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Keith Weiner, the head of The Gold Standard
Institute USA, explains
in this exclusive interview for Matterhorn Asset Management, among other
things: why he sees a permanent backwardation in gold coming; the role of
gold as the cornerstone of investor’s portfolios; and the specific kind
of gold standard he envisions for the future.
By Lars Schall
Keith Weiner has been a technology entrepreneur. He
was the founder of DiamondWare, a VoIP software
company, which he sold to Nortel in 2008. He is an adherent of Ayn Rand’s philosophy of Objectivism, and a student
at the New Austrian School of Economics. Recently, he received his PhD under
Professor Antal E. Fekete.
Mr. Weiner is currently a trader and market analyst in precious metals and
commodities.
Lars Schall: A few days
ago you received your PhD from The New Austrian School of Economics. What
have you done for it?
Keith Weiner: That’s a good question to start
with, thank you. For several years I’ve been studying with Professor Fekete in monetary science and developing my own ideas.
The school, as you may know, emphasises spreads
more than prices and spread is the difference between two prices. For
example, if you distribute eggs, you buy eggs at the farm and you pay the ask at the farm and then you bring them into the city.
And you sell them in the city on the bid. So, the bid in the city minus the ask at the farm is the spread that you as the
entrepreneur, as the distributor can earn.
And so if you look at the world as a landscape of
different spreads, one of the things that you realise
is that first of all, that very process of that arbitrage will tend to
compress the spread, who is trying to profit in the market
is decreasing the spread from which he profits. Which means, sooner or later
he has to move on and find something else to profit from because the spread
is squeezing. But you can almost define economic coordination as a process of
spreads that are becoming more narrow. And one of
the things – my thesis covered a number of different topics and I
looked at government interference and government distortion as a result of
that interference. You can almost look at it as absent distortion and
interference, economic coordination is increasing which is the same thing as
saying that spreads are decreasing.
So, every time an entrepreneur discovers a new way
of doing things, he’s now making the spread more
narrow. And so, one of the things that I did was I looked at a number
– I’m going to say maybe eight or ten or 12 different ways that
governments can interfere in markets. So, they can pass a tax on profits, a
tax on wages, a tax on capital, they can set a minimum quota, they can set a
minimum price, a maximum price and I went through each example and showed
through looking at different spreads how whenever the government does
something which they always do in the name of helping people, they force the
spread wider, which as we already proved means that they are decreasing
economic coordination and creating distortion. And so, the ultimate example
of distortion would be if somebody is over here who
is hungry, if somebody is over here who has farmland that is fallow and this
person is unemployed, you have a person who wants to eat, you have a person
who wants to produce food and they cannot make a deal. And that is the result
of distortion that without the government trying to manipulate the economy,
that distortion would not occur.
L.S.: Why does big business love government
intervention in the economy?
K.W.:: That’s also an
interesting question. The motivation I think is fairly simple and I
don’t think it’s a function of bigness. First of all, I think any
business – so, you have to have a minimum size in order to have access
to the government. A one lone person who is running a pizza restaurant
doesn’t have the money to get to government, but there are much smaller
businesses that play this game as well, particularly defence
contracting for example. They go to the government and they say, ‘We
would like you to help us take money’ and I will not use the word,
‘Make money’ but ‘take money’ by giving us a special
subsidy or a protection or go destroy our competitor with anti-trust or a
lawsuit or environmentalism or whatever it is. And so they get money as a
result of this government interference into the economy.
L.S.: One of your specialities
is the examination of backwardation in gold and especially permanent
backwardation. Do you see this ahead for us?
K.W.: I do see it ahead. Shall I define for your readers backwardation?
L.S.: Yes, please do so.
K.W.: The simplest example to think of would be the
market in wheat, although the concept applies to any commodity. And so the
wheat harvest I’ve been told arrives around early August. So, imagine
if you drove a truck out to the farm area in late July and said, ‘I
would like you to fill out my truck with wheat. Right, today, how much will
it cost?’ Well, first of all they will laugh at you because there is no
wheat, you know, two weeks before the harvest, all the wheat has been
consumed. But, if you insist, eventually they’ll go to every bakery and
everywhere else and they will renege on their contracts and buy their way out
of their contracts so that they can put wheat on your truck. If a normal
price of wheat is $8 per unit, you may pay $20 per unit.
If, instead, you are happy to take a contract for
wheat to be delivered in September, you will pay $6. So, backwardation is
very obvious here, you have to pay $20 to have the wheat today, right now as
we say, ‘Cash on the barrel head’ in the US. But if you can take
delivery in five weeks, then the price is $6. So, the price today is much greater
than the price is five weeks, that is backwardation.
And what it means is shortage or scarcity, so in wheat, obviously, there is
no wheat a week before the harvest, the wheat is about to come in, all of the
grain elevators are depleted.
Now, if you take a look at gold or silver these are
metals that have been accumulated for thousands of years. We use the concept
of stocks to flow ratio, which is the amount of inventories that we have
accumulated divided by the annual production. For gold it is estimated around
80 years, so at the current rate of mine production it will take 80 years to
accumulate the stocks that we have in inventory now. For silver, I think
it’s a little bit less but it’s still many, many decades versus
wheat which is three or four months. And so, in gold where we have 80 years
of stocks to flows the concept of shortage is meaningless. There’s
plenty and plenty and plenty of gold around the world and so, if gold goes
into backwardation this is very serious.
That doesn’t mean that there’s a
shortage of gold per se it means that there is a shortage of gold in the
market, and the reason why this is serious is that gold is money and the
process of going into backwardation is the process of gold withdrawing or
money withdrawing out of the system. Even though the Keynesian economists
that run the financial system deny that gold is money and they can pretend
that the paper bill can replace gold, it’s not true. And so, I
encourage everybody to think of a market crisis. Again, with the emphasis on
‘Bid’ and ‘ask’.
When you think of a market in crisis, think of it as
always the bid that withdraws, it’s never the ask;
it’s always the bid. And so, the example I like to use, Los Angeles
California is known for earthquakes and so far, the earthquakes have been
relatively small, but it’s on one of the major faults in the world, the
San Andreas fault. So, imagine if the United States Geological Survey, the
USGS said that before January we will have an earthquake in Los Angela, 13 on
the Richter scale, nothing taller than a dollhouse will survive. What will
happen to the real estate market in Los Angeles? There will not be a lack of
offers to sell Real Estate – there will be no bids.
L.S.: You think that permanent backwardation in gold
is the earthquake?
K.W.: Well, I’m just using the earthquake as
an analogy, it’s the bid that goes away. After
the USGS announces this there will be no bids. There will be plenty of offers
to sell real estate but no bids to buy real estate, the bid will be zero.
Now, I want to use that analogy as gold is money and paper is credit. Gold is
withdrawing its bid on the US dollar, little by
little the process of withdrawing the bid can also be called the process of
moving to permanent backwardation.
As those that own the gold become reluctant to buy
the paper with it, those that own the gold will hold the gold close to their
chest and say, ‘I am comfortable standing where I am, I have no need
for that paper’. The problem comes from the fact that those who have
paper are still very eager, ‘Please would you give me a little bit of
gold? Here’s more paper, how much do you need?’ and they will
open their wallets for more gold. This is obviously a process of rising price
but in the new Austrian School we’re more interested in spread; what’s
happening here. Well, many people in the gold world realise
gold is the only commodity where rising prices can lead to reluctance to
sell. If this happened in crude oil, if this happened in copper, commodities
would come out of the woodwork and the price would correct. But in the case
of gold, not so.
So, let’s take this a little further and say
that we get to a point at the end – permanent backwardation leads to a
point where there is no longer a gold bid on the dollar, the euro, the yen,
the pound, the frank and so forth, that’s it. the
gold people say, ‘We’re not selling anymore’. Here’s
where the collapse occurs. The people with dollars are still interested with
euros and with franks, they still want gold. How do they get it? Well, they
say, I can trade my dollars or my euros for crude oil or wheat or copper or
any liquid commodity that has a market. And then once I have the copper or
the oil I can then trade that for gold. And so this will be a process of
trading paper for commodity, commodity for gold, paper for commodity,
commodity for gold. Paper to commodity, commodity to gold without limit and
this will push the price of the commodity up to any arbitrary –
we’re just doing an interview here. That will drive the price of the
commodity to arbitrary high levels.
Picture $10,000 per barrel of crude oil or $1
million per barrel of crude oil. But in dollar terms and it will push the
price of the commodity in gold terms lower and lower and lower. So, the price
in dollar terms for all the commodities will rise exponentially and the price
in gold terms will be falling exponentially. And the only end to this process
is when people officially say the paper currency is no more. And so, I
don’t think that the collapse of the currency will be due to the quantity
of the currency being printed like in Weimar or Zimbabwe where they just kept
printing more and more zeros onto the notes. I think it will be because of
this arbitrage the last desperate holders of dollars trying to get a few more
ounces of gold will drive the prices. Does that make sense?
L.S.: Yes sure. – Why do you think that gold
in this environment is especially attractive and why should it be –
where have I written it, why should it be the cornerstone of everyone’s
portfolio?
K.W.: I think very simply, gold is money and that
process took thousands of years to decide and gold became the most marketable
good which mean it has the smallest bid spread and that spread widens the
least as you go to a larger quantity. So, in any other commodity if you want
to sell $10 million worth of copper, you will crash the price of copper
temporarily in order to sell that but in the case of the gold market, the
liquidity is always there. This means that gold has the highest stocks to
flow as we’ve talked about and this means that gold has a marginal
utility that either declines the least or maybe does not decline at all. So,
gold has been selected over thousands of years as money.
We are now close to a point of the collapse of the
paper monetary systems and so, you don’t want to hold – so the
problem with paper money is it is debt. If you think you have money ‘In
the bank’, you actually have a credit obligation, you are a general
creditor, unsecured creditor of the bank and the bank owes you the money. And
what does the bank do? Well, they buy the government bond which means the
government owes the bank the money. And so it’s just debt to debt to
debt.
The problem is when somebody defaults, that means
the debt is no longer good. The creditor now has a hole in his balance sheet
and the creditor may default. And once the defaults begin to cascade, they
will wipe through the system like dominoes tipping and falling and tipping
and falling one into the other. And so, anybody who thinks about this should
want to not be in that chain of dominoes holding paper credit, they want to
hold money, not as an investment, I would not call it an investment,
I would say it’s simply holding money because everything else will be
falling in terms of real money.
L.S.: Since you’re the president of the Gold
Standard Institute in the U.S., I think you envision a specific kind of gold
standard. Could you define it, please?
K.W.: Yes, absolutely. So, I talk about the term,
‘The unadulterated gold standard’ and I use the definite article
‘The’ because there is one kind of unadulterated gold standard.
Although we have many different kinds of gold standards that have been used
throughout history usually involving some degree of government intrusion into
the market where the government has said okay, you can’t use gold coins
circulating, we will have these 400 ounce bars in the Bank of England vault
in London and we’ll print all this paper that represent claims against
those bars and so that’s the gold bullion standard. And then the gold
exchange standard was after 1933 and especially after 1944 the United States
government had most of the gold after World War II certainly and said you can
use these dollars as if they were good as gold and they will be redeemable
but only to Central Banks. This was the gold exchange standard.
And so the Central Banks then created credit in
their own local currencies, you know, the Deutsche Mark, the French Franc,
the Italian Lire and so forth and that that was ultimately backed by dollars.
The dollars were backed by gold. Well, that collapsed in 1971. So, today as
we think about going forward to a gold standard, I think what we want to be
very, very clear on is that the unadulterated gold standard means it is not
adulterated. Now we have to be clear what is it not adulterated with;
coercion, force. So, what we mostly want is for the government to not
interfere in the market for money and credit. We want an end of what is
called, ‘Legal tender laws’ that force creditors to accept the
government’s paper script. We repeal the laws that nullify gold clauses
and contracts. So, a landlord can sign a long-term lease in gold and not have
to worry what will the ounce of gold be worth in 30
years or 50 years. We repeal the laws, most people don’t think about
this, there are laws that force tax payers to keep their books, their profit
and loss statement and their balance sheet in dollars or euros or francs or
pounds or whatever, allow the tax payer to keep their books in gold or silver
or in some combination, aggregate unit if they want and to pay their taxes in
gold or silver or some aggregate.
Finally, you know, eliminate the laws that control
banks and control what people can do, allow people to hold the gold coin
directly in their hands. Allow people to either hoard that at home if that is
their choice or to bring them into a bank and deposit it if the bank offers
terms and interest that are attractive to that consumer. And the reason why
this is important is because the rate of interest is set by two forces. There
is arbitrage by the marginal saver who either deposits into the bank or
withdraws from the bank based on the rate of interest. If the rate of
interest is too low, I might as well hold the gold coin in my pocket, the
bank isn’t paying me enough to take the risk. If the interest rate
rises I’m happy to earn a yield in the bank. And this will set the
floor under the rate of interest.
The ceiling in the rate of interest is set by the
marginal business. You cannot borrow money at a higher cost than your rate of
profit. If you’re making 5 percent by selling your product in the
market, you cannot borrow at 6 percent. By having a free market and money in
credit, the rate of interest will be set in a narrow range and if you take a
lot at a graph of the United States government 10-year treasury bond,
let’s say from after the war of 1812 which almost destroyed the United
States, from 1812 to 1913 the rate of interest was incredibly stable and
there was a spike for the civil war and there were one or two other glitches.
But basically, very, very stable. And it’s important to have a stable
interest rate because when the interest rate moves, that destroys capital and
that’s part of the problem that we have today. The rate of interest has
been falling for 31 years.
L.S.: One part of the bashing against gold is that
it isn’t an earning asset, that it does not pay dividends. What is your
argument against this argument?
K.W.: Well, obviously and I want to address a deeper
issue there because I agree with the underlining issue although I think
it’s misapplied today. Today, the problem is the death of paper money.
So, I would use the analogy of picking up pennies in front of a steam roller
to earn 2 percent on your paper money while the entire paper money system is
going over the cliff into the abyss. To me it’s misguided, but the
broader issue is absolutely correct. We cannot have a gold standard if
everybody buys gold to hoard it and take it home and burry it under the floor
or bury it under the mattress. It is absolutely essential to the process of
moving forward toward a gold standard that there be gold bonds that pay a
yield not in paper currencies but that pay a yield in gold and that if the
world could have a way to buy a gold bond and earn a yield in gold, then I
think the adoption rate of gold would accelerate exponentially but in a way,
that would not be to permanent backwardation, in a way, that would lead
towards a solution to the problem that we have in paper money today.
L.S.: Do you have a price target for gold?
K.W.: To my way of looking at things, the price of
gold will continue to rise and I use a computer software term, I’m
going to use the expression, ‘A race condition’. So, on a
computer if you have two different processes that are both not really
controlled with respect to one another. One is moving forward on one track
and one is moving forward on the other track and you don’t really know
which one is going to hit first. Will gold hit $3,000 an ounce first or will
it go into permanent backwardation? Which basically means
there is no offer to sell gold in terms of dollars or in terms of euros.
So, at some point, gold will not be quoted on the board anymore, so I use the
analogy in the last you know six or 12 months of Zimbabwe there was no quote
for gold in Zimbabwe dollars, so what is the price? The price is undefined, you might as well call it infinite. So, what
happens first is gold hit $3,000 or $5,000 or does gold simply seize to be
available. Which one happens first is anybody’s guess.
L.S.: Yes, and we also hear a lot about that people
argue that gold is in a bubble. Is gold in a bubble?
K.W.: I think the ultimate bubble is paper money
that people have built up an enormous stock of faith and faith is the only
word that I can think of in paper money. And as paper money collapses, then
the price of gold in terms of paper money becomes meaningless. Gold is
restored to the same role that it always was which is gold is money. Long
before we had the paper dollar or the paper euro people accumulated gold
without regard to price. In any other commodity, if the inventories rise, we
call it a glut and then the production stops and we work off the inventories
until the price falls. In the case of gold, that does not occur. So, I would
say in a certain sense, it’s not possible to have a bubble in gold,
it’s a meaningless term.
L.S.: Then there’s another topic, and
that’s Sandeep Jaitly’s
interview on the Keiser Report, which caused a lot of buzz in blogosphere. Do
you have any comment on this?
M: So I’m the president of the gold standard
institute USA. I was not involved in the decision that was made by Phillip
Barton. My only comment is that as the gold standard institute we’re
looking to be open and encouraging friendships with the people of the Mises Institute, the libertarians, the fans of Ayn Rand and Objectivism. These are the logical people
that today, before the Gold Standard Institute, advocate a return to or going
forward to a gold standard.
So, we want to be their friends, we want to
encourage them to join the Gold Standard Institute to read our materials, to
learn more about a proper gold standard, to encourage them to write so that
our journal will become an active forum and a place for it where ideas can be
shared. And so we don’t want to issue statements to deliberately
antagonize them and say that, you know, Ayn Rand is
bad and is phony and Mises was not an Austrian
School economist. We don’t want to create this controversy, we want to
say, ‘Welcome to our tent. We have a common goal, let us pursue our
goal’. Let’s keep aware one thing, the
world faces a deadly crisis right now. If we do not solve the problem of
irredeemable paper money and the collapse that’s coming, this collapse
is not going to look like 1929, not at all. I would encourage people to look,
to read about the collapse in 472 AD when Rome fell. We’re talking
about starvation, exposure, disease, war, strife, death.
I think we just have to focus on, we have this
problem, there are not very many of us that understand the problem let alone
the solution and we have to, you know, set aside whatever differences we may
have to work together. This is the problem. And the enemy is the Central Bank
not, you know, different flavours of people that
support Gold.
L.S.: When one would have an unadulterated gold
standard, there would be no need for Central Banks, right?
K.W.: Correct. Let’s have a free market in
money and credit. The government will have no more involvement in the market
for gold or money or credit or banking as it should have in computer
software. Let people decide if people want to take the gold coin home, they
take it home. If they want to put it in the bank, they put it in the bank.
L.S.: Yes, one last question because you’re
talking about banks. Mark Faber said recently that he fears a confiscation of
gold in the US again. What’s your take?
K.W.: That’s a very interesting topic and I
have to preface my remark by saying that now we’re not talking strictly
monetary science where conclusions can be definite. I can say I’m
certain that the dollar and the paper currencies will collapse. Now
we’re talking about speculation as to what the politicians might do in
the future. That said, I do have an opinion and I actually don’t think
that the US government will confiscate gold. And the reason why – I
have several reasons why.
First of all, in 1933 when they did it, they had a
very obvious goal which was they had to demonetize gold. People were used to
– people actually had gold coins and they could make purchases in gold
coins and most people would have one or two, you know,
at least gold coins at home. My grandfather who was not a wealthy man in 1933
and he was a young man, he was born in 1909 so that would have made him 24
years’ old, he was working very hard and not educated I don’t
think he was by any means wealthy. He had at least one gold coin which came
down to me through inheritance. So, everybody was used to having them and the
government had to change the perception that gold is money. Today we
don’t have that issue, nobody, at least in America thinks that gold is
money.
I think you are fortunate in the German-speaking
world that people are more sophisticated and they understand gold a little
bit better. I think most Americans really don’t. That’s the first
thing. The second thing is the other reason why they would seize the gold is
because they’re desperate for the money. I think in the United States
there is about $7 trillion, $8 trillion in retirement accounts, IRA, 401K and
other government regulated retirement accounts. Part of the regulation is
that all of these retirement accounts are held in the custody of a small
number of highly regulated you know, government approved
custodians.
So, if they want to get their hands easily on $7
trillion they could pass a new law that says in order to keep the tax
deferred status of your retirement account, you have to put, you know, for
example, 50 percent into a special new government retirement bond that
we’re going to issue. And this avoids the problem in the United States
you can’t take somebody’s property without due process and the
Courts are decaying but they’ve still got respect for this. So if
you’re saying you’re going to take somebody’s gold, you
might have a problem in the Court. But if Congress changes the law for a tax
deferral for an account, I think the courts will accept that.
So, all they have to do is to say, ‘Well, to
start with 25 percent of your retirement account has to be in a government
bond and then they can raise that next year to 40 percent, 50 percent. And so
I think there’s $7 trillion that they could sweep off the table and
take to spend and that will keep the game going for two or three more years,
three or four more years of the current deficit rate depending on the
assumptions. Also in the United States there’s another difference
between Europe which is gun ownership. It is both easy and very pervasive.
There are not that many people that own gold in the United States. However,
amongst those who do own gold, gun ownership is probably close to 100
percent. So, if you actually tried to take the gold from the people,
you’re taking it from people who have guns and there would be a lot of
bloodshed if you tried to do this.
L.S.: Yes.
K.W.: In 1933 I think people were much more trusting
of the government. The government said, ‘We promise to give it back to
you, this is temporary’. I think a lot of people were very naïve
and said, well, okay, you know, we’ll do this. Today I don’t
think anybody will say that.
L.S.: Now, we’ve had already the final
question but I think it is essential to add another question here, because
when you would have no need for a Central bank and you’re against
central banks, isn’t it then logic that the Central Banks will do
whatever they can to fight you and the guys in your camp?
K.W.: Yeah, absolutely.
L.S.: And the Central Banks are one of the most
powerful forces in this world.
K.W.: So, I’m an entrepreneur and I look at it
as an analogy of a disruptive new business start-up and so, I’m sure
you’re familiar with Skype. When a start-up comes into the market and
tries to compete against a big business doing the same thing that the big
business does, the start-up will never be successful. There are 100s of
companies that have tried to produce a car with rear wheel drive and a
gasoline or a diesel engine that you’ve never heard of because they did
not succeed. Skype succeeded because they created disruption. And a way of
thinking of disruption is if you have a lever, where do you move the fulcrum
point under the lever.
So, if you think of the market for a voice, you
know, phone communications and you have AT&T over here and you have Skype
over here. What Skype did is they positioned the fulcrum right over here and
now it’s very easy for them to pull on this end of lever and they can
control what happens. And so AT&T in the United States has a declining
business other than for mobile phones. With mobile phones people need
wireless service and AT&T is a very big provider obviously. So in the
case of gold is money, I think if we structure this right and frame the
conversation right and we trigger the right dynamics with the gold bonds for
example, obviously the trend is people are buying gold to hoard it and take
it home. So the Central Bank is going to be destroyed by permanent
backwardation. Once the currency collapses and crude oil is $1 million per
barrel, the Central Bank is finished.
Alternatively, I propose to bring back the gold bond
in a way that would allow a graceful change. The Central Bank, there are
plenty of precedents and I can think of New Zealand where state-owned
enterprises are sold at auction to the highest bidder and then the Federal
Reserve and maybe the ECB I’m not as sure about that, the Bank of
England probably could be sold and become a private bank that obviously has a
lot of advantages to start, you know, in a free market. So I don’t
think they necessarily disappear if we do this right with a gold bond, but
they become privatised and then they become a
private actor in a free market. That’s what I would like to see.
L.S.: Yes, but isn’t the Fed a private bank?
K.W.: I don’t believe so. Obviously
that’s a very controversial statement. I’ll just simply point to
the fact that it’s CEO is appointed by the
president, it’s federalreserve.gov as its website. It behaves and acts
as a branch of the US government in all regards.
L.S.: Yes, but who are the shareholders?
K.W.: They call it shareholders but if you take a
look, they pay a dividend that’s a function of the original paid in
capital in 1913, so, you know, JP Morgan gets a cheque
for $80,000 a year and then, you know, $800 billion a year is remitted to the
treasury. So, they have – the process – when the federal reserve
was set up, it was a very different entity than it is today and every step
along the way they either took power for themselves that was not originally
granted by law, and so Professor Fekete points out
the law allowed the Federal Reserve to own only Real Bills to back the dollars
that they issued. But by the mid 19-teens the Federal Reserve was buying US
government bonds. And so it took until I think 1935 I don’t remember
the exact date before congress retroactively passed a law that said that the
Federal Reserve can own treasury bonds.
So, there’s been
many, many changes to the Federal Reserve from its original origin as the
re-discounter of bills into the Central planner and regulator that we all
know and hate today. Somewhere along the way whatever vestige of private
– you know being private that it may have had in 1913, today it’s
a government agency, it behaves as a government agency, it’s arm of the
government and institutes government policy.
L.S.: Yes, but didn’t the Fed reveal by its
actions that it protects the interest of the private banks and that it is
willing to throw the citizens of the United States or maybe the citizens of
the world under the bus?
K.W.: I’m not sure if they would have quite
said that openly. I certainly agree while we have – people call it a
free market, in my opinion probably the greatest damage done by Ellen
Greenspan is to convince people that what we have is a free market today. If
you look at Benito Mussolini and how he defined fascism, he said it’s corporatism, it’s government and business
working together. So, we have a perverse currency and monetary and financial
system today in which the private banks such as JP Morgan, Bank of America,
Wells Fargo, in Europe Deutsche Bank and so forth, have a partnership with
the government and they get all sorts of special privileges, special
immunities, special subsidies and, of course, bail-outs, especially after
– but actually no, I was going to say after 2008 but, of course,
bailouts are not new, they had bailouts in 1987, they had bailouts in 1991 to
1992 in the US and elsewhere in the world at different times.
So they have a very crony fascist corporatist system
where the survival and prosperity of JP Morgan is integral to the success of
the currency. If JP Morgan were to fail, the dollar will fail. JP Morgan has
too many liabilities to too many counter-parties. If they default then all of those counter parties will be destroyed and in
their default everybody else who wasn’t destroyed by JP Morgan’s
default, everybody else will be destroyed at that point as well. And so
they’ve built a web or a net that’s inter-connected in a way that
no one party can be extricated and that’s why the concept too big to
fail. If there’s a legitimate core to it or a truth to it I should say,
is that they are too big to fail and if they fail the whole system fails. And
so all the politicians and I have to remind the people reading this
interview, all of the voters would not be in favour
of allowing the system to collapse.
Let’s keep in mind what that would mean,
‘Collapse’. You wake up in the morning you have no bank account.
You think, okay, you still have a job; no, your employer has money in the
bank to pay payroll, your employer is destroyed, your insurance is destroyed,
your pension is destroyed, the economy is wiped out. And so I don’t
think the voter’s will agree to allow the system to collapse either.
There has to be and this is my idea of gold bonds, there has to be a way of a
graceful smooth transition that does not involve collapse, but a smooth transition
to a gold system. And so, you know, without getting into the conspiracy
theories, yes, Morgan is integral to and Deutsche Bank for that matter as
well, are integral to the paper system. Let’s be careful, if we wish
for them to fail, let’s be careful what we wish for because if our wish
comes true we might find it’s a nightmare.
L.S.: But aren’t we on the road that everyone
more or less will be killed if the system survives under the current
circumstances?
K.W.: Well, I don’t think the system can
survive so I would say we’re on the road right now were the system
collapses and everybody will be killed. So, that’s why I think it is so
important to propose a workable solution for gold to – the key is gold
must begin circulating again as money and the key to that is people must be
able to earn interest on their gold, and then they will be willing to invest
it to make the interest. Those are the two keys; if we do that then we can
get away from this crazy, crazy system and the power and the wealth of Morgan
and the central Banks will recede. But in a graceful way rather than, bang,
you know, all at once.
L.S.:
Okay, thank you very much.
K.W.:
Thank you.
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