Gold's Not Dead

0:00Just briefly I would like as part of the Mises Institute to thank you again for your coming. Many of you suffered the indignities of a hurricane to get here and we definitely appreciate your presence. That's the last nice thing I'm going to say. First I had two jokes, and Lew won't let me tell them. So the first one what I'll do is I'll make it politically correct, but you're, well I could say it, it's originally a Polish joke, but he won't let me tell them, so I've changed and it goes as follows that there are these three neocons and they're terrorists and they take over a US submarine and they take it out to sea and they're holding the submarine and the crew hostage and they make their final offer and their final offer is two million dollars of confederate money and Three Parachutes Originally the joke was two million Zloty's in three parachutes but of course I'm going to tell the other one too

1:33this is uh... any feminists in the room I'd object but what the heck seems this fellow is speeding along the highway in a highway patrol flashlights going and sirens turning and they pull him over and the policeman says to him, sir, your wife fell out of the car eight miles back. And the fellow says, what a relief, I thought I was going deaf. You should have heard the original of that before he made me change it.

2:18Let's talk about gold. My original topic was Murray Rothbard, but I'm sure Murray will allow me to change the We had a bad day yesterday, us gold bugs. We had two of the people I have enormous esteem for, Jim Grant is one of my heroes and Dr. Friedberg, the most generous host and fellow and gentle fellow I've maybe ever met. I was going to savagely attack both of them for their attitudes about the gold and I really was going to or rather direct criticism of them both, but we had a better day today. We had Dr. Hoppe and Walter Block present gold in a more historic and abstract manner and I'm not as angry.

3:14And in analyzing the situation, what I decided is that on the first day, Jim Grant and Dr. Dr. Friedberg, these are people, you might say, in the real world. They are dealing with problems and investment day to day, whereas today we had a more academic, historic evaluation of it, and as I say, that made me feel a bit better. One of the things that was most interesting was the agreement by almost everybody that there's a balloon out there and this balloon is at best fictional or artificial and at worst immoral and that it's going to burst.

4:01I think there was total agreement and not surprisingly from from speakers of our, from our view. Yet nobody seemed to follow that, at least on the first day they didn't. What does the burst of a balloon mean? Does it mean twenty percent down in the Dow Jones averages? Does it mean an increase of unemployment? Does it mean bankruptcies? I mean the ramifications of, particularly for those of the Austrian view of a market break, a proper market break, no one knows where that would go and I'll deal with that a little later. A gold dealer, you might say, is a halfway house between the real world and the abstract.

4:52And in a way, I've been operating sort of a halfway house for 40 years. We have a myopic view, ours is not dealing with the whole person, we're not interested in how they made their money or what their other investments are or what kind of retirement programs they have. We're really concerned with potential disaster. I mean that's what it's all about in the current situation. Gold is a fever thermometer telling us how sick we are and it's that aspect of people's lives that we're dealing with. Some of our customers Others are very articulate about it, others are not, but they all come from the same view and I'll just briefly tell you about a conversation I had with a customer on the phone, to profile, 70 years old, retired, and we were chatting a few moments and about 10 minutes into the conversation his wife was on the line on the extension, I wasn't aware of it, in the old days you could tell when someone was on the extension you can't do it today, and I was

6:05I was surprised, and I hadn't told any of my bad jokes, so it was okay, but she was a little critical, she asked me a question, and pretty soon they were kind of having a fight, and I'm holding the phone, and I didn't know what to do, and so I excused myself, and the last thing I heard was something to the effect that the girls at the Britsch Club had an investment portfolio, and they're up about 800 percent.com this, This and whatever that and this dummy husband of hers is buying gold at a 26 year low. That was effectively what she had to say. So he called me back in about an hour and I said, how did you handle that? She was, he said, oh, she's a sweetie pie.

6:50No, she's not a sweetie pie. She wasn't very nice at all, but he was nice. He said, he said, I explained some time ago to her that I'm speaking for him now. All along the way he came upon a body of knowledge, an understanding of the world, that he found rational, he found moral, he found historically valid. He also had great respect for the people, whether it was the Rothbards or the Mises or the newsletters, however he came to it he found it an appealing view. Unfortunately, or fortunately, it took him out of other things. He no longer could comfortably invest in other areas. He wasn't comfortable with the stock market and he was really taken out of those other alternatives.

7:40He never had to wake up in the morning and say, shall I buy a share of amazon.com or an ounce of gold? He did not face those circumstances. He had no bitterness unlike me. I have a lot of bitterness about our enemy. I'd like to see them suffer as we have for recent years. He had none of that. He knew in his heart that he would prevail, that the truth and morality of what his position was ultimately might not happen in his lifetime. He recognized that. He knew how powerful the forces were. It was just interesting that he represented something that many of my customers have. It's a viewpoint. It's moral. It's a moral position. Murray wrote his book, The Ethics of Liberty.

8:26That's what's really important. There is an ethic to our view, setting that aside. That was just a, there's a history that my friends,

8:39the realists, Dr. Friedberg and Jim Grant, they really don't go into the history of the modern gold market, modern in the sense that From 1931, 32 or 33 actually, until 1974, gold was illegal. And as someone discussed today, it was as, Walter Block, it was almost as dangerous as smuggling heroin. In fact, in San Francisco, the feds raided a money-changing house, because just with flak jackets and just unbelievable. So this was because they had some hundred kroner gold coins.

9:24I mean the government was very clear about its attitude toward gold. The king doesn't want you to know the value of an ounce of gold because if you do you know what mischief he's been up to. So the king is very powerful and and making it against the law is about as powerful as you can do it. From 1974 until about 1981 there was relative freedom, we didn't monetize it Hans, but there was relative freedom in the gold market people could, there was no, there was whatever government influence there was put on upon the price of an ounce of gold was ineffective and that's why the gold reflected every, you voted no every time you bought an ounce of gold and if you had a little war someplace we used to in the trade say well that Something would spill over in the Middle East and say, that's a $12 war, meaning that we knew it would react.

10:20And then, I guess it was Paul Volcker who instituted a new policy in 1981-82. Murray Rothbard once said of Paul Volcker, he never trusted anybody that was six foot seven, and I... And without going into the devices that they used, they effectively, from 1982 to the present have learned how to control the price of an ounce of gold. There's no ands, ifs, or buts, so anybody who looks to things like the dumping of gold, the scorching on a part of central banks, I mean that's all, the game is a rigged game. The best evidence recently, this was I think the price of gold got to my experts from the and the Commodities Market. They got to 291 and the very next day they announced the UK gold sales.

11:14I mean that was just as blatant in our view of the effort that they have to control. So if Jim Grant who was just frustrated by these markets, he just couldn't understand it, there's no frustration, it's absolutely controlled and directed and so it's a fixed game and you shouldn't be disappointed. Well, why in heaven's name then would you, would anybody buy gold? I mean, given the nature, well, back to my friend on the telephone, he has this view of the world that makes him comfortable, it's moral, he buys gold. There's also an impatience about us in these markets today.

12:01For one third of my career, the gold was $35 an ounce. Now it's true, we really had no expectations, the philosophy was there, we knew that one day things might change. I remember a dinner party we had when gold went to $100 an ounce, it was a celebration. Unfortunately, by the time we had it, it was back to $86, so it wasn't exactly the celebration of $100. But, I mean, everybody is moving at such a pace, Llewellyn Rockwell wanted to send me

13:01There is investment, because that's the wrong way to view it, it's an extension of your savings, it's a hedge, it's an insurance, or it just makes you feel good, or it gives you something, if you're a masochist, it gives you something to suffer with all the time. But then there's other events that come to mind, and this is pretty grim, is everybody finished with their food? This is grim stuff. I have recollections, recent recollections, not of Indians from the Amazon washing their clothes in the river or African natives cannibalizing each other.

13:46I have recollections of a train leaving the Berlin station a couple of months before the Berlin Wall came down. I don't remember the exact circumstances, but things were very bad in East Germany and the checks of all people had set up a place where some of these trains and as the trains left the station, the people were throwing the paper money out the window. That's something I will not... and again, these were real people. These were like us. They weren't from another planet. Another recollection is shortly before the fall of the Soviet. One of the most dramatic things is they demonetized a thousand ruble note on a Friday. Imagine that, you've worked and you've saved and you've got these notes that are money or they're a promise and you're told that they're worthless.

14:35I mean, these are pretty savage things to happen to people. Back in, someone brought up the Mexican situation in 1982. Just briefly, in Mexico, they don't have an extensive middle class as we do, but they have a professional class, doctors and lawyers, and anybody in Mexico never saves in Mexican pesos, never ever saves, you live in Mexican pesos, you pay your bill, but any reserves you have, you do something else with, and historically, these professionals always held US dollars, that was their gold. and they did very, very well. Every time there was a cataclysm in Mexico, about every decade, the poor get poorer and those who are professionals manage to get richer. They always profited, except in 1982. What happened there, although you didn't have a change of government, it was the same party, you did have a change of something, a new president, and what they did is they confiscated the dollar accounts, all of the dollar accounts in Mexico, and They converted them over a period of a couple of weeks at the official exchange and you

15:48lost about 90% of your assets. So here was another instance of people who, if they, now their best choice would have been if they'd had Swiss francs until April of 82 and then switched them over to the dollar by November, but that's crazy. People aren't trading. Some of our younger people maybe have that kind of alacrity but as you get older you lose some of those skills. By golly gold is a money, is a historic money and in this instance those who had gold did survive that. They didn't have an easy time of it because there were fears that the gold would be called in as well.

16:33Now you don't need, and Y2K, now we're concerned about Y2K, I don't know my, I don't even I don't know if I have an opinion on the subject. I don't know enough about computers, but I sure know a little bit about human nature, and it's people's perceptions of things that are more important than the realities, and I could see a housewife going into the supermarket and seeing the shelves empty of bottled water, and she's not going to do a critical analysis of Y2K. She's going to go to another store and try to buy bottled water. I could see these things happening. I hope not, but Y2K could reveal other weaknesses or act as a catalyst, but I think more relevant is what I call the crisis in a person's life. There's two kinds of crisis. These are my own labels. One I label a mini-crisis. That doesn't mean it's small. It means it's you.

17:38It's divorce, it's sickness, it's litigation, it's the IRS, a partner sues you, I mean, these things happen in a lifetime, and they're not many by any means, but we say it's not a bad idea maybe to have some gold if you go through a mini-crisis, and I'll explore that in a minute. A maxi-crisis is happening to everybody. That would be wars and floods and Y2Ks and pestilence and whatever. And once again, these are emergencies that happen, they happen all the time. There's not a month, well every other month, I'll get a call from a lawyer, lawyer representing one of the parties in the divorce, usually the wife.

18:27The contention is that he has assets that he's concealing, and gold is easily concealable, and he's been led to believe that the fellow has gold with us. And of course, I discourage that. I say, look, you want to subpoena our books, you can do it, you're not going to learn anything. And when it's all over, I'll say to him, you know, off the record, I hope he does have gold. And I hope she has gold, too, that he doesn't know about. Of course, as a gold dealer, I have a self-interest there, but someone brought up the case of the fellow who ran away with the diamonds. Well, diamonds are terrific, and they're a girl's best friend, but they ain't money. They don't have a history of money, and gold does.

19:18I might add that lawyers, in some of these cases, I know these people. They've been married 30, 40 years and the lawyers get in and it's just dreadful. Don't get any divorces. It's a bad idea financially. I didn't mean to make it a commercial, but it really is. We feel a prudent person who understands what's going on has some gold. What's the difference what you're paid for? All you know is that you have immediate liquidity in this market, total privacy, or as close as you can come to privacy, and there's no other asset that I don't think that can quite accomplish it as gold.

20:16When you're buying, buy from a reputable dealer, I once was asked by one of the trade publications to list all of the qualifications that a dealer should have, and of course I described myself, so that was once again a little self-serving. But everybody around here has an employee discount, anyone in this room, so once again I thank you all for coming and for being patient to listen to me complain, but we enjoyed having The panels were very, very good today, the best I've ever attended. Thank you very much.