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Gold As The
Truest Measure Of Value – Interview With Anthem Blanchard
Welcome to the RunToGold Podcast. This is Trace
Mayer. I have a special guest with us, Anthem Blanchard.
Trace: Welcome, Anthem.
Anthem: Hi, Trace.
Trace: Now Anthem is currently CEO of nuMetra,
which is a federated CDN (a content delivery network) and they are working on
a new, innovative approach to transferring bandwidth, particularly for streaming
video, through the Internet.
Anthem, you’ve been involved in the gold industry
for a long time haven’t you?
Anthem: I have, I have. Since I was born, actually, as I was raised by a
gold-bug, James U. Blanchard, and it was
a case of really being indoctrinated into the Austrian school of economics,
and understanding what real money is, and also I went to the traditional
school of finance at Emory and I am actually going back into the gold
industry. So, I am very familiar with gold, as well as the
traditionalist-type mentality for monetary policy.
Trace: We are very grateful to your dad, he was involved
in this sound money fight back when gold was illegal, and there were criminal
penalties for holding this most dangerous of all controlled substances, this
inert yellow metal! He actually campaigned quite a bit in the public sphere
to get gold re-legalized, so we are very grateful for your family’s
work in that regard.
Anthem: As am I.
Trace: Now, Ben Bernanke last week on Capitol Hill testified “I don’t fully understand movements
in the gold price”.
And so, I’m
trying to figure out which is more frightening: that investors worldwide are
losing confidence in these little paper coupons, or that the shepherds of
these major world reserve currencies like the dollar, the evaporating Euro, these
colored coupons; that they don’t understand what’s going on with
money.
I was wondering
if you could speak about that?
Anthem: Sure, I think that really it draws from a deeper
conclusion and understanding that quite simply, one is never educated at all
throughout the educational processes, (at least the ones I had and pretty
much the one that everyone I’ve spoken with has had), in actually
learning about gold as being the truest money and the truest measure.
Some of the ways
that you can actually look at gold, and the reason why it is one of the
truest measures, if not the
truest measure, is that it can, comparatively speaking, valuing one asset
class versus another, you can distinctly tell that gold holds its value,
because it is
valued.
And so therefore,
it makes comparative ratio-type exercises, puts on, so to speak, x-ray
glasses, and it is a secret decoder of sorts. So once you know that secret of
looking at comparative value, then price in terms of a national currency,
becomes irrelevant.
Trace: Yeah, I mean I wrote an article on it, the Numeraire.
Anthem: Yes, I love that article!
Trace: Yeah, we use gold as our unit of account. We
don’t necessarily need to use it in ordinary, daily transactions
(although that has some wonderful uses when we do use it) but even without
that we can still keep our financial statements, our income statements, our
balance sheets, our cash flow statements, keep them denominated in gold, and
then as you say we are able to more accurately calculate prices, which are
really just a ratio between two different assets.
And so, when we
use these synthetic commodities, these little colored coupons that have no
value in themselves, well how do we get a reliable
measure? As you say, we have to use an asset which is in effect
nobody’s liability.
Anthem: Exactly, and as you very well know any fractional reserve banking
system by nature, issues liability
currencies.
Again it’s
the right to pay, the right to bear actually, (to pay is what we originally
had back in the gold standard days), but today it really is just a fiat
decree of a debtor, in particular the governments, having to accept, or
having to get paid in these national currencies.
So, it’s
very difficult to get comparative value off of a liability, off of any
sustainable long-term period, so it makes it very difficult to make wise
choices.
Trace: Yeah, exactly. We’ve moved from money, to
money substitutes, from money substitutes to these little fiat currency
illusions, these little coupons. They say the dollar is an “IOU
nothing” and the Euro is a “who owes you nothing”! So when
you do look at these fiat currencies, in effect they are just common stock,
the common stock of the various institutions or organizations that they
represent. Whether it’s this entity known as the United States or this
entity known as the Euro or as Iceland, since all of them are declining
relative to gold, it does portend some turbulence in the future, like we are
seeing politically, too.
So, it’s
kind of a scary time we are moving into, but at the same time for those of us
who are able to put on those x-ray glasses, I think that there are a lot of
potential deals to be made, and to be had if we are able to accurately
discern what is going on.
Anthem: There’s no doubt, and again I know that
I’ve been able to use it quite successfully for myself, personally, to
make choices about value, where
to invest or where to save my value. It’s been quite good for me.
So I think that the charts really speak for themselves. You have a lot of
great charts in your website, and it’s really just that once
you’re able to see over a long-term, multi-decade period.
One asset,
specifically gold in this case, we are able to look at the price of oil in
terms of numbers of grams of gold, or the Dow, it paints a whole different
picture.
Trace: Yeah, because actually on my website there’s
a link called key
ratios, and I’ve got some of the various key ratios. You mentioned
one of them, the Dow to gold ratio, and everybody it is all happy that the
Dow is doing better it’s over 10 000 and “oh, there’s a
recovery!” . But really, when you look at the
Dow pricing of gold, we are currently in at 8.38 ounces of gold for the Dow,
which is lower than we had several months ago.
So the Dow has
actually been falling, losing more of its value pricing gold. We are
currently seeing the same thing with barrels of oil, right now it’s at
1.73 gold grams per barrel of oil. So, I’d like you to speak a little
bit more about how exactly do use these ratios with each other to make better
investment choices.
Anthem: Well for myself personally, I like to look at what
I called the ultimate savings and investment cycle barometer in that Dow gold
ratio and the reason why like it so much is that gold, as a relic of the end
of World War II’s the Bretton Woods Treaty,
is priced on all the major exchanges and specifically the London Bullion
market, it’s primarily set in dollars in terms of receiving payment,
yet they are also set in other currencies but the vast majority of the
clearing gets done in dollars, so when you’ve got the Dow and all of
the earnings, the unit of account for the Dow 30, irrespective of what those
companies are, and those are meant to represent the industry, the big
industry players obviously being in the US, it also is the dollar.
So by canceling
out that dollar in the numerator and the denominator of the ratio, one all of
a sudden it’s able to take the most variant of all variables, when it
comes to finance, given the foreign exchange market is the largest in the
world and the dollar is by far the most circulated currency, national currency,
that all of a sudden it illuminates the picture to really be able to see how
expensive or cheap our investment is, relative to savings, and how long left to
have to go roughly until we get to the investment cycle.
Trace: It really makes me wonder, does Bernanke really
not “fully understand the gold price movement” or is he just
feigning ignorance. Because it really boggles the mind to think that people
who are in charge of these institutions, that are moving trillions of dollars
around, the value that they don’t understand, the role that this monetary metal plays as captured in the spot gold price. Because the LBMA
you mentioned, I think that their actual daily transactions were up something
like 40% year-over-year, so there’s a lot more gold changing hands this
year on the LBMA than there was last year and so gold is functioning as a
major currency with tens of billions of dollars changing hands every day. So,
I think that there’s a lot that we as investors can gain from being
able to use it to perform the calculation value.
Anthem: Absolutely, absolutely.
Trace: I think we’ve used up about most of our
time. Do you have any recommendations or tips for the listeners of run to
gold?
Anthem: Well, I would suggest to focus
on saving-type investments and obviously in terms of the ultimate form of
savings, being able to look at gold as being the ultimate form of savings.
But also looking at cost-cutting saving cycle-type plays. So whether
that’s media, whether it’s a form of escapism…
unfortunately that’s what happens in saving cycles, is people have to
save and not spend as much. Anything that people can get distracted from their, unfortunately, more difficult financial
situations. I think that that’s a real growth industry, and history has
been a very good indicator of that.
So those are my
passing thoughts.
Trace: So things like the five dollars Starbucks every
day is not so much a good play in the saving cycle?
Anthem: Seems to be pretty easily substitutable products
and I guess you could look at McDonald’s at that specific example, so
it’s garnering a lot of market share.
Thank you very
much for this discussion and we’ll have you on again just like
we’ve had you on before.
Trace Mayer
RuntoGold.com
Trace Mayer, J.D., holds a degree in Accounting from Brigham Young
University, a law degree from California Western School of Law and studies
the Austrian school of economics. He works as an entrepreneur, investor,
journalist and monetary scientist. He is a strong advocate of the freedom of
speech, a member of the Society of Professional Journalists and the San Diego
County Bar Association. He has appeared on ABC, NBC, BNN, many radio shows
and presented at many investment conferences throughout the world.
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