling of gold with russia and china and perhaps the brics nations are plotting to overthrow the dollar so i take it you don't think that'll happen because you said all the other currencies will fall first and then the us dollar falls well that yes and and part of the reason why i say that is all the other currencies are dollar derivatives anyway so you know it's like saying that um you know a call option on google would survive the collapse of google stock i mean how could how could that even be possible if the google stop collapsed the call option would collapse long before that so um but if another nation converts their currency into physical gold would that change the landscape it's that let me try to take a step back and answer that a different way by looking at as as the world came out of the middle ages um banking started to develop and and banking and credit was a key force that enabled us to climb out of a very dark period of history um what what banking you know did was it it asked people to extend trust and trustlessly is the key component of credit the bank said okay you know give us your gold and on your behalf you know we're going to lend it and um you know and and in so doing enable increases in production so everybody becomes better off as we start to finance or they started to finance things and of course the depositor would get interest on it or in the least case they would they would get paper bank notes that were more convenient to handle and carry weren't subject to wear and tear and had you know convenient denominations you know one two five 10 20. um so it's a people bringing their money to the bank and giving you know extending trust and getting credit and that has to be an organic process um so what governments did um in some cases in the 19th century in other cases in the 20th century and obviously it's very well understood what in america what the fed did and and what fdr did president roosevelt in 1933 said okay we're taking all the gold away from everybody and we're making the dollar which had been acclaimed to gold deposited we're making the dollar now a claim against nothing the dollar isn't anything anymore it's dance for itself it's a self-referential you know circular uh argument um but the trust in the credit was still there everybody was trapped in it but they didn't have any reason to lose faith in it obviously and they didn't in the 1930s 1940s and so on but today all of these currencies are pure irredeemable they don't represent that extension of um of gold credit you can't retroactively declare okay well from now on a dollar is um you know two thousand dollars represents one ounce of gold or a thousand dollars or five thousand dollars name whatever number you could you can't retroactively declare the dollar to be redeemable in that because no dollar began its life as the borrowing of that and so all that would do would be a retroactive change of the rules of the game um so first of all it would be a giant lobbying battle with all the creditors lining up on the one side demanding a low price of gold just counter-intuitive but think about that for a minute if you owe me a thousand dollars and i lobby the government and say that the gold redemption value should be back at its historic level at twenty dollars an ounce then that means you have to pay me 50 ounces to get out of debt which is enormous sum and obviously a lot more than the thousand dollars you thought you were borrowing in the first place on the other hand all the debtors line up and say no no no the price of gold should be a hundred thousand dollars so then you can give me um 1 100 of an ounce which is a little fleck of gold you know smaller than your pinky fingernail um so that that would be the first problem with it but the second problem is when governments try to engage in a price-fixing scheme and that's what this becomes that's just fixing a price the dollar isn't gold it isn't like gold credit it's something else it's it's a price fixing scheme and so when you get the price wrong depending on in which direction your error buys you get either you know crazy amounts of deposits as everyone says wait really you're gonna give me a hundred thousand dollars for every ounce of gold and now i can go out and i can go shopping and i can buy ferraris to buy ferrari for three ounces of gold great or if you set it in the other direction you say well it's you know two hundred dollars what you just got is a run on the bank and everybody will will withdraw and so um but that becomes particularly dangerous because the value of the dollar in gold terms is not only falling over the long term that's uncontroversial everyone can see that on the graph but it's non-linear and it's unstable and when it gets to a certain point it will begin the dollar will begin collapsing against gold not against consumer prices necessarily but against gold and whatever price they fixed for gold when the dollar begins to fall way below that you'll just get this enormous run which is what was happening in 1933 in the first place um and then they're going to have to abandon their peg so it just becomes like the banana republic banks declare a peg against the dollar and it lasts only for as long until the market really wants to test it and then they're forced to abandon so i don't think any of these governments can um just declare a gold peg so then do you not subscribe to jim records theory of ten thousand dollar gold and how this might play out well i think it's a matter of time before the price of gold hits you know ten thousand and more as as the paper currencies collapse the and the dollar collapses it will be worth less than one ten thousandths of an ounce of gold at some point but not not because you know a bunch of countries are getting together to plot anything um you know one thing i'd like to say is that i've met a number of central bankers not just here in the us but but around the world and i try to keep lines of communication with them open where that's possible and they know my work and i either agree or disagree but i i'm interested in their thought processes and and the first thing that has to be said is that none of them have any with a few exceptions because they're kind of austrian school guys um but and and their austrian views by the way are on their own time in their own personal opinion the views of their banks definitely aren't but at the more senior levels there's no interest in gold there's no understanding of it there's no expectations around it there's no oh well we all know that we're destroying our currencies and so we're all going to privately stock up on gold and then when everything blows up we're going to be the rich fat cats there's none of that thought process you know whatever you can point out that's going on with their currencies they all have these glib answers that as far as i can tell they believe you know they're smoking their own stash i guess masters of the universe not even so much that but more like technocrat um you know dearest yeasts that you know we have this formula we have this incantation you know it's i of newt in the mid summer's eve and you know when we we have a taylor formula and we have this equation and it tells us that you know we have to increase the money supply by this to get the inflation rate here and inflation trades off against unemployment according to the phillips curve and you know they have all these rituals they go through and um you can point out certain things and it if it doesn't fit their theory it it doesn't exist in their world and and one of these things is that everybody's understood or at least i can say everybody the economics world was aware that the price level does not correlate with the quantity of money it correlates with the interest rate and this goes back to work by newt wixel in the 1890s who by the way was a monetarist and believed in the quantity theory of money but he did the research and he was careful enough and he found the relationship didn't work the way he thought it did and then later they called the gibson's paradox um why do they call it a paradox it's pretty simple there's nothing paradox about pockets about obstacle about it at all but um and i just i just use this as an example of when something challenges somebody's mental paradigm they reject the thing that challenges it rather than their paradigm itself and the central bankers just don't have any particular view on gold other than they might have a directional price view they might think gold's going to go up and so then they buy it like anybody else buys it and for the same reason it's you know they think of it as an investment um and of course in russia you know they had an additional incentive which was for a while it looked like politically what they were doing in the ukraine might result in the us locking them entirely out of the you know swift uh banking system and so that you know like iran is locked out and so if i ran it's very difficult to make payments or receive payments in the world markets and so you know there might have been some thought okay well we have to have gold because we could always put gold on a plane and pay for anything we want but it wasn't a ideological thing it wasn't a monetary thing which is simply that's the practical reality of invading ukraine pissing off the united states and okay well this is how we're going to work around whatever they do to make our lives more difficult keith how does oil factor into all this oil is often referred to as black gold when we're talking about the currencies of these nations and how it's related to gold how do you see oil related to the currencies of all these nations so um you know in terms of russia russia was a net buyer of gold as long as the price of oil was holding up and when the price of oil went through its you know i have to call it an epic collapse there's been two epic collapses of oil one in in 2014 to 2015 and one uh in 2020 um you know russia becomes a net seller of gold or at least not a buyer because they don't have the income anymore and they may even have to liquidate that gold in order to keep feeding the people if you can't feed the people in you know in an authoritarian regime like that then you have regime change and i'm sure that uh you know putin must be you know thinking about that but um more broadly oil and gold you know something happened um a couple three weeks ago uh and i wrote about this at the time the price of oil went negative um and so it's kind of a weird anomaly of the futures market but in short we've had all of this stimulus over the past 10 years uh 12 years right since you know 2008 11 and a half years i guess in the form of of low low zero falling interest rates and what that does is it overstimulates over capacity you know if you're if you're a business manager let's say you're in the oil business but whether the hamburger business clothing business or the computer business is always the same calculus you always think okay i could build another factory and increase production and okay how much am i going to make if i do that and you have your numbers and you plug them in and then it always comes down to cost of capital so every time that the central bank is lowering the cost of capital it's tilting the equation more and more and more in favor of increasing capacity so that's what we did um we overstimulated over capacity in oil particularly in fracking and it would produce more and more and more of this oil okay great consumers love it we can drive you know big gas gus long suvs and all that um and i i don't complain about that i drive the corvette z06 so uh it's gonna be complicated there's nothing wrong with that but the price of war you lock down the world and you say that so far 33 and a half million americans can no longer be employed so they're not driving to work most of the rest of the people who are employed aren't driving to work either working from home and you can't drive to the sports game you can't drive to the concert you can't drive to the restaurant you can't even drive to weddings you know visit friends etc so um you know driving and trip you know travel has collapsed i mean the airlines are airline travels down you know ninety percent i don't know what it is it's gotta be huge so we're burning less oil right that's just the consequence of lockdown so all of a sudden you have a situation where the oils continue to be produced um that oil was all bought long ago on futures contracts and now that it comes to delivery time this is that technical thing in the futures market if people want to speculate in oil unless you have a giant tank somewhere you got to do it in the futures market so you buy a future contract and you think okay well you know if the price of oil goes down i lose if it goes up i win i can always sell it i'll cash settle my futures contract because i don't have a truck that can take a thousand barrels or you know 40 what is it 40 000 gallons of oil i can't take delivery of that so all that oil all those speculators on the oil futures contracts have to sell and meanwhile more and more oil keeps flowing through the pipeline and but demand has collapsed and so it got to the point on one day i don't remember what day that was now about three weeks ago i think um when the price of the june futures contract had minus 38 you had to pay somebody to take the oil and whatever else one might say comparing old oil to gold there will never ever ever be a situation in which you have to pay somebody to take your gold but it did just occur in oil and as we see with for different reasons what what the government has done the supply chain in meat the ranchers and farmers are now being forced to destroy animals and so effectively there's a negative price in an animal keeps eating so there's a negative value on meat there's a negative value in oils there was that day so all these other commodities never gold and silver but other commodities we find there can be under the right circumstances a negative value to it keith your website is called monetary metals what metals do you consider monetary gold and silver not palladium or platinum no uh which are i mean they're expensive um industrial ingredients maybe they're pretty and maybe people like them and you know that's not the argument but money is is money because of what's called a high stocks to flows ratio that is in the case of gold the the case is the most obvious and clear we've accumulated virtually all of the gold ever mined in human history is still in somebody's hands i mean a little bit is worn away as the coins rub in people's pockets some of it's lost when you know ships sink uh some of it was buried with people who had gold tvs although the grave robbers usually recover that eventually so you know all the gold over maybe 5 000 years of human history is still in human hands and so that amount of gold as a total stocks is a giant multiple of uh you know annual mine production so according to the world gold council what is it 180 000 tons of gold is the total stock something like that which i think has to be a big underestimate because you can't inventory it because people have been hiding gold from their neighbors and their governments for 5 000 years um and you can divide that by annual mine production of you know 3 000 tons or something like that and you end up with according to according to that estimate which i think is low stocks that flows in gold is 60 years in oil is a couple three four months and anything more than that the price goes negative and so gold and silver both have this enormous accumulation of inventories that has occurred over many many thousands of years and no other metal is remotely oh no other commodity for that matter is remotely close to that we'll be right back after this word from our sponsor silver one resources is an exploration and development company backed by strategic investors eric sprott and ssr mining at silver one's candelaria mine project in nevada there is already a historic resource estimated at 127 million 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industrial medal yeah and i agree with that and obviously the industrial component of silver has collapsed along with you know oil and everything else but the monetary hasn't but i i think you have to look at the question why are there two monetary medals markets tend to be winner take all you know being coming from the technology business myself i always look at early technology um contests and so when when computer networks started to become a bigger thing you had so many different kinds of networks you had token ring from ibm you had ethernet you know and so forth and at the end of the day tcp won and everything else was obliterated but we have two monetary medals and they survived for as far as we know you know 5 000 years something like that um why did one not displace the other and i think the answer is they serve slightly different markets and slightly different purposes so gold obviously has always been as they say the money of kings wealthy gentlemen you know big merchants and so forth gold solves the problem of how to carry value over great distances and so today the reason why um your gold is so liquid is you could put it on a plane from anywhere in the world to anywhere else in the world and get it there in less than 24 hours and that's you know settlement in the gold industry is t plus one or t plus two anyways so if there's a relative shortage in dubai and a relative surplus in um new york city it gets on a plane and it goes silver on the other hand um serves the purpose of carrying value over great amounts of time and particularly for wage earners so if you are working for wages in a skilled labor kind of thing and you want to set aside 10 of your weekly wage that might be 50 or 80 or something like that um that's not terribly convenient in gold it doesn't give you like a handful of gold it gives you a very small fleck of it and it's an inefficient way to do it because you pay big premiums for tiny little pieces of gold like that i mean you can buy a one gram bar uh fleck or whatever you want to call it wafer i guess um for about that much money it's not much to hold it's not doesn't feel exciting and there's a big premium in the manufacturing of something that small silver on the other hand you know 50 or 80 dollars of silver is a handful of silver rounds or silver coins so silver tended to be um accumulated and hoarded by wage earners and gold tended to be um you know by the by the capital owning class well if you look at what's going on in the world today the wage earner is under ever greater pressure and that's a topic i've been writing about for for a decade or so um and the and the class that owns capital assets is enjoying um at least for now the the boost provided by the fed and so um the wage earner may be forced not only isn't able to buy more when he loses his job he may be forced to sell to put food on the table and the the capital class right now is feeling pretty smug with you know it was a dip in the stock market but things seem to be recovering as far as they're concerned and so that's why you see these two metals performing very differently and of course we've hit as far as i know an all-time record that the world has never seen before of a gold-silver ratio of you know well over 110 briefly touched 120. um i think that will turn around um and i think that ultimately even institutional investors who normally turn their nose up at silver um are turning to silver in some cases because they see the relative bargain as to when uh you know that's a bit of a guess and as listeners go over to monetaryhyphenmetals.com uh what does that have to offer we pay interest on gold and silver so you know the mainstream view is that you know you buy gold or silver it's a dry asset but its price will probably go up and certainly in this environment i i think it's realistic to expect the price will go up but it's a dry asset that isn't doing anything and you're paying for storage in the meantime um we want to bring about the gold standard first of all and we're pretty open about that and we believe that to do so it has to be possible for everybody who wants to to earn interest on their on their medal and we see the monetary medals as the appropriate and best means of financing productive activities so we are open to the public to deposit metal and get a return on it of uh you know between two and four and a half percent and that's metal on metal so if you have 100 ounces of metal and the interest rate is three percent the next year you have 103 ounces did you ever propose that to warren buffett because you know that's one of his objections for not investing in gold um i don't happen to be privileged to be in his inner circle to suggest that to him face to face we did write an open letter to warren buffett and we talked about that um and uh you know whether he's read it or not who knows um but uh you know it's an idea that if this was pre-2008 it would have been the wrong time and i don't think we could have been successful in this business um you know post post that world um you know the the perception of the precious metals has changed and it's a sea change and you know people don't think the way they did in 2007 and now post coronavirus we see a big uptick in interest in this stuff and just like in 2008 2009 a whole bunch of people came as first-time buyers to gold who never had it before there was a whole nother round of first-time buyers in as more people are uh you know there i use the term waking up and and you know i mean i think if you're if you're a mainstream conventional person there's two things you can see that don't require any doom and gloom or gold bug kind of stuff and one is the size of the federal deficit it just can't feel good to be you know an own r of their credit paper when you see that kind of abuse it just has to be uneasy to anybody no matter how warren buffetty you are you have to feel uneasy about that and then number two the interest rate which is your reward for taking so the risk is going up with all that borrowing but the interest rate which is your reward for that has collapsed and so in um in falls 2018 you could get 3.2 on a 10-year treasury bond that's a pretty good deal but you know and and this winter as recently as this winter it was 1.8 percent which is still something and then in march it collapsed to 0.5 and now it's been banging around on that you know new floor so you know was it 0.6 percent today or something 0.7 they've taken away the reward at the same time they've amped up the risk and i think i think a lot of people can see that and as they start to ask themselves the question that everybody has to ask before they start buying gold what's my way out can i opt out of this this is madness and then gold comes to mind so we're saying okay gold is money which we believe it is money should earn interest warren buffett is right disingenuous obviously in the way he was trying to frame it but he's right the money should earn interest and so that's our unique selling proposition that's our vision um to bring about a change for the better it changes the whole standard by making it profitable for investors to move us in that direction and i'll put a link to monetary metals in the show notes website again is monetaryhyphenmetals.com you've been listening to the ceo and founder keith weiner keith i really appreciate your insights on the economy federal reserve gold and everything that's going on thank you for joining me on today's show thanks for having me