The Market Report: Is Gold Money? How Can it be a Better Solution to the U.S. Dollar?
Following in the footsteps of Utah, Kansas and Texas, Oklahoma recently passed a law to allow gold as legal tender, which has led some to believe that the U.S. is slowly moving towards the gold standard. How would that work? And is it even realistic? How would you even use gold in place of the U.S. dollar? It’s a fascinating topic with no right or wrong answers.
In this Market Report, Will Hart and Jake Kennedy give their take on these questions. Pay special attention to the enlightening example that’s taking place in Ukraine today.
Mark Alyn: This is the Market Report from the Birch Gold Group. Hi everyone, I’m Mark Alyn. Joining me today, Will Hart and Jake Kennedy from the Birch Gold Group. Gentlemen, welcome.
Will Hart: Thank you Mark, thanks for having me.
Jake Kennedy: Thanks for having us.
Mark Alyn: Let’s start with you, Will. There’s a recent happening in the state of Oklahoma where Oklahoma seems to be moving toward the gold standard. Can you explain that?
Will Hart: Okay, the way I understand it, again, Utah has already done it in the past, where they’re accepting gold as currency. So they’re looking at gold, again, the dollar is not backed by gold. To me, when I hear “gold standard”, that means that our dollar is backed by gold and that is not what’s happening right now. However, Oklahoma is leaning towards saying, “Yeah, you want to buy something with gold? We’ll accept it.”
Mark Alyn: So I can walk in to a store in the state of Oklahoma and pay for it in gold?
Will Hart: From what I read, that is exactly what you can do. Again, I don’t know what type of change you’re going to get. If the item is a hundred dollars and you walk in with an ounce of gold, are you going to walk out with $1,200 in cash and the hundred dollars left is what paid for it? I don’t know the specifics.
Jake Kennedy: This isn’t going to take on, I don’t think, unless everybody in every store is briefed on what to do if someone hands them an ounce of gold. So I don’t think this is really a practical measure because, do people really expect to take their gold or silver in and buy a gallon of milk with an ounce of silver? Because what are people going to do, “Oh, how much is this worth again? Let me check on my app on my phone or whatever.”
Will Hart: Yeah I agree. And I think that it’s not a very practical idea for people to carry around gold in their pocket. But what I like about it, why I think it’s a great measure that Oklahoma’s taking and Utah and other states like Kansas and Texas I guess are following suit, is that people are recognizing gold for what it is. That it’s something that is rare, it’s expensive to get out of the ground, and it’s not just a piece of paper that somebody printed.
Mark Alyn: Jake Kennedy, what’s your take on this?
Jake Kennedy: I think it’s more of a big picture issue that the states are addressing. I think that they’re losing confidence with our currency but they’re listening to the people of the states who really don’t have maybe much confidence with the dollar or where we’re heading as a nation. And I think they’re implementing these actions to show the people that maybe in the future we may not need to rely so much on the dollar. And gold could become a strong part of our foundation as a state, much as it was when the nation was born. So I think it’s more of a symbolic move, but it could actually be a part of a bigger move of many states that see, maybe, five, three, two years into the future where the dollar could lose dramatic amounts of its value and because this bill’s already in place sitting there as a sleeper bill or simmering under the surface, maybe suddenly it’ll be like, “Okay well let’s look at this paragraph, and yes the dollar’s in free fall. Yes, it’s not worth what it was and we don’t want to trade the dollar. Look, we’ve got this thing in place, which says you can use gold and here are some new rules about how it’s used…” And suddenly, in the space of a few days, it can actually be pushed to forefronts of legislation and suddenly, it makes a lot of sense to be trading in gold and silver and it can probably be implemented very quickly.
Mark Alyn: Historically, when high inflation and currency values drop. Precious metals, gold in particular, rises, right? That’s what you’ve been saying for weeks.
Will Hart: Absolutely.
Mark Alyn: So I can see, you know, some people going into stores with barrelful’s of money, of cash, of dollars, yet somebody else walks in with a sliver of gold. I don’t how that will work, but to buy their groceries, for example.
Will Hart: Yeah, again, if we’re still specifically talking about Oklahoma, I guess that is certainly an option. I’m one of the believers that the dollar is on the way out and that we’re going to have to make some dramatic change and I think gold is going to be a big part of that. I think, you know, saying yes you can use gold to buy things, I just don’t think it’s very practical and I agree with Jake on that aspect, but at the same time, I think it’s a great move to get people aware and to say, “Hmmm, maybe I should have gold in case the dollar continues to head down this southward movement.”
Mark Alyn: And Jake, would agree with what Will just said?
Jake Kennedy: I think so because, yes I do—
Mark Alyn: But? I hear a “but” in your voice.
Jake Kennedy: No, I think he’s right and if it makes people more aware of what real money is and to own precious metals as maybe a hedge against inflation or a hedge against the dollar, then that’s a great thing. And I think ultimately if you look at history, when nations hyperinflate their currencies through reckless creation of money, money printing essentially, what has ultimately happened is that I don’t think you really necessarily trade in gold unless maybe we’re heading down that road, but what people do because they have gold and own gold, and they need to buy something or they need cash to pay a debt or whatever it is, they take that gold which is rising in value versus the money which is flat and therefore losing buying power, so they take that gold and they trade it in for the currency at the time, local currency. In our case, the dollar. In Germany’s case, the Reichsmark, whatever it is, and they get a bunch of money, and then they use that to buy goods, products and services at the time.
Mark Alyn: But they do that, you were saying earlier, almost on a daily basis because the dollar, the currency, changes and fluctuates so quickly.
Jake Kennedy: And history shows, let’s say for example the Weimar Republic in Germany and Zimbabwe and other countries that have had extreme hyperinflation, at the end of this, when the inflationary, you know on the chart at the tail end when it doubles, triples every day in terms of percentage of inflation, that’s when currency, what do you with this? That’s when you wheelbarrows full of cash. And so what people do is, you know, you have to trade, if you’re trading from gold to paper, you have to spend that money right away because an hour later or three hours later or half a day later it’s lost 10% of its value or 20% or 30%.
Mark Alyn: It goes that fast?
Jake Kennedy: It does. I remember learning that during the last few months of the hyper-inflationary period in Weimar Republic, Germany, people were getting paid their salaries three times a day. And they would take a break, once they got paid in the morning and everyone would leave the offices, go into the streets and buy hard goods, products and services, or just products, really, whatever it is, go back to the office, four hours later they would get paid again and then go and spend it on food and stuff.
Mark Alyn: And they do that every day?
Jake Kennedy: Yes, it was the end of this crisis.
Mark Alyn: Wow.
Jake Kennedy: And so it became a part of life for a short while, anyway.
Will Hart: And see if we had a currency backed by gold, that would not be the case. You wouldn’t see that kind of rise and fall.
Mark Alyn: So in history, who do we blame, if anybody?
Will Hart: Well the situation we’re in now, we blame Nixon. Nixon took us off the gold standard. If Nixon didn’t take us off the gold standard we would not have an $18 trillion debt, or almost an $18 trillion debt, and we would not be able to just print willy nilly as much as we need. The government would say, “Okay we have ‘x’ amount of gold sitting at Fort Knox. We can only print so much money, and there it is.” And that’s why we are in the problem we are right now.
Jake Kennedy: The gold standard allows countries to remain fiscally responsible. And that’s where we have over the last thirty or forty years become fiscally irresponsible because, “Oh, we’ve got this war to fight, let’s just create more money. And we’ll just pay for it that way.” And of course, down the line, and we’re pretty much at the end of the line here, that’s when you get in trouble when everything falls apart.
Mark Alyn: There is a very interesting article on gold, the gold standard, if you will, in Oklahoma and other states, which was in a recent Forbes column by Keith Weiner. And we have an exclusive interview that will be on our website, the Birch Gold Group website, shortly. So people should stay tuned for that and look for that in coming weeks. I’m really curious about something and that is: Are there other countries that are backed, their currency, is backed by gold today?
Will Hart: The answer is no. There is not a single currency on Earth that a currency is backed by gold. That’s the problem. Everybody has a fiat currency, everybody’s printing and that’s the problem that we’re running into is the percepted value of a dollar or of a Yuan or whatever, is questioned. I think this is one of the reasons why we’re seeing Russia, China, India, Germany, so aggressively buying gold by the tons! They’re not doing because they’re bored, they’re doing it because they have some sort of plan, in my opinion, in motion. And I’m waiting to find out what it’s going to be.
Mark Alyn: And at the same time, major corporations, universities, are also stockpiling gold.
Will Hart: Absolutely, billionaires, the list goes on and on. And again I always say, go where the smart money goes. Why are they all leaning so heavily towards gold? Why are people shying away from the market? The big $64,000 question is what is coming around the corner?
Mark Alyn: What would be the purpose of using gold versus cash, versus dollars in our case?
Jake Kennedy: On a day-to-day basis you mean?
Mark Alyn: Yes.
Jake Kennedy: I don’t think you would be using gold on a day-to-day basis. I think gold in these environments and situations is more used as a store of value or a store of wealth. So you buy the gold and you put $10,000 or $100,000 into gold today and you see inflation. That gold will rise in value. I mean let me give you a real-time example out of the Ukraine. And this is what people there, what the smart people would have done if they saw this coming. The crisis happened earlier this year, the beginning of this year. And in that time to today, the currency, the hryvnia, has lost 25% of its value, probably more by this point. But gold there has gone up 70% in value, in that time. So what does that mean? How are people using gold? Well they’re not necessarily buying goods, products, and services with gold, but the smart people, if they saw the crisis coming or when the crisis started, they saw where this could be going, and they took their $10,000 in the bank account or $100,000 in their retirement account or the equivalent, and they moved to gold, rode the crisis through, and it’s still going, but rode the crisis through, their cash, if they still had cash, has lost 25% of its buying power and today buys them less goods, products and services. So they’ve lost money, although it’s still sitting in the bank.
Mark Alyn: They’ve lost dollars. The dollar value.
Jake Kennedy: The value, so it buys them less. They still have that money in the bank, and most people think, “I’ve still got the money” but they go and spend it on milk, and gas has gone up 25%, so some people don’t see that. But, if they bought gold, it’s actually up 70%. So what the smart money is doing and what people are doing is buying the gold, or should have been buying the gold, and when they need to fix their car or buy a new car, they then trade that gold in, get the increased value for the gold in the currency, not the best currency to have, but then you spend it right away. Do you see what I mean?
Mark Alyn: Sure.
Jake Kennedy: So that’s how they should have done it there, and I see that situation as being maybe a, something that could happen here. We’re seeing a crisis maybe playing out over a longer period, two years, one year, three years, and it’s going to speed up towards the end. But you put your money into gold, the local currency, in this case, the dollar, will lose value, and it always is the trend is down, and gold will go up in value. And at the time you need money, you trade out of gold into dollars—
Mark Alyn: Spend it as quickly as you can.
Jake Kennedy: Yes. Pretty much. But store your wealth in a tangible asset, gold, silver, that is going to maintain and increase value during these pretty tough times we’re seeing ahead of us.
Mark Alyn: As we see the dollar take a dive.
Jake Kennedy: Exactly, yeah.
Mark Alyn: Do you agree with that Will?
Will Hart: I do. One of the products that we see sell is called the Valcambi Bar. Basically you can break them off in grams. Credit card size I just don’t see somebody breaking it off going to 7-Eleven to go buy a Big Gulp with it and then what change are they going to get? It doesn’t make any sense! So definitely having the gold as a store of wealth, and then when you’re ready, you’re offsetting that devaluing dollar, and then when you’re ready to sell that gold, you sell it, and you get the value of whatever the gold is worth then, but at least you didn’t ride that dollar down.
Mark Alyn: Now we’ve talked about Utah, we’ve talked about Oklahoma, of course. Texas. I believe you said there are another twenty or so states considering using gold as cash, as currency, allowing it.
Will Hart: Yeah, they’ve made themselves aware that they’re interested. A lot of people don’t trust where the dollar is heading. States are saying this is silly. We’re just losing value and they’re believing more and more leaning back towards gold.
Mark Alyn: Alright, as we wrap up, you said something very interesting a while ago, Jake. And you said “hedge against the dollar”. We’ve heard the expression, for years, “hedge against inflation”. I guess this is a fairly new concept, a hedge against the dollar, as the dollar is taking a dive.
Jake Kennedy: Yeah I think what you read and what you hear from our clients is that they’re very concerned about the dollar losing value. And if you look, since 1972/3,
Will Hart: 1971.
Jake Kennedy: ’71, yeah we’ve lost 78% of the dollar’s buying power. And in the last ten in years it’s around 40% of that devaluation has happened. So it means it buys you, with inflation, a lot less than it did ten years ago. So I think we’re going to see that exponentially speed up over the next, maybe, five years because we’re creating that much more money, and it has to do with our debt ratio versus gold. So what people are worried about here is that as we continue to devalue our currency by massive money printing, everything’s going to get more expensive and our dollar will buy us less and I think therefore, and of course some people are very concerned and it’s a real possibility that the dollar could actually crash, or fail as countries and nations and people lose confidence in this fiat currency we’re printing into oblivion. And as that happens, their dollars will become worth less or even worthless, so people are trying to hedge against a catastrophe with the U.S. dollar here. And one of the best ways to do that is to buy gold and silver and store your wealth in tangible assets that rise with inflation.
Mark Alyn: I know we’ve thrown out a lot of different concepts and ideas, so we’re going to invite our listeners to ask us questions. If you have a question about buying precious metals, email us at firstname.lastname@example.org. That’s email@example.com. Or you can visit our website, that’s www.birchgold.com. There is a lot of information on there. It’s constantly updated. It’s a great website to give you a look at why gold and silver and other precious metals belong as part of your portfolio. And of course you can always call a Gold Specialist directly at (800) 355-2116. That’s (800) 355-2116. Will Hart, Jake Kennedy, thanks for joining us on the Market Report.
Will Hart: Thanks Mark.
Mark Alyn: I’m Mark Alyn for the Birch Gold Group. Thanks for listening.china, germany, gold, gold standard, india, keith weiner, russia, ukraine