Fed President Worries the Fed Risks a Repeat of the 1970s!

Gold and silver markets drifted lower again this week as investors braced for additional Fed rate hikes to come.

On Wednesday, the Federal Reserve released the minutes from its latest policy meeting. Policymakers agreed on the need for additional increases in interest rates. They settled on just a 0.25% bump up at their last meeting. But some dissenters called for a larger 0.5% hike.

Since the Fed’s last move, incoming economic data is emboldening the hawks. A superficially strong U.S. jobs report combined with stubbornly high inflation readings suggest central bankers have more work to do.

Following the Fed's policy meeting earlier this month, Chairman Jay Powell declared that disinflation was taking hold. But since then, inflation indicators have shown the opposite -- that prices levels in the economy continue to come in high and continue to exceed most forecasts.

Federal Reserve Bank of St. Louis President James Bullard is casting doubt on Powell's call for disinflation to take hold. Bullard says monetary policy is not yet sufficiently restrictive. And in recent remarks, he warned that if the Fed is too soft on inflation, we risk a repeat of the 1970s.

James Bullard: Inflation's a pernicious problem, so it is a risk and it does affect... One of the lessons over the last two years is that everybody feels the effects of inflation. It's pretty much across the spectrum, so rich and poor, young and old, everybody notices. So, if we can't get this problem under control soon, we risk a replay of the 1970s.

In the '70s, the U.S. monetary policy did not act strongly enough to keep inflation under control. Let's hope that we get disinflation in 2023, but right now it came in hotter than we thought.

Of course, the 1970s was a difficult decade for investors. Bonds got clobbered while stocks suffered a severe bear market in real, inflation-adjusted terms.

Precious metals were the standout asset class of the 1970s, culminating in a manic run to record highs in gold and silver in January 1980.

We aren’t yet seeing that kind of outperformance take shape. Although demand for physical bullion remain strong, there is little speculative interest on the long side manifesting in futures markets or exchange-traded funds.

In recent weeks, traders have been more inclined to sell metals contracts.

As of this Friday recording, the gold market is posting a weekly loss of 1.8% to bring spot prices to $1,818 an ounce. Silver is off 4.0% since last Friday’s close to trade at $21.06 an ounce. Platinum is down 1.4% this week to come in at $929. And finally, palladium prices are down a whopping 8.2% for the week to trade at $1,435 per ounce.

Metals markets are entering oversold territory and may be due for a technical bounce in the near future. Whether that develops into a more sustainable breakout will likely depend on whether the Federal Reserve indicates it will be winding down its rate hiking campaign.

For now, gold and silver bulls will view any bad news on the economy as good news.

In news on the sound money front, both houses of the Mississippi legislature have voted overwhelmingly to exempt physical gold, silver, platinum, and palladium coins and bullion from state sales taxes. The bill now awaits the signature of Republican Governor Tate Reeves.

Mississippi is set to become the 43rd state to exempt sound money from state sales tax. A dozen other states are currently considering legislation to rescind sales or income taxes on precious metals transactions.

The more tax and regulatory barriers to broad public participation in physical gold and silver markets that are removed, the greater the surge in buying will be if a 1970s-style mania phase in precious metals ensues.

For much more important information on the battle for sound money unfolding across the nation right now, here’s a replay a comprehensive interview of Money Metals president Stefan Gleason on the Gold Exchange Podcast this past week. Stay tuned…

Ben Nadelstein: Welcome back to the Gold Exchange podcast. My name is Benjamin Nadelstein. I'm joined, as always, by founder and CEO of Monetary Metals, Keith Wiener. Today, we are joined by a special guest, Stefan Gleason. Stefan, how are you doing?

Stefan Gleason: Hey Ben, I'm great. Good to see both of you guys today.

Ben Nadelstein: Really excited to have you. There's some big news in the air in the Sound Money community, and we thought we better have on the new. And Keith, how are you doing today? Are you excited? We've got a special guest on. We've got some great topics. Are we looking forward to it?

Keith Weiner: Absolutely. Stefan's been a good friend for seems what about a decade almost?

Stefan Gleason: Almost.

Keith Weiner: Stefan's the CEO of Money Metals Exchange, who's been a Monetary Metals lessee for maybe not quite a decade, but half at least. It's always good to see you again, Stefan.

Stefan Gleason: Yeah, it's great. I love what you guys do across the board and also just the way you're inventing and creating all the time and really finding solutions, which obviously work as I know firsthand.

Keith Weiner: Very cool.

Ben Nadelstein: All right, let's jump in with just a basic question, at least for me. We've had Jp Cortez on the podcast as well talking about sound money initiatives, but why don't you give us a quick, broad overview review, what is sound money? Why should we want sound money? And what is the landscape in 2023 for sound money initiatives?

Stefan Gleason: Well, sound money is the system of a monetary system, as Keith well knows, and most of the listeners know, where you have honesty and you have actual money circulating that retains and holds its value, that's stable. And that was the system that we had in the US all the way up until basically 1971. And then, or at least till 1913, when the Federal Reserve System was created. And of course, that was a system where the market price of money was set by the market and not by government central planners. And now we have a system of central planning by using monetary policy and pulling levers and creating money and expanding liquidity and contracting liquidity. And it's become a political money. It's become really fake money because we don't even have actual money circulating anymore. It's a representation of money. That has led to just a complete spiral in inflation and confidence. We look at this problem as mostly caused by the federal at the federal level, by the Federal Reserve System, by the US Treasury, by the dominant economic thought, Keynesian economics, which forced out sound money thinking and Austrian economics and so forth. That's where the problem originates.

But where the policy, I think, where the really exciting opportunities to push back and reinstitute or at least begin promoting sound money again, other than just people doing it privately on their own by going on their own gold standard, their own silver standard, which, of course, people can do and should do. But more from a policy standpoint, we're seeing a lot of opportunities at the state level to really do the things at least states that states have some things they can do to promote and defend the concept of sound money. And it's really the province of the states under Article 1, Section 10 of the US Constitution. Gold and silver is essentially the money of the states. In fact, states were and are prohibited from making payment in anything but gold and silver coin for payment of its debts. We've gotten away from that. That's a long, complicated story and a lot of legal questions raised there. But the idea of states reassuming their monetary role in promoting gold and silver as money is not only viable, but it's something that we are seeing a lot of enthusiasm about. And you have a scenario where you have states that are competitive with each other and you have an opportunity to push and propose policies and see how they work and see how they're adopted and then states start looking at what each other are doing.

And we've really been seeing an explosion in this activity in the last few years. I'd say some of it has to do with our efforts at Money Metals and the Sound Money Defense League. And some of it is frankly just a result of the economic circumstances we're in where inflation and the Federal Reserve and all the intervention in the market has really caused some pushback among state legislators and, of course, people in general. And so we're just seeing a tremendous amount of enthusiasm. This year, we actually have more bills than we've ever had. There's 22 states currently, right now as we speak, in this January, February legislative period where a lot of the sessions have come back in, there are 22 states that have bills right now that we're tracking or working on, or even in some cases, drafted to promote sound money in various ways. And we can get into the categories of that, but I can definitely say that it's an incredible increase in interest and enthusiasm and hopefully success.

Keith Weiner: I can tell you from my own personal experience, having been involved at the state level trying to promote some of this stuff from about 2012 to 2017 to whatever year at Arizona, finally, after five years passed, it's watered down gold legislation. And my thought then was that the way the media works in collective consciousness, one can be dismissed as, oh, that's some crazy stupid libertarian thing in Arizona or Utah. Two can be dismissed as the fluke. We were but one, two, three, many. And we never really got to the many. And I got a bit burned out on it and decided I was going to go in a different direction and try to achieve this via Monetary Metals as a for profit. But it's really exciting to see that that theory going into practice and that now it's not just one, two, three, many. It's one, two, three, 22.

50 states. And I guess actually you got to count it. There's a few more that probably don't have legislation because they already had passed something really cool. So it's probably more than half the states either have something currently pending or already passed something. I knew what the theory was in 2012, but I couldn't really imagine how that would play out 10, 11 years later. Very cool.

Stefan Gleason: Yeah, definitely that helped get the ball rolling. So those efforts were very valuable in what we're seeing today. Specifically in Arizona, they eliminated the income tax on precious metals. They already didn't have a sales tax. So that was the bill you were working on with the income tax. It had other parts that fell off, I guess. But that's one of the prototypes.

Keith Weiner: Out there. Three times by two different Republican governors.

Stefan Gleason: That's right

Keith Weiner: Every one of those pieces was hacked off violently by a politicized process that to this day my head still reels from it.

Stefan Gleason: But that's one of the model bills on the income tax issue. And it was a really good bill because it was a tax neutral one. It just says at the state level, we don't recognize gold and silver as a capital asset that will be taxed by the income tax. It's just like the Federal Reserve note. It's transparent. There's no gains, there's no losses. And of course, because of inflation and devaluation, that will generally allure to the benefit of people who sell gold that have gains and therefore won't have to pay taxes on them at the state level. But there's bills literally right now on just like that one are very similar coming up in Idaho but already introduced in Iowa, already introduced in Missouri, already introduced in West Virginia, South Carolina, Kansas, Michigan, and Arkansas right now, just on the capital gains issue that started with Arizona and Utah.

Keith Weiner: That's a big impediment to circulation. If there's enough groundswell at the state level, and there I hope or dream for it to be done at the federal level, then that's just one barrier removed for the use of the stuff the way it always was.

Stefan Gleason: And the first barrier is the sales tax. And we've seen a lot of progress there, too. That was the one area where there was at least some good law in the books. And that was the idea that when you purchase precious metals, many states would not charge a sales tax. But maybe 10 years ago, there were about 33 states that had an exemption. Today, there are 42. And there are five states that have bills that would do the same. And one on one state that would expand the exemption they have. And hopefully we'll pass one or two of those this year. That's been the most attainable policy change at the state level is to get rid of the sales tax. And as we've moved away from that, not moved away, but accomplished most of those, we're starting to focus more on the income tax and on legal tender type ideas, payment mechanisms, and some of the things like holding gold reserves in gold, the state holding gold as a reserve asset. And so that's where a lot of the energy is starting to shift because the sales tax battle has largely been won.

Keith Weiner: At this point it's all over with but the shouting. Yeah. So tell our audience about the salient points in the Wyoming bill. The Wyoming bill, just to make sure I understand where it's at at the moment, we're recording this on February 7, 2023, it passed the…

Stefan Gleason: Senate. Right..

Keith Weiner: And it's pending the House. Correct. Wyoming.

Stefan Gleason: Yeah. And we don't have the committee yet that it's going to. We think it's going to the revenue committee, but we won't know that probably till later today. But Wyoming legislation moves pretty fast, so we are going to do our best to mobilize through email and so forth and testify at the hearing because it's going to come up very soon in the next few days and it'll either move forward or not, we'll see. But in terms of what the Wyoming bill does, it builds upon the Legal Tender Act that we helped secure passage of in 2018 in Wyoming. And what that bill did was it was fundamental, but it was mostly symbolic. But one thing it did do is it specifically said there shall be no taxation of any kind on precious metals buying, selling, or anything related to precious metals transactions in Wyoming. Now, there already was no income tax in Wyoming, but there was a sales tax, so that obviously impacted the sale of, I'm sorry, the purchase of precious metals in Wyoming. So that bill knocked out the sales tax in Wyoming. There already was no income tax, but there's now another law that says there will be no income tax or any tax on gold and silver.

It also affirmed that gold and silver are money in the state of Wyoming, and that includes, they call it specie and specie legal tender. Specie would be gold bullion, silver bullion rounds, bars, valued based on the purity and weight. Species legal tender would simply be a government minted version of specie. It declared that they are legal tender in the state of Wyoming and said there will be no taxation on them. The amendments, which are now being considered in Wyoming, basically add more teeth and implementation of the Wyoming Legal Tender Act. It does it in several ways. The first thing it does is it authorizes taxes to be paid to the state. Now, there's no income tax, but there's severance taxes from mining and other natural resources that are paid directly to the state. Now, if it passes, which it hasn't yet through both Chambers and hasn't been signed, but if it were to pass, it would permit those who pay mineral taxes to pay those in gold or silver if they wished. Now, presumably, the state treasure could provide an incentive for them to do so as a way of encouraging people to deposit or pay gold to the state so the state could accumulate gold directly from tax revenues.

There was an earlier provision that was amended out that basically set the same system up at the local level where they have property taxes and other things, but there was a lot of pushback on that. And so it was amended because of the logistics and it was not understood how that would be handled. So it was amended just to deal with the mineral taxes in terms of the payment of taxes in gold and silver. And that's where it stands today. Totally fine. Then the next thing it does is it has the state treasureer creating basically a published exchange rate for gold and silver and what items it might take. Will it take gold Eagles? Will it take just gold bars? What is the exchange rate, viz a viz the Federal Reserve note? It will publish that information on the treasure's website. It will provide guidance to those who may wish to use it or pay in it. But also, and this is probably the most likely direct result of this bill if it were to pass, it will cause the treasure, in fact compel the treasure to at least hold some physical gold on behalf of the taxpayers of the state of Wyoming.

And so it will put the Wyoming Treasures Office in the business of understanding how to receive value and hold gold and silver for the state. And that's going to require just setting up some systems, probably working with a depository. Maybe some outside experts will come in and assist the treasure in setting this up, build the plumbing, so to speak, for a gold based system to help make that potential transition down the road more possible or more seamless. Then the part that I think is probably of the most interest to some of your listeners and clients is the provision that says that the state treasure may invest in precious metals, leases, and or bonds payable in precious metals. And so if that passes, that will be the first state law that explicitly prompts the state treasure to look at these kinds of investments specifically. I'm not suggesting that they are already something treasures could do in their states. In many states, they probably could. But this is one where the will of the legislature would be, we want you to do this. And that presumed… And by the way, the treasure in Wyoming is very gold friendly.

And so, and he testified in support of the bill. So I think that if we can get this through the house and then signed by the governor, I think we're going to see some really neat things come out of the Wyoming Treasures office.

Keith Weiner: That's really exciting that they can invest it to get a yield on their gold. And I think the lack of the yield is the reason why the, in the mainstream world has a lot of them, if it just takes for gold for that reason. Obviously, a lot of them, I was going to say that's why that's the reason. But a lot of them, the reason is it's ideological. It's the idea of gold and free markets just rubs on the wrong way. But for a lot of people to just look at it and say, Okay, but holding gold has cost. And now, if the treasure's office is realizing a return on their gold, then even the people that are working the bureaucracy in the state government could understand that. Okay, yeah, I get it. Okay, so we have some tea bills that are doing this. We have some gold price of gold is going up, and we're getting this kicker of a couple of percentage points. And then for them, that will click and say, yeah, we like this. This is working well for the state. This is generating returns. We're doing our fiduciary duty for the state taxpayers.

And our rainy day fund is accumulating, actually growing because it's a surplus that we can do something with in return to the taxpayers or whatever in future years. Everybody will be excited about that.

Stefan Gleason: Yeah, I think that actually those in the treasure's office, and I can't speak for them, but I know I've interacted with them, and they do have a Wall Street orientation, which is a little bit hostile to gold bullion and gold ownership. But in fact, Jeff Christian, interestingly, a month or two ago on the KE report, did a great job of explaining why Wall Street hates gold. And one of the main points he made, and he said he's been saying it for decades, but I don't think a lot of people necessarily realize the conflict of interest that goes on there. But he said basically that money managers want to sell clients on investments that they know they're going to be able to turn over. And the average turnover of an investment is 18 months or something like that. And so every 18 months there's a new commission, a new fee or whatever for that. And so with gold, when you sell somebody gold, whether it be probably the case of the state, but certainly with individuals, when you sell them gold, more than likely they're going to hold on to that for a long period of time and there won't be another commission for the seller.

Stefan Gleason: I think, and he spilled the beans on this reality. And so for a variety of reasons, there's a lot of hesitance or just hostility by some of these people. But I think your point, I think actually the idea of a gold yielding instrument or just a gold lease, which has a yield, actually appeals more to those people. And those are some of the people in these, they're making these investment decisions. So I would not be surprised if they embrace that once they fully understand the opportunity there, even more than they will embrace the requirement that they hold physical gold. But we'll see. But either way, if this passes, it's going to put Wyoming even further ahead than the other states on the sound money index. They're already at the top of… They're only 54 %, but they're at the top, but this will put them even further ahead. But that said, there's other bills in other states that could really…

Keith Weiner: Yeah, hopefully other states will leapfrog Wyoming and go even further. To me, this is so exciting, obviously very validating to the Monetary Metals business model because we offer, develop and offer gold leases and gold bonds. And just to see that now at that concept ratified at the government level, this isn't wild, odd, crazy people in the comments section on zerohedge. This is state government. That is just super exciting for us as a company, but also just for the gold standard as a movement that here, we call it the Warren Buffett Objection. Why do you want to own this thing that's neither productive nor procreative? It doesn't generate or yield. You buy a lump of gold, stick it in your desk drawer 20 years later. He also said that 20 years later, it's not churning over 18 months. 20 years later, you pull that lump of metal out of your desk drawer, it's still the same lump. It hasn't done anything for you. And when the mainstream world realizes that it could do something for you, it could be a regular conventional investment. A gold bond is a lending instrument that's financing a productive enterprise. And like any such instrument, it pays an interest rate. When people realize that, then some of the tar that's splashed onto gold, it's cleaned off and people can say, Oh, this thing is actually pretty shiny and it's pretty and it's nice and we can get involved with that.

And if that happens, who knows? This gold idea might sweep the world at the end of one day.

Stefan Gleason: I've noticed when we're talking about the whole idea of yield versus holding the physical, I've noticed that those that say, Okay, the yield is inherent. We got to have yield. We can't have no yield. And of course, yield is good, particularly if it's in gold. But it glosses over the fact that gold is… I consider it like cash, except it's better than cash because it doesn't lose its value over time. And they seem very focused on yield. Even a few years ago in Wyoming, we had a couple of people saying, We got to have a yield. We can't just have gold sitting there. But yet they have third world debt that they own a huge amount of. Yeah, and it has a 9 % yield, but it lost 30, 40 % of its. So whereas gold has no yield, but it's gaining in capital, at least, vis a vis the devaluing Federal Reserve note. And so it's interesting, the mindset is, if it doesn't have a yield, then you're not making money. But they're not concerned about the negative real return they have on their bond portfolio, which has a 1 %, 2 % yield, but is actually getting a negative 5 % real return.

So there's a a psychological glitch that people have when they think about physical gold. But if you can have physical gold and yield, all the better. You did a study I saw where you looked at the performance of a portfolio with physical gold over the last 20 years, and it was adding 10 % to the portfolio, and it had a higher overall rate of return and lower volatility if you add it to a portfolio of stocks and bonds. And then when you add it, gold with a yield, it has an even higher overall rate of return with lower volatility. So they're both good and they're both vitally needed in a portfolio. But the question of how to do it, obviously, I guess you're introducing more risk whenever you do something that has a yield, more risk than just…

Keith Weiner: The first thing that needs to be said in the first slide and literally every deck we put out is that, there's no such thing as a return or yield without risk. Anybody promising you that, you should run. And now, of course, the crypto space not to take any cheap pot shots there, but the crypto space, some of those old slide decks are coming out of what these companies were promising. It's like risk free returns of 8 % or 18 % and they're going to really get burned by their own words. But my personal theory on this is that the people that bring themselves to the point where they want to actually lease their gold and lend their gold via bond program also are going to have some physical gold that they're going to hold. That's not all or nothing. It's not either don't hold any gold or put it all in yield. There's going to be some way, some balance of like, okay, some in the yield, some as one would hold cash versus investments in dollars. Not every dollar is put into long term bonds, for example. And it never was that way. Even in the time of the gold standard, people would have gold coin in their pocket or their stock drawer.

They would have some maybe in a bank safe deposit box, and they would have some deposited to get a return. And everybody sets that balance based on risk preference, time preference, liquidity preference. Economic theory has all kinds of different angles for looking at that. And probably the same thing will be true with the state government. My guess would be if Wyoming passes this in the first instance. And if the treasure decides to go forward and do some gold lease, my guess would be that it would be like 1 % that who just barely just tipped that first toe in the water. But what happens is, oh, wow, that was cool. But I got a return on it, but it was only 1 % of the portfolio. And so next year, then he would dip two toes in and over a certain period of years, eventually it's whatever their comfort level is, which is probably less than 50 % anyway, I would think.

Stefan Gleason: I think it's all about just taking that first step and getting the system in place to understand it and basically prompting the treasure. Hey, this is important. It's a missing asset class. We have tremendous impetus right now to look at gold and silver. Given what's happening in the financial system, we're sitting ducks. We don't have to be sitting ducks. Let's get up to speed on how to deal in gold, how to hold gold, how to value gold, and potentially how to invest in gold instruments or gold bonds and leases. And that's all this bill does. They're actually looking at a Wyoming stable token right now at the same time. That passed the Senate at the same time. I don't want to cast dispersions on that, but it's linked to the dollar. It's a crypto Wyoming dollar. And so they're willing to try innovative things like that. And it was interesting. There was one representative who was in favor of our bill, and she said, if we can vote for a Wyoming stable token bill, we can certainly vote for a bill that allows the state to own gold. Given its history and it's not new and it doesn't have this cloud, that argument resonated.

That said, it only passed 16, 15 through the Senate. And of course, I think we got one Democrat out of two because there's no Democrats in Wyoming. You have to be a Republican to win a primary in Wyoming. So you don't have many Democrats. But we got 16 votes. It was bipartisan, but it was close and unfortunately too close, but it moves forward. So we'll see what happens in the next couple of weeks in the House.

Keith Weiner: That's very exciting. I think I was there in 2018. Is this the same treasurer? Because I'm pretty sure I met with either this or that.

Stefan Gleason: No, you were there in 2019, I think. But it is the same treasurer you met, yes.

Keith Weiner: Who seemed receptive at the time? And is this the same bill sponsor that I met?

Stefan Gleason: No, Roy Edwards died, actually. Well, you may know Bob Iad. He wasn't in the Senate.

Keith Weiner: That's who I was thinking of.

Stefan Gleason: Bob was out on the outside supporting our efforts, and now he's a Senator, and he was the sponsor of this bill. He just got elected. This is his first bill that he's passed through his chamber. Oh, that's very cool. It's a top priority for him. But the state treasure is supportive, Kurt Meyer, and the Senate Majority Leader was also a big advocate. Larry Hicks, he was vocal on the Senate floor during the debate, which you can see if you go to MoneyMetals.com, there's an article you can actually watch the 20 minute debate of the final passage in the Senate, which was interesting. And then we'll see there'll be a house hearing probably in a couple of days. But there's another bill I should mention. There's a bill in Missouri that would almost do all the things that we're trying to get done in Wyoming that's being voted on for third reading today in the Missouri Senate. It's already passed the committee. It would declare gold and silver as legal tender. It would remove capital gains taxes, and it would allow for taxes to be paid in gold and silver, and it would allow the state to hold gold.

It doesn't talk about leases or bonds, but it has many of these other aspects. So that comes out of the blue in Missouri because we have a sales tax exemption there, but there's some sound money forces there and they're very energized and they seem to have some momentum and we're doing what we can to support it. They even had a provision to have a state depository, but they strip that out because it's just so much all at once. And I don't think it's necessary to consider that at this stage in a state like that. Too much objections, too much cost, too little understanding. There's a lot of very interesting bills right now.

Ben Nadelstein: It sounds like from my understanding that once you get one small win, no matter how symbolic or maybe different than some of the other bills that have passed, other states feel that competitive pressure to say, Well, if Wyoming did it, yeah, maybe we're a step or two below on that sound money index. But if we pass our own bill here, or if we amend our previously passed bill, there's this ratchet effect, which when everyone starts to compete, you get actually a positive outcome instead of, in politics, what's usually the opposite, competition in the.

Stefan Gleason: Bottom. 100 %, that's part of the dynamic we're seeing. You especially see that on sales tax because now you have states, and I'll just give some examples, Mississippi. There's a Mississippi bill to appeal the sales tax of Mississippi. That state is now surrounded by states that have no sales tax on gold and silver. Kentucky, there's a bill that's being introduced next week or possibly this week. Same thing, surrounded by states without a sales tax. Wisconsin, sales tax appeal, surrounded by states without a sales tax. Y ou start having this, you were like an outlier. This is an outmoded, even controversial practice of taxing gold and silver purchases. And so you're able to really, and there re looking at this, we don't want to be the only state. There's even business reasons. Put aside the ideological. You got the business reasons. You got coin shows won't come to your state. They don't want a sales tax collector milling around, checking everybody's certificate, all these out of state, out of town people getting nailed. The coin industry, we're not even going to go to a state that has a sales tax. Then you have customers that cross state lines. If you're surrounded by states without sales tax, people will go to the next state to buy their gold.

It's worth it. Theoretically, if they bring it back into the sales tax state, they're supposed to pay a use tax, but they don't. And so they probably don't even realize they're supposed to. But the bottom line is it's bad for business putting aside the sound money aspect. And so I think on the sales tax, we've gotten to that point where there's so much momentum that it's just really making it less and less difficult, if not easy. I don't want to say easy, but it's becoming way less difficult because of the fact that we now have 42 states. And so hopefully we'll achieve the same thing. I know that at some of these conservative legislator or liberty oriented conclaves, there's presentations. Jp Cortes goes to a lot of these things. Legislators will compare notes about what's being done. And with everyone talking about inflation right now, it's the number one issue or number two issue in the country. And so this is part of that solution. And I think for all these reasons, we're just seeing a tremendous amount of enthusiasm and momentum. I was going to stay. We're not passing anything yet this year, but we'll see.

Keith Weiner: There's a very interesting thing in the… I don't know if I could call it political economic, political macroeconomic backdrop to all this, which is there's overt discussion of… And a lot of the economic thinking is wrong, but in the mainstream thought, there's this trade off between inflation and employment. And there's a very deliberate callous, let's render some people unemployed to reduce demand and reduce consumer prices or at least slow inflation. And for a lot of years, that conversation didn't break out into the public awareness. You have the Fed, most people have no idea what the Fed really does, and it's supposed to keep the money stable and employment stable, and nobody really thinks anything more about it. And as long as things are almost okay, they weren't really okay. But most of those years, in the last 30 or 40 years, most of those years seemed okay anyway at the time. And then you had a crisis every once in a while, and then the Fed visibly gets involved and tamps it down, and the treasury has whatever bailout, and then things go back to normal. But now there's this calculating, let's unemployed people to keep the money more stable.

And of course, the other side of it is no, let's keep people employed and damn the inflation.

Stefan Gleason: Yeah. Now the choice is just people are given these two bad choices, and everyone's talking about it's like, why are these the choices we have? High inflation or high unemployment or both.

Keith Weiner: There's a quote from Milton Friedmann. Everyone thinks he was this free market guy, and that's one of the axes I grind. But there's this quote where he's talking about at Daylight Savings, and he said, you might say that if anybody wants to get up later in the winter and wait for the sunrise to get up, they could do so and everyone can set their clocks whoever they want. But isn't it so much more efficient to have a master clock? And he's analogizing to, sure, all the employers and all the workers could negotiate and renegotiate their wage agreements, but isn't it so much more efficient to just devalue the currency and save all these people that are in trouble of renegotiating. Of course, anybody who's holding savings is like, Wait a minute, I'm collateral damage. You said it would be easier to debase the currency to save all those other people, to bother of having to renegotiate. But now you just literally, every year decimated my savings by taking 10 % away. And that whole concept has now exploded back into the public consciousness where it hadn't been as I've been dormant for arguably four decades. And so people start to think about, Wait a minute, what about this gold thing that they can't base?

And that's the sea change that as we talk to our customers, we see that under way right now. And it's unfortunate. I mean, it's fortunate in the sense that people are thinking about gold. And anyway, they'll be thinking about gold. I'll take it. I'm happy with it. But in a way, it's unfortunate because it's taking a tragedy. It's like some car has to crash and somebody has to die before people think about, Yeah, we should really put seatbelts on our kids and not have this recur. It's tragic that that had to happen. But I think that's a big part of a backdrop of why so many people are thinking about it at this moment in time.

Stefan Gleason: Yeah. And yet at the same time, I think it's still a very small minority of people that are thinking about it in terms of gold or even policies related to gold. I mean, people are generally aware of and concerned about inflation, but I would say we still have a big communication challenge to steer people in their minds in the right direction. Because if you look at the interest in gold and silver just as an asset to own or as a form of investment, it's still very small participation. I agree.

Keith Weiner:

With that. I was going to say, but it's a slightly less small today versus a couple of years ago.

Stefan Gleason: Yeah, it's double, but it went from half a % to 1%. But I'll take it. Doubles again, that's two.

Keith Weiner: I'll share something that one of our board members said to me when we were talking about this topic and changing the world and all that. And he said, supposedly, Lenin wrote a letter to Marx back in I don't know if it was the late 1890s or 19 00s. And I don't know when Marx died, so this may not actually work. But the stories I heard, it was that Lenin wrote to Marx and said, The success of the revolution is assured because there's now 10 people that understand Marxism. And you could look at that and dismiss that and say, Okay, that's cocky. But there's a sentiment there that, okay, when an idea is… Now, obviously, I don't think that Marxism is good, but there's no question that the world was dry tinder waiting for that idea to burst, that swept the world. And that was a rotten idea, so it was harmful to adopt it. But there's a certain sense that when the tinder is dry and ready for that idea, it doesn't take all that many people to get it. And most of the people in the main chain will never really get it.

They'll go along with the idea because they're swept up with the crowd. There's a video that is popular in startup communities and venture capital communities. I don't know if it's called Dancing Man. I don't remember what it's called. But it basically shows a bunch of college kids sitting there picnicking on this grassy hill. And this one guy gets up and he's freaky looking and he starts to dance. And he's spastic.

Stefan Gleason: I've seen that.

Keith Weiner: And there's a narrator voiceover, some venture capitalist or something, or some consultant. And he's like, This isn't the important part. Let's see if all the other kids will ignore him. And then another kid s up. And the narrator says, This is the important moment. It's the first follower. He's the one who creates the movement. Other than without him, it's just this plastic guy jerking and jerking and jerking his way on the hill. But having a follower has now set the seeds for this to be a movement. Let's see if anyone else joins in. Sure enough, someone else joins in, and now you have a movement. And the moral of the story is make it easy to follow, make it easy for people to participate, make it fun, make people feel like they're belonging, all these things that as the thing goes on. And by the end, every last kid is not setting their picnic anymore. They're all dancing to whatever the music was.

Stefan Gleason: I've seen that video and that was really compelling, actually, about it's a microcosm of the network.

Keith Weiner: So do people really understand? Is there a large number of people that are thinking about gold right now? Absolutely not. But it's just the moment that the tender is dry and the gold idea becomes the spark that sets the world alight. It remains to be seen. I wouldn't want to prematurely declare victory just yet, but it's things like this Wyoming bill that give me encouraging signs, let's put it that way, that there's a lot of the stuff that's fallen into place now. But I thought after 2008, the response of both the Monetary Authority and the fiscal authority, the Fed and the Treasury after 2008 was so insane. But literally every chart, if you looked at Fed balance sheet or anything else in any chart, basically everything up until 2008 looks like a flat line. Now, if you cut out after 2008, it wasn't a flat line. It had its slope and those zigs and zags and everything else. But when you saw what they did in 2008, basically a flat line just about at zero. And then this moonshot, or other graphs would just completely fall off the cliff. And there were so many of them that I thought, my God, everyone is going to come and realize that this system is failing in an fundamental way.

And a few people did. But then what happened was the Fed tamped it down, and they got the market to come back and buy junk bonds and everything else. And then everyone said, Oh, see? It's working. And the Fed did what they're supposed to do. They're a bunch of really smart technocrats, and they did all the necessary things. And we don't understand it, but they did the right thing, and everything was fine. By 2011, victory was declared. But then we had another little eruption, what about 2017? And then obviously a much bigger eruption when COVID lockdowns hit. And now we're dealing with the hangover from the COVID stimulus. And each episode, there are more people that open their eyes and look around and say, Oh, my God. I had no idea this is what our Masters were doing to us. And anyways, this is super, super exciting. And I'm gratified to see that the early efforts that I did helped lead to this as I bowed out. But I'm also glad that I had that chance to go to Wyoming, meet some of those folks. Maybe I planted a seed or two in some of the things that I said, I hope.

And now, just really grateful and thank you for your efforts at the Sound Money Defense League. I'm really grateful for your efforts and JP at the Sound Money Defense League. And man, just to see virtually all states getting rid of sales tax is just an incredible thing to see because that's not how the world was for many, many years. So you really can change the world.

Stefan Gleason: Yeah. It's just so much easier to do public policy at the state level, where with organization and grassroots, these legislators don't usually see that on any one bill. So at the federal level, they get hammered on all the time by their constituents. At the state level, our bills have become, in some cases, the most popular or one of the most talked about bills at the state level because the grassroots, we have very enthusiastic people, we're sending out emails, direct mail to people in the state asking them to contact, giving them something to do. And they're doing it. And they're doing it in a manner that these legislators are not seeing on other bills. And yet there's no real opposition, at least for the sales tax stuff, nobody really opposes that. So it's like all this support, no opposition, it makes it a lot easier to do.

Keith Weiner: That was something I used to argue in Arizona, and I remember going to Texas and at least one or two other states is that, look, most of the legislation that comes before you creates a winner and a loser. And winners are going to be here telling you how great it is. But you're also hurting somebody and somebody's been pissed off and want to vote against during the next election. But this stuff to lift this tax or make the state slightly friendlier to people that have gold doesn't create any losers. There's nobody here showing up saying, you're taking away my livelihood. You're hurting my kids. If you cut the school budget by one thousandth of one %, everybody shows up and says, You're hurting children. You don't have that with us. There really isn't an opposition other than the broad based ideological antipathy to gold. But those people aren't really motivated to show up because it's not really affecting their lives. And so the testimony in every bill that I went to, the people that showed up to testify in the Chambers was completely lopsided. You have 17 people that wanted to get in a word and say, yeah, please pass this.

Keith Weiner: And zero, or you had the… The legislative council said there's a constitutional issue, or you had a fiscal note, and the treasure said, well, by requiring us to accept payment from the public in gold, we now have a problem. We don't have the technology to tech counterfeits. We don't have the security. We don't have the safe in our office. Those sorts of, I guess I'd call them quibbles.

Stefan Gleason: Technical objections, yeah.

Keith Weiner: But you didn't have the public showing up saying, Don't pass this. You morons. You baby killers. You didn't have any of that. You just had all the people showing up saying, Look, it's constitutional. It's down the money, protect us from the Fed. And so the politics are very one sided, which is favorable.

Stefan Gleason: Yeah. Ben, you were jumping in there.

Ben Nadelstein: I wanted to ask you, because change occurs on the margin and a lot of people are going to be listening to this and saying, Wow, Stefan is doing incredible work. Maybe their clients have monetary medals and they want to know how they can get involved in the Sound Money Defense League. What are some ways that let's start with a simple question. What are some ways that an individual who has no experience with any of this stuff can get involved, either specifically in Wyoming or just in general with Sound Money and Sound Money initiatives?

Stefan Gleason: Yeah. Well, I guess first of all, we have a lot of information on the soundmoney defense. Org website and the moneymedals. Com website. So sign up for the email list on either of those sites, moneymedals. Com or soundmoney defense. Org, and we will be able to contact you when we have a legislative project in your state. We have literally about 700,000 email addresses. Many of those are customers of money medals, and many are just people that are on our list. If you're a customer of Money Metals, we are sending out direct mail in targeted states. We just sent out 8,000 letters to Wisconsin today and 7,000 letters to Minnesota. We're sending 3,000 letters out to Mississippi tomorrow to our customers because we have their mailing address and we're telling them, hey, contact this committee chairman or these people. Here's the bill numbers, here's what's to say. So we're doing that by email and mail. So the way to engage would be to get on our list so that we can contact you and when we know of a bill coming up, we can alert you. You can obviously just follow the news or just on your own contact people.

If you know there's a bill in Wyoming, which there is, the issue right now is the State House, we want the state house to pass it. The bill number is SF 101. You can contact, if you're in Wyoming, contact your State House member and contact the members of the Revenue Committee and tell them to pass the bill. That stuff really works, honestly. It really does work, particularly at the state level. Going in with arguments is great, but when it comes to politicians, their sole focus, or at least for many of them, is getting elected. I guess it was Senator Evertson who said back in the 60s, and there are lots of big debates, and he was the Senate President Pro Tem, he said, When I feel the heat, I see the light. T hat's really fundamentally how it works. Politics is not about necessarily making the right argument. You don't have to be right. It's good. We are right, but that's not really necessary to win, as we know. And so grassroots activism really works, particularly at the state level. So that's how people can help.

Ben Nadelstein: That was my first question. My second question, maybe it's a little more nuanced, which is, let's say I'm a politician or I'm somehow involved in state level politics. What's the way that I could personally get involved? Maybe I want to pass a bill or sponsor a bill that looks similar or has some sound money initiative. Let's say I'm watching right now, how could I get involved?

Stefan Gleason: So we publish the sound money index every year and we go through and we rank every state on about 13 policies related to sound money. And then here's the math. But basically we have model bills for most of these pieces of these policies. And so we would be happy to, if somebody contacts Money Metals or Sound Money Defense, there's a contact form, whatever. If you're a legislator, you can reach out to us and we will provide you with model bills. We may even provide with grassroots support and testimony for the bill. We can help draft or modify bills if needed. And so we're there. There's some opportunities to look at what other states are doing and just grab the language. We're seeing that now. Some of the bills, maybe a third of them are bills that we didn't initiate. They just grab language and some of it is good language, some of it's not as good. But either way, there's a lot of enthusiasm and it's just happening even without us. I feel like we played an important role in fostering this, but obviously we can't take credit for a lot of this. And, Keith.

Ben Nadelstein: I want to throw some of the final questions to you. So you shared that quote about, well, now that 10 people know how this works, it's game over. We victory is sealed. Can you explain to at least the two of us listening? I know Stefan definitely knows, but to anyone listening in the audience, what is the benefit of a gold lease? What is a gold bond? Maybe some people have never heard of it. Maybe they're not clients of monetary medals. What is the one minute elevator pitch as to the gold standard through this gold bond or gold lease mechanism?

Keith Weiner: Very broad question there. I think the aspect that I'll focus on is that there's a win deal. To the last C, it's inventory. So if you have an inventory of, I don't know, nuts and bolts or a little copper fittings, those are base metals that are relatively cheap. You may not necessarily need to worry about financing your inventory of nuts and bolts. Your hardware store, it may add up to a few dollars and whatever. It's pocket change. But gold is $1,900 an ounce. It's got to be financed somehow. And if you borrow dollars to finance it, then you have this mismatch between the financing, the liability of dollars, and then the asset is gold. And if the gold price drops, you could be insolvent if it drops enough. So then you have to hedge. And if you lease the gold, you don't have the hedging problems and risks and costs and complexities and management headaches. You just have inventory you need without the price risk that you don't want. And on the other side of somebody who owns gold, who by allowing that gold to be used by somebody else's inventory is getting a return on it.

And so it's just a nice win win deal. That's what free markets are at the end of the day. Ship out all the ideology about what works and what doesn't work and what's fair and what's not fair and all this. Deals don't happen unless they're win win without somebody coming along with coercion with a gun and say, well, you're going to have to do this anyway, even though you don't choose to. So how do you get a gold standard? When anybody has the right and the opportunity, but not the obligation to put their gold to work, financing something productive, as we saw with crypto, there was all sorts of promises of things that call themselves yield, but it was all self referential. It's now become infamous the Alex McKinsey so called flywheel, which is basically a Ponsy scheme. You're getting all this deposit in and finances the purchase of more and then more people buy more. And as long as the price keeps going up, the Ponsy scheme seems to work. But there's no actual yield there because the only money that comes into the system is the money of the next person to buy in.

And when you finally run out of buyers in, then it collapses. But to have a sustainable system wide yield is because you're financing production and the yield is paid out of part of the profit generated from that production. And so when anybody that wants to deposit their gold to get a return on it can do so, that's a gold standard. That's a working gold standard. And so at least this is the first step towards scaling that in a big way.

Ben Nadelstein: Right. Well, Keith, thank you for the explanation. Now there's at least 10 of us who know how this works. So victory is certainly sealed. Steph, and I want to say thank you, obviously, for the work of the Sound Money Defense League. But where can people find you? Where can people get in contact with you? Let's say I'm a Florida legislator and I go, Wow, this episode is awesome. I want to get on the top of the list. I want to be Wyoming. What's the best way to do that? Where can they find you? Where can they get in contact and just learn more about Sound Money?

Stefan Gleason: Yeah, go to soundmoneydefense.org, and there's a contact us form there. That's one way. We're also on Twitter, and so is Money Metals that Money Metals handle on Twitter. So you can tweet at us, you can email us, you can call us. There's a phone number on both websites, money metals.com and sound money defense. Org. It'll come to me or Jp if it's related to this topic of policy. So I'll put out JP Cortes's email as well. So he's JP Cortes. So it's [email protected]. So that's probably the best contact person for legislators.

Keith Weiner: Stefan, do you have a handy reference for Wyoming House of representatives members for people that live in Wyoming to be able to contact?

Stefan Gleason: It's being assigned to a committee today. So as soon as we know which committee, then we're going to issue something out. So I can email that to you guys and then you'll have it and you can forward it or make it available.

Keith Weiner: Yeah, we should attach it to this video. Sure. And then I know we've got a couple of folks in Wyoming, including one of our directors that we're already asking about. Okay, good. How can they help?

We are expecting a hearing on SF 101 next Tuesday or Thursday in the House Finance committee. It's critical the bill be passed out of committee next week. Chairman Harshman and the other house members listed on this page (right side) are the ones that should be contacted by anyone in Wyoming – https://www.wyoleg.gov/Committees/2023/J03

Stefan Gleason: Well, they can obviously contact any member of the house, but we'll specifically be focusing people on contacting the committee.

Keith Weiner: At this stage. It's that committee, absolutely. And then once it passes that committee, I'm being gray. What's the word? Using positive assumption? I forget the word. When you assume a good outcome, you don't say if we win, you're going to say when we win, then we're going to do this. So assuming the positive after that, then we're going to want people to reach out to everybody in the Wyoming House and not just the members of the committee. Once it passes that, then it's on to the governor and everyone should reach out to the governor.

Stefan Gleason: Yeah. And if you're a constituent in Wyoming, you should definitely contact your own statehouse member right away and tell them you're interested in this bill, you want them to support it. If you're an actual constituent for that person, they may feel like they need to follow up on it. They might talk to the committee member if they're not on the committee, that thing.

Right. And it's Senate File 101, SF 101, and it's the Wyoming Legal Tender Act Amendment. But it's SF 101. That's the bill number.

Ben Nadelstein: All right, well, Steven, thanks so much. We'll make sure to have all of this information in the description, help people get in contact with you. How can they get in contact with the Sound Money Defense League? Want to say thank you so much. It sounds like 2023 is going to be a killer year for Sound Money. And we look forward to having you on 2024 when every single state is issuing gold leases and gold bonds. We don't use dollars anymore and we can pay you in gold and silver.

Stefan Gleason: That's when your show collapses.

Keith Weiner: There's nothing to say anymore because it's all been said and all been done.

Ben Nadelstein: I will happily relinquish this role. 2024,

Keith Weiner: We're going to hold you accountable for that!

Stefan Gleason: Okay, I'll do my best.

Ben Nadelstein: But, Stefan, if I get fired because we go back to a gold standard, I will be the happiest unemployed person on the planet. So thanks so much and we'll see you next year.

Stefan Gleason: Thank you.

Keith Weiner: Thanks, guys. Take care.

Well, that will do it for this week. Be sure to 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 weekend everybody.

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