Is Gold a Good Buy?
Alex Moschina: I think a lot of people wonder why does this, a gold coin, have 7,500 times the value of this, something the same size but a dime?
Andy Snyder: So there’s three main reasons that gold has become popular. It’s pliable, it doesn’t rust, and it conducts electricity.
Alex: So, what’s to stop us right now? Gold could be right underneath us… what’s to stop me from just digging around and finding some?
Andy: So that’s the thing about gold. It’s really rare. There’s only about 5.4 billion ounces of it on the planet. And if we took all that and put it into a cube, it would only be about the size of a tennis court. The first references to gold, if we look back through history, about 640 BC. So, that’s a long time ago. So, for thousands of years, people have been talking about gold. There’s hundreds of references to it in the Bible. And it even promises streets of gold.
Alex: More cultures and countries have been using it for a longer period of time, which makes it a more universal type of currency.
Andy: Yeah, I think, the word “universal” is strong there, because if we look at gold, it’s kind of the most honest currency out there. It can’t be manipulated. So we look back in the colonial days, the countries with the most gold had the most wealth. That’s why Spain sent Columbus across the sea looking for gold, it’s why men went to California in 1849, looking for goals, it’s why they climbed up to Klondike, looking for gold.
Alex: Well, they would do anything for a Klondike.
Andy: Yeah. So, let’s not forget, through that whole time, that currency was based on the weight of the gold that was in it.
Alex: Right. Right. And can we talk about the Wizard of Oz?
Andy: Sure. So, I think, the Wizard of Oz is an interesting twist. So, it came at a critical time where America was starting to think about getting away from the idea of gold and start printing paper money. We have the Oz, the symbol for ounces in there, we had the yellow brick road. In 1900 a law was being written that was going to make gold the official form of currency in the United States. And what it did was set the price of gold at $20.60 an ounce. That’s critical. It fixed the price of gold and no longer let it float around based on who had more. So this is the transition where gold is being a little more manipulated by the government and by man.
Alex: So are you saying the book itself was inspired by what was happening or is it a coincidence that those two things coincide?
Andy: No, the book itself was absolutely a commentary on what’s happening, because it was very political. You go from the kind of the natural state of currency to the government manipulating it. So then, we fast forward over the next 100 years, we see that de-evolution of money happening kind of from that 1900 point on. So the Wizard of Oz was kind of the focal point of that coming down.
Alex: I just thought it was about funny shoes.
Andy: And wizards.
Alex: Okay. But kidding aside. We’re talking about this now because it’s relevant now.
Alex: People are writing to you and asking why you’re basically recommending gold or investing around the fringes of gold and why that’s a good idea right now?
Andy: Yeah. I’m really bullish on gold right now because if you look at history, you can see all the cards lining up to get us where we are now. Trump is talking about taking us back to the gold standard. I think if he had the ability to tweet it into action, it would happen. Countries, whenever they get in trouble, they get off the gold standard, because we talked earlier that gold is rare, so a country only has a certain amount. So World War I forced countries like Germany off the gold standard. And then remember, in 1913, the Federal Reserve was created and it started to meddle with gold and the idea of monetary manipulation.
Alex: To metal?
Andy: “Meddled” with a D. And then, England coming out of World War I, kind of screwed up its price lock. We went back to the gold standard, but it locked it in at the pre-World War I price. The problems in Britain started to spread here. And then, all of a sudden, and Americans started to hoard gold. And that led to The Great Depression where the hoarding became even bigger, the manipulation became even bigger, and then banks closed, and then FDR bans the ownership of gold.
Alex: And that’s huge, I don’t want to misquote you, but I believe you’ve called it “Franklin’s felonious folly.” Is that right?
Andy: Yeah, 100%.
Alex: Very alliterative. I love it.
Andy: So, Franklin made it illegal for the average person to own gold. So he made it that only the government could own gold. And remember, it was traded at $20.67 per dollar. And he bumped the price to $35 an ounce. It’s great for the government, bad for the people. And so, that leads into 1944, where we have, what you could call, The Great Compromise, The Bretton Woods Agreement, where all these countries got together trying to figure out, again, that idea of international trade. Do they trade dollars? Do they trade pounds? And they came back to the idea of gold. All right. So, the Bretton Woods Agreement works as long as we have enough stores of gold here in the United States to match what we’re importing and exporting that the currency all kind of adds to equilibrium. So in the ’60s, we were pretty good with that. So in the 1970s, we had $14.5 billion worth of gold for $45.7 billion worth of overseas transactions. So you can see the equilibrium is kind of falling apart.
So then, in 1971, it was called the famous Nixon Shock. He shocked the world by pulling America off the gold standard. So, all of a sudden, our dollars had nothing to do with gold. So that gives the Fed the opportunity, the government to go out and spend as much as they want and the Fed can just print money at it’s whim, because we don’t have to be mining gold and we don’t have to match our gold stores to the amount of dollars that are circulating throughout the world. From 624 BC till 1971, currency was kind of fixed.
But now, for the last 50 years, and we’re still at the very beginning of that, you look at 2000 years worth of monetary history, we’re at 50 years worth, we have no idea what this is all going to lead to. So when I talk about being a gold bug and being bullish on gold, that’s why I want readers or viewers to go out there and buy gold, to have a little bit of it.
Alex: You can’t just hold stocks, just like you shouldn’t just hold gold. You should have a diverse mix of all those things, because at any given point, there’s going to be ebbs and flows. You’re going to want those losses in one spot to be made up for with gains elsewhere.
Andy: We can’t just go out there and print more gold. And again, it’s the most honest form of money. And the dishonesty that we’re seeing in the economy and the monetary world now is going to end badly. It’s just a matter of time when it does. And when it does, that gold, that gold coin that, I think, you stole from me, is going to be worth a lot of money.
Alex: Yeah. And so, this is going to come up more and more because Trump is talking about it. He’s voiced positive things about a return to the gold standard. He’s got a proposed Fed nominee who is a fan of the gold standard and has written about it.
Andy: Yeah, Steven Moore. We’ve talked to Steven Moore ourselves, and we talked about the gold standard, and we’re starting to see people leaning that way.
Alex: Well, cheers for people who are holding gold.
Andy: Cheers to that.