Tom Woods invited Monetary Metals’ VP of Relationship Management Addison Quale on his show to discuss inflation, the future macroeconomic outlook and how Monetary Metals is offering investors a way to reignite the gold standard.
Click below to watch the full show. Let us know what you think in the comments below or in the video comments.
- The current inflation trend and the unhealthy economy
- The near zero and negative interest rates and retirement pressures
- How Monetary Metals is different than other gold companies and how we offer investors yield
- Monetary Metals’ Gold Fixed Income and our Lease Opportunities
- How Monetary Metals plans to scale up and bring back the Gold Standard
Episode 2003 of the Tom Woods Show – A Step Toward Sound Money Show Transcript
Announcer: The Tom Woods Show episode 2003. Prepare to set fire to the Index Card of Allowable Opinion. Your daily dose of liberty education starts here, The Tom Woods Show.
Tom Woods: Everybody, Tom Woods here. I’m joined today by Addison Quale of a company called Monetary Metals. And we’re going to be talking about sound money and gold, but from rather a different angle. We’re going to be looking at one way gold can be — I don’t know how else to put it — activated. That is to say, not just sitting in a vault somewhere, not just inert, but actually back into the economy without waiting for legislation or without waiting for some politician who happens to like gold.
Maybe we can get gold performing some monetary function in the here and now. And that’s what Monetary Metals has been up to for quite some time. So I wanted to talk to Addison about that. I just saw him a few weeks ago at the Supporters Summit of the Mises Institute and decided we should talk about this. I don’t know of anybody else doing exactly what he’s doing. So Addison, welcome to show.
Addison Quale: Hey, Tom, thanks so much for having me.
Tom Woods: All right. We’re going to be talking about gold, but not in the usual way. Today, we’re going to talk about an interesting practical strategy to get gold in more use and actually to make it more attractive to people. And this is a subject, gold in general, the gold standard, that when I look back to the early episodes of the podcast, I noticed that I covered this a lot. I used to talk a lot about gold and sound money, and I would answer the various objections that people had that, didn’t the gold standard caused the Great Depression, or isn’t there a problem with deflation with gold, and isn’t deflation bad for an economy and stuff like that?
And I would take all those sorts of things on. And in fact, also, I have a blog post that I’m going to try to remember the post from some years ago, where I looked at the issue of how various Austrian economists proposed that we return to a sound money or gold standard, and they had various step-by-step proposals. It wasn’t all pie in the sky.
And so I had a blog post where I brought all these together. So it was Murray Rothbard, Henry Hazlitt, George Reisman, obviously all very important economists, G. Edward Griffin, and maybe even one or two others, just talking about what the steps would actually be. So in talking to you today, we’re going to accomplish two things. Number one, we’re going to bring gold back into the conversation where it hasn’t been as much on the show, because there’s been so much interest in Bitcoin that it’s a lot of people have forgotten about the significance of gold.
And I am of the opinion, why not both?
But secondly, we’re going to be talking about a different way to get gold back into more use. And that wouldn’t involve the kinds of plans that I’m talking about by these various economists that we would do this and that and the other thing. Rather, you’re proposing something that would make… Well, in fact, I don’t want to steal your thunder. I will say that it would make gold seem more attractive to people who think they get gold, and then they just sit there and they wait for it to increase in value.
You have rather another way of approaching it. So let’s get to that in a minute.
First, let’s get on the general subject, though, of sound money and of the monetary system we have now, because at Monetary Metals, where you are, that is a major topic of conversation all the time, and it’s what you guys write about and talk about.
To most people in the financial sector, that seems, even now with the problems evident everywhere, even now, that seems like an eccentric thing to be worried about, the monetary system as a whole. Why do you think it’s not an eccentric thing to worry about?
Addison Quale: Right. This past year and a half, two years have been obviously filled with drama in our country. Obviously, from the libertarian side of things, there’s a lot of things to be concerned about. And one thing that has lost attention is the monetary system. Everybody knows that we’re not on the gold standard anymore, and that’s probably not a good thing. And yet our system seems to be moving forward. We still can buy and sell what we want. Life seems to be going on. Yeah, we have some inflation now, but we don’t have hyperinflation.
The GDP is up, the stock market’s up, yet we know something’s off. And so at Monetary Metals, we point to two key indicators that something is wrong about the monetary system, and one is simply skyrocketing debt. So, for example, the national debt is rising exponentially, doubling every eight years. And we all know exponential trends are unsustainable. Eventually they lead towards some collapse.
Currently, the national debt’s like $28 trillion. We know we’re never going to pay that off. There’s no way that we’re going to pay $28 trillion plus up to $100 trillion of unfunded liabilities. All that debt has to be serviced. Interest has to be paid on it. That connects to the other indicator, which is interest rates.
Interest rates have basically been falling since, like 1980, and no one’s really picking up on this. It’s just they were at 16 percent in the early 80s and were down to zero, basically. Most sovereign debt in the world is negative right now, which is a crazy concept. And interest rates are a very important factor in the economy. You need to have stable interest rates.
And what that means? If interest is down to zero, it means you can’t earn yield on your capital. So if you’re going to retire… You tried to retire in the 90s and you put a million dollars… You had a million dollars and you put that into a CD. You can easily get like five to seven percent. So your million dollars is earning you 50 to 70 grand a year.
Well, now, if you take a million dollars and put that into a CD, you’re looking at one percent. So now you’re getting 10 grand a year, on the same amount of retirement capital. That’s crazy. You can’t live off 10 grand. And now you need 5 million to retire using a CD.
And so the idea that everything seems to be moving fine and life goes on. Well, your capital is not earning a yield for you anymore. And so that’s why people are speculating into the stock market. That’s partially why the stock market is going up so much because people are searching for that yield and they’re trying to replace the yield with speculation.
And just want to point out one thing. This is the plan of what we could say is the architect of our current monetary system, that’s John Maynard Keynes. He called for the euthanasia of the rentier. In other words, the death of the saver, the person that’s living off the rents that they earned from their capital. And that’s happening. People are not able to earn a yield on their capital. And it’s not good. This is getting worse. And it’s only been sped up by the whole coronavirus, lockdowns, and everything related to that.
Tom Woods: And now these days, the warnings that we’ve had about price inflation, that have been largely ignored, are coming clearly true. A lot of people can see that. Whereas before, we might have had to say, “Well, prices should be rising even lower or even more slowly, or they should actually be falling if we had a sound money.” Well, that’s harder for people to see. They have to think with their mind’s eye. But here, they can see, well, we just saw numbers coming out for producer prices for the last month, something like over 8 percent annualized, just crazy, crazy numbers.
So it’s starting to trickle down to the ordinary person getting that there’s something not quite right. Now, they don’t know all that. They haven’t read Rothbard or they don’t necessarily know the answers, but at least they’re asking a question. And meanwhile, they see the lizard people in the media telling them that this inflation is actually good. It’s a good sign. It’s a sign of robust demand. But there’s been plenty of times in history when there’s been robust demand doesn’t mean that your money is going to lose all this value every year.
It’s just a whole lot of propaganda that people are exposed to.
So tell me about… I’ve seen you and I’ve met you a bunch of times. I see you. I just saw you with the Mises Institute Supporter Summit. I see you at all kinds of libertarian events. And I know you’re with something called Monetary Metals. And frankly, until you explained it to me, frankly, a week ago, I actually had no idea what you guys did. I thought maybe you might have sold precious metal coins and stuff like that. I honestly didn’t know what it was you did.
And now that you’ve explained it to me, maybe there’s somebody else doing what you guys do. But if there is, I’m not aware of them. So let’s talk about what exactly is that Monetary Metals is and what you guys do and what this has to do with getting gold back into the monetary system.
Addison Quale: Right. So our view of Monetary Metals is the key reasons for why our monetary system is struggling. It’s because we’re disconnected from gold since 1971, since Nixon closed the gold window. The dollar is completely disconnected from gold, completely irredeemable. And this is the key driver of these problems. We have to get some money back in. So how do you get sound money? How do you get gold back into a monetary system?
A lot of people have said, “Well, through the right price.” If the price just gets high enough, or if we can set up gold payment systems where you can buy and sell with a debit card, those things are really going to jumpstart the gold standard.
And our view is those things give attention to gold. For example, a debit card, people don’t really want to spend their principal. They’d rather spend their income. So if they get gold on a debit card, they probably just want to just hang on to the principal. They hope it goes up in dollars. But then your gold balances aren’t grown over time. You’re slowly spending them down and you’re paying for storage fees. So our view is the way to get gold back into a system, is basically by lending and borrowing in it, by incentivizing the lending and borrowing of gold.
That’s what gets gold to come back out of the treasure chest and the underground hordes and the vaults, all the hidden places.
If you put a gold coin in the bank back in the day, and they said, “We’ll pay you zero percent interest.” You’d probably say, “Well, this isn’t worth the risk. I’m just going to hold it at home.” That’s effectively what we have today. If you can pay one, two, three, four percent interest on gold and pay that in gold, suddenly, gold is coming out of these hidden places and going back to work in the monetary system, financing companies and paying a yield. And now you’re getting a healthy yield back to people in a time where it’s very hard to get yield.
Tom Woods: So if I’m understanding this right, you mean that, okay, I have some gold in my physical possession or I have it in a particular location. You’re right. It’s not earning any yield in the traditional sense. Rather, it’s a matter of, I hold on to it, and I have confidence that in some amount of time, it’ll be worth more than it is now.
And I have that for a variety of reasons. But it’s not like holding it is earning me X percent per year or anything like that. That would be nice, but that’s not what I have it for. But if I could do that, if I could take gold that I’m just sitting on anyway and earn some return on it, well, that would be an unbelievable bonus for, basically, having to do absolutely nothing.
What I don’t understand is, would I have to send you my gold, or would there just be some certificate, or would I buy the gold from you? How does it actually work?
Addison Quale: Right. So Monetary Metals, we have set up a program called Gold Fixed Income. We finance companies in gold and silver. We pay interest on gold and silver. We’ve done 40 of these leases basically, since 2016. We even did the first gold bond in the US. There’s been no gold bonds, gold contracts, basically, since FDR. So we came out with the first gold bond in the US since 1933 last year. It matured successfully last month.
Yeah, basically, if you have gold on hand or you’re looking to add to your possession of gold, you can send coins into our vault, you can send cash and purchase new gold at about $15 to $20 over the spot price. It’s set up at first, just like a storage at any other storage vault, the metals in a secure, safe facility. It’s zero storage fees. So that’s another benefit. We don’t charge any storage. And then every month or so, we’re going to come out with a new opportunity where you can take your metal and put it into a lease deal and pay interest on it.
Basically, we’re working with companies that work with gold. These are jewelers, mints miners, refiners, coin companies. They have to finance. Just explain a little bit, normally, they would go to the bank and get dollars. They borrow dollars to buy their inventory. But then that leads to a mismatch because they’re financing in dollars, but then their revenues are really beholden to the gold price.
So if gold goes down, they could get underwater on the loan back to the bank. So if they borrow a million dollars to buy 500oz of gold, and then gold goes down from, say, 2,000 down to 1,500, they can’t really pay that back very easily. Their inventory is not worth that much.
So we do is we come in, we basically say, “Well, instead of borrowing in dollars, why not basically borrow in gold?” In this case, it’s leasing, but you finance in gold, and to match a revenue in gold, it’s apples to apples. And that way, regardless of whether the gold price goes up or down, they are hedged naturally. Whereas before, they’d have to buy a put on gold in order to maintain that hedge. And that just adds cost and risk and increases the financing costs. So yeah, that’s basically how it works.
Tom Woods: Yeah. So they don’t have to worry about the dollar at all. And they don’t have to worry about gold in terms of the dollar, because dollars are not part of the transaction. And so this, as you say, takes away a major headache and source of risk for them.
Okay. I guess I’m interested in this, and I like this idea. Is this what you guys have been doing all along, or did you branch into this after being, maybe, a more traditional metals company? I actually don’t know the history of your company.
Addison Quale: Right. So, yeah. Our motto is, a yield on gold paid in gold. And that has been the motto of the company since the beginning. The beginning was 2012. We started with a hedge fund that traded the gold silver ratio using physical bars. We pivoted in around 2017 to really focus on, basically, what we call gold fixed income, which is a fixed rate of return on gold paid in houses of gold.
So leases are our flagship offering. Again, we’ve done, like, 40 deals since 2016, all of them successful. And we’re now building into the gold bonds as well. So gold bonds is a much larger market than the leasing, and that’s something that we’re going to build into in the coming years.
Tom Woods: All right. Let’s say, I buy some gold from you rather than send you my gold, and I say, “All right, well, now you do with it what you will, and I’ll sit back and collect the yield.” Now, first of all, is that basically how it would work, if I have it right?
Addison Quale: That’s more or less correct. You’re more in the driver’s seat, though. You would set up your account, you fund it with ounces, and then we notify you when we have these opportunities. And basically, you’re choosing which ones that you want to be in. That’s essentially how it works.
Tom Woods: All right. Let’s just imagine that the worst happens, that somehow these transactions, that my gold that’s involved in just go sour. And you guys don’t get the gold back. What happens to me?
Addison Quale: Right. So we have another thing we like to remind ourselves of Monetary Metals, and that’s just rule number one, lose no gold, like fight club. You don’t talk about fight club. We don’t lose any gold in Monetary Metals. We just have a very thorough due diligence process to begin with, just to vet which companies we work with. We only work with solid companies with a good track record, with people that have a good track record and who have a serious business need for the metal.
It’s a lease, so it’s different from a bond. A bond is more credit risk. A lease is more operational risk. Where is the metal? Where is it flowing? Who has access to it? And what facility is it? And basically, we want to see very, very strict controls. It has to be extremely strict controls. We have to be able to monitor the inventory.
So in a lease, let’s say we lease a company 1000oz of gold. If a customer comes up and, let’s say it’s a jeweler, a customer comes up and says, “I want to buy that necklace”, we don’t just take the customer’s cash. They don’t just take the customers cash and hand over the necklace. They take the cash. They buy an ounce of raw gold. They put that into the vault. And then they can take out the necklace. The idea being on lease and in the vault, they always have to have the full amount of 1000oz.
So we generally are following their inventory on a regular basis and monitoring it. So we can see if that dips below 1000oz so we can catch it right away. So we want to have strict controls, ongoing monitoring, and transparency.
And then on top of that, we put in a lot of safety measures from corporate and personal guarantees. Every lessee has to have 100 percent insurance coverage on the metal that they’re holding on lease. And then on top of that, Monetary Metals also gets a half million dollars. We have a half million dollar policy with Allianz Insurance as well.
So you can never say that there’s no risk. What you can say is we’ve mitigated as much risk out of the deal as possible, and we work very, very hard to just not lose any ounces. And so far, all our deals have been successful.
Tom Woods: Okay, good. It doesn’t matter, but I’m just curious of the people who work with you. Are these, in general, people who also tend to have a philosophical commitment to the ideas that you and I have, and they feel like working there is a way of implementing them in the real world, or is it just a job? And there’s nothing wrong with that by the way.
Addison Quale: Right. Now, I would say it’s definitely the former. Everybody here is acutely aware of the mission. Obviously, the first mission is lose no gold, get people a return. People want a return on their capital. Till now, gold has been… It plays a role in a portfolio, but because it doesn’t offer yield in their storage fees, it’s a drag in some ways. Here’s a way to basically help people earn yield on a part of their portfolio that was otherwise static.
So it’s a big deal for that reason. But then also, as we’ve discussed a little bit, this is a way to jumpstart a working gold standard. So we’re all very acutely aware of that. And everybody, generally, is on board with that idea and excited about it and doing what we can to move the needle forward here.
Tom Woods: All right. So if people are interested in this, I always do these little… Like when Dave Smith came on one to promote his comedy album a couple of years ago, it was some crazy link on iTunes you would never find. So I just did tomwoods.com/libertas. I think it still works by the way. I didn’t check it before coming on here.
So likewise for you guys. I just set up tomwoods.com/mm, for Monetary Metals. So tomwoods.com/mm. If this is something you guys would like to look into. And as I say, I see Addison pretty regularly at libertarian events and at Mises Supporter Summits, which means he supports the Mises Institute. These are all good signs, folks. These are like the best signs you could ask for. And he’s here on The Tom Wood Show. That’s the trifecta right there. So tomwoods.com/mm.
Again, because this is an unusual conversation in that, normally, I talk about topics where… If I don’t know as much as the guest, I can at least hold my own. But this is a question of a company you’ve worked for for a number of years. So obviously, it’s a bit lopsided in terms of who knows more. So if there’s anything I missed or didn’t get to that you think is important, feel free to share it with us now before we wrap up.
Addison Quale: I think we covered all the basic ideas of the product. I guess I would love to just add a couple of ideas. We’ve been talking about sound money and trying to get the gold standard back for a number of years now. It’s become clear that going through Washington and trying to legislate that politically is just a non-starter. It’s just not going to happen. But what something that did happen and has been happening in recent years is you have things happening in the economy and the culture going viral, and that’s pushing the change.
And so no, the answer is not to bring back a gold standard through Washington.
But look at what Uber did instead. Uber came out of nowhere and took on the New York City taxi cabs, went viral overnight, and it became impossible to bottle this back up. Michael Malice has said the gun control debate is settled not because of legislation, but because of gun proliferation. And so our view is the way to get the gold standard back, is to do the same for interest on gold, to get gold to level up and go viral so that you can’t bottle it back up.
I’d love to share just one last quote from Keynes. He said something like, “Lenin was certainly right. There’s no settler, no sure means of overturning the existing base of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction.”
So basically, our view of that is Keynes and Lenin had this idea that if we debauch the money and we employ hidden forces, and we see hidden forces like incentives or interest rates. And that’s what’s happening with the paper monetary system. You have interest rates going out of control, and they’re leading towards destruction.
What we can do at Monetary Metals is we can reverse that. We can set up incentives, in other words, interest rates, that get gold to come back into the system in favor of creation and construction. And that’s Monetary Metals. We provide interest on gold, paid in gold, to incentivize gold, to come back out into the system and go to work in the monetary system again and jumpstart that gold standard.
Tom Woods: All right, well, the page I set up… I beg your pardon. The redirect link is tomwoods.com/mm. For anybody interested in this. And, Addison, thanks for your devotion to the cause and for your time today.
Addison Quale: Thank you so much.
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