Ep-58 Jeff Deist: Shaping the Future of Money and Credit

Ep-58 Jeff Deist: Shaping the Future of Money and Credit

Jeff Deist makes his first appearance on the Gold Exchange Podcast to talk about why he joined Monetary Metals and what he sees for the future of money and credit. Keith and Jeff discuss the importance of Say’s Law, the impossibility of economic modeling, and the failures of the Fed. Tune in for this must-see episode and what can be done today to return to a sounder monetary system.

Follow Jeff on Twitter: @JeffDeist

Connect with Keith Weiner and Monetary Metals on Twitter: @RealKeithWeiner @Monetary_Metals

Additional Resources

Mises Institute

Jeff’s New Book

Say’s Law

Theory of Interest and Prices

The Case for Gold Yield in Investment Portfolios

The White Pill

Per Bylund Episode

Road to Serfdom

Jeff Snyder Episode

Podcast Chapters

00:0000:51 Intro

00:5103:32 Why Monetary Metals?

03:327:07 A Profitable Gold Standard

7:0712:33 Money Upstream of Everything

12:3316:06 Mental Distortions

16:0619:55 Keynes vs the Austrians?

19:5524:37 Say’s Law

25:1029:12 Capital Accumulation

29:1233:03 How Countries Get Rich

33:0335:01 What is Capital?

35:0141:36 The Problem With Modeling

41:0745:00 Why We Have To Fight

45:0049:33 Currency Collapse

49:3351:44 The Path Forward

51:44-52:44 Monetary Metals


Benjamin Nadelstein: Welcome back to the Gold Exchange podcast. My name is Benjamin Nadelstein. I’m joined today by founder and CEO of Monetary Metals Keith Weiner and our special guest, former president of the Mises Institute and soon to be General Counsel of Monetary Metals, Jeff Deist. Jeff, how are you doing today?

Jeff Deist: Well, thanks a lot. I’m excited. I appreciate it. Appreciate being here with Keith. I’ve watched a lot of your podcasts and seen a lot of your guests. So this is my inauguration. So it’s great to be here.

Benjamin Nadelstein: Excited to have you, Jeff. So let’s jump right in. Why did you choose to join Monetary Metals, which is a for profit institution? Instead of staying with a nonprofit organization like the Mises Institute? I mean, with your background, you chose Monetary Metals over other financial organizations, like maybe the IMF, the World Bank or maybe working for another political campaign. Why did you choose us, Jeff?

Jeff Deist: Yeah, I’m not so sure the World Bank would have me. I definitely would not have them. I’ve known Addison Quale for a while. I’ve known Keith also for a while. I’m familiar with his work and obviously, there’s a nice detail in my own perspective on money and banking. It is one that’s heavily influenced by a lot of the famous gold standard writing. I’m obviously a big believer in sound currency. So monetary metals were a good fit and an easy fit. The nonprofit questions. Interesting because you have to ask yourself what’s the best form of persuasion in society, right? That’s an interesting question. And I think the idea of a company being successful and, and especially becoming profitable, you know, it, we believe that profits are socially beneficial. A lot of people dispute that. But nonetheless, I think in the monetary metals world, if you accept that, then the challenge is to go out and unlock some of this moneyness. Hayek uses the term that there can be degrees of moneyness. The moneyness of gold is a really intriguing idea.

And so I do think that all kinds of persuasion are important. I do think there are, there are great nonprofits out there. I think the Mises Institute is important in its role. But I also like the idea of the marketplace proving out the idea that gold still has monetary uses. Trying to create a proof of concept here that we can create a yield on gold and, and that all those hundreds of thousands of metric tons of gold that are sitting out there in the world somewhat follow. It doesn’t have to be that way. And, and so that, that’s an intriguing proposition to be and it’s, it’s personally, it’s just nice to work with like-minded people towards a mission that I, that I agree with conceptually and, it’s not just a job for a paycheck.

Keith Weiner: You know, if I can just add to, to what Jeff just said, not only is this profitable for us, it’s profitable first and foremost for our clients, we’re, we’re making it profitable for them to move forward to the gold standard,  which is also socially beneficial as well as one heck of an incentive. Jeff, I’m sure you’re familiar with that quote from Keynes where he says there’s no sure way to overthrow the capitalist order, which means overthrow civilization, right? Because if you replace it with pure and perfect communism or, or some sort of statism that’s actually collapsed, there’s no true, true way to overthrow it. I’m gonna say it my way of civilization rather than by debauching the money. And  I think it goes on and on and on. And then at the end, he says,  by engaging all the hidden forces of economics which today we would use the word incentives by, by engaging, by offering the right or the wrong incentives. We can get people to destroy their world and he’s gloating, smirking this bastard. I call him a vicious bastard in print. The only time I ever dropped an F-bomb in any written piece, that I put is that Keynes was a vicious bastard. That was my article. He’s gloating that not one in a million can diagnose what’s happening to their world because he’s saying we cleverly wink, wink, nudge, nudge, and then Cass Sunstein’s sense of Nudge people.  With these perverse incentives, we get perverse outcomes and they can’t even figure out how they’re drilling holes in their own boat and the boat is sinking. And, that was one of the formations. The ideas that came from me thinking about that was one of the sort of formative ideas of Monetary Metals. OK. The system offers these perverse incentives. How do you reverse this? Well, you have to offer a different incentive and what’s that incentive is to offer interest on gold? And so,  yeah, we’re gonna make money at this. There’s a good business here and the customers make money at us and by money, I mean, gold, of course. And if you align all that right, then you get beyond proof of concept and into something that can actually move the needle of the world. And I’m looking forward to getting into that phase.

Jeff Deist: Well, it’s, it’s interesting you bring up Cass Sunstein and of course, he was lauded for what I consider that absurd book Nudge. I mean, it’s not exactly novel in economics or otherwise to suggest that incentives matter and that people respond to incentives. I’m not so sure that that deserves much praise, but more importantly, the incentives he’s talking about are not what we would consider win-win market incentives. He’s talking about using state power to nudge people towards what is politically determined proper behavior. The kind of incentives he implies are very different from the incentives of the marketplace.

Keith Weiner: That’s what it’s all about. Today you look at every last program they’ve got, every last three-letter agency, every last welfare bailout subsidy. They’re all, well, let’s just substitute state coercion for market forces. And then, oh, that didn’t break the world yet. Ok. That means they can, let’s pile on another one. Oh, that hasn’t broken yet either. We can pile on another one. Let’s see how far we can get away with this. And,  anyway, so I don’t, I don’t want to dwell too much on that today. But, I think we’re in violent agreement on that.

Benjamin Nadelstein: And Keith, what I find so interesting is this Andrew Breitbart quote saying politics is downstream of culture. But I’d like to add that it seems money is upstream of everything. When these kinds of monetary incentives, interest rates obviously being one of the biggest factors are centrally planned, Artificially changed that changes everything below it from politics to culture. Jeff, how do you see the kind of irredeemable currency system that we’re currently on? That? America has been severely on since 1971, affecting the culture, the politics, and finances of the United States.

Jeff Deist: It’s really fascinating because it’s such an untold story, an unremarked story. In other words, I would consider the monetary pro profligacy. I call it monetary hedonism of the past several decades. Maybe the biggest unwritten story of our lifetime. Certainly for financial journalists in the sense that it does affect everything about us in terms of our time preference, our actions and what we want from economists. Let’s remember, economists are social scientists, right? They are supposed to help us understand the unseen, right? Basat talks about the unseen. So how do we explain the unseen? It’s very easy to take a government policy, tax, some people take the money built, have a bunch of cronies get paid and build a big public housing project and put some poor people in there. And so the politician can say, see, look, this works, we built some housing. But what economists are supposed to help us understand is the unseen costs of that, right? What were the alternatives? What were the opportunity costs? What was lost as a result of that money being forcibly taken and put into a project that the market otherwise would not have chosen? And so with money, so much of it is unseen if, if you go out and, and if you’ve been shopping for a car lately, it’s absolutely hellish. I mean, car dealerships have like 20 cars and then, the used cars are very expensive right now. But nonetheless, you probably go online, you probably do some research, you probably talk to some family members and say, hey, I think this new Honda Pilot is great. I have one, I had one before. I’m looking at all the consumer reports, it gets very good ratings. So that half of the equation, the goods or services being purchased for money, you, you tend to do a little bit of research on that. But on the other side of that equation, Honda just gets the money. So, is Honda spending all of its time engineering cars or is it spending all of its time, sort of looking at monetary policy and wondering about what’s gonna happen to the dollar and what’s, what’s the quality of this dollar? I’m getting closer to the quality of this Honda Pilot I’m selling. And so because the market works at least over time and, and in the broad sense in a way we know Honda kind of does have to look at the quality of that dollar and they kind of have to price that in now that’s imperfect. But nonetheless, there’s two sides to every equation and we spend a lot of time thinking about goods and services, but we don’t spend much time thinking about the other half of that, the dollar itself or whatever currency. And the idea that there is almost a politburo of central planners at the Fed, the Open Market Committee, the Plunge Protection Team, as it was once called, sort of sitting around making these decisions the way Honda properly in the private sphere is sitting around making its decisions. That’s that, that’s an untold story. And I think as a country that, that hasn’t served us well.

Benjamin Nadelstein: Keith, let’s go to you about that untold story. On every side of the equation one of those sides is the dollar. Our credit today is the dollar. It could be gold and you can analyze gold in a transaction. We’ve had Jeff Snyder on the podcast and Jeff mentioned that in those transactions on the foreign exchange market that the dollar is on over 90, maybe 95% of those transactions,

Keith Weiner: 96% of the dollars on one side of every derivative or 96% of all the derivatives. He said it’s not the dollar and other currencies. It’s a dollar system and I think of the other currencies. It’s kind of like a coal mining town has their little script and then coal mining towns agree to trade scrap. Oh, see the end of the dollar headphone. Not exactly. Yeah, they’ve created a very perverse world and, and to build on what Jeff just said, the CEO of Honda has to be thinking about monetary policy. Absolutely does because if interest rates are headed down, then that’s one set of incentives for him. And if interest rates are gonna be forced up, then that’s a whole different set of incentives for him and his customers. And companies that get the business cycle wrong, go out of business companies that, and we call it the business cycle. It really should be called the Fed’s unnecessary and artificial credit cycle. Um, the fed’s binge and purge cycle, I call it, , if you get that wrong then you go out of business because you’re investing in precisely the wrong time, you’re gonna get creamed and then you don’t, if you still survive that you don’t have the capital when we finally hit the bottom of the V or the U and start going up. And that’s when your competitors are investing and you’ve spent all your dry powder and you’re just clinging on for your life. You’re losing market share and, and technology edge and all those things. Absolutely, everybody is affected by the gyrations of this. And then I think of 11 interesting things that need to be pointed out. The FED is by far the greatest employer of monetary economists. I mean, what an enormous distortion, imagine if we had a free market. They shudder to think of an actual free market. What a diverse set of opinions you might have amongst monetary economists and some of them might be for central planning, some of them might be otherwise, but you at least have this full spectrum. But everyone, everyone in the monetary economics field understands the FED is the source of most of the juice in that field. And even if you don’t work for the Fed today, you don’t necessarily want to say views that would make you unfit because you might want to work for the Fed tomorrow or you might want the Fed to give a grant to your university. You don’t want to be ungrantable or whatever the term might be in, in, in that space.

So I totally agree, Jeff that economists are, are supposed to be social scientists. Unfortunately, there are three types of people calling themselves economists today and the actual scientists, the ones that actually want to discover the truth, wherever that may lead are pretty small. It, it seems to me certainly in the monetary area, pretty small minority. Um, most of them are either the Ys, the ones that just get off on having their hands over the levers as they attempt to guess the mainstream believes is fine tune the economy in reality, dispense, favors and, and punishments as they will. And as they try to build their out, when people talk about Jay Powell building his legacy, I’m like legacy. He’s, he’s destroying. And he wants to get the, the message just right. And Iran had a lot to say about second handers, people that don’t actually care that they’re causing harm, they’re just concerned about crafting their image.

So one type of, people calling themselves economist is the central planner. And then the other type I call them the court economists, the people that peddle the message, they either, they’re not in the, in the state of power right now, but either they want to be, or they’re just happy to be the paid hack just a shill for the system. They put out all of this rubbish, as a drug, it’s a sort of there, there, there would be a lot of outrage against the fat and what it does if it wasn’t for this endless outpouring this damping effect where they’re constantly putting wet towels on it to tamp it down. There’s an awful lot of economists, , people calling themselves economists who make their living. I call it the indirect employee of the system. It seems like there’s all too few that are actually trying to pursue the truth. , of course, the truth has one advantage that the lie can never overcome, which is the truth, has the advantage of being true or being in accord with reality. One lone voice or a couple of lone voices can ultimately change the world. Nothing can stop an idea as times come. And I think gold, as a re-emergence of the monetary system, I think fits Voltaire’s idea.

Benjamin Nadelstein: Well, Keith, I want to step in there for a second and let me push back from the other side. So there’s all these PhD economists and I think you are accurate and right, that 90% of those economists end up either being hired by the Fed or in touch with the Fed in some way. But I mean, Keith, these are Nobel memorial prize winning economists like Ben Bernanke, Paul Krugman, are you really saying that the kind of Keynesian model of stimulating borrowing spending to improve the economy? That that’s the kind of Keynesian approach is wrong and it’s the Austrian kind of school who is right and these other kind of free market wackos, I mean, so are the phds wrong? I mean, what are these highly decorated individuals missing that Austrians are getting right

Keith Weiner: When you frame it that way, how could, how can anybody possibly say that?

Benjamin Nadelstein: I did say Memorial because I know Dr. Bob Murphy is probably going to watch it and keep an eye on me for saying that. And Jeff, what about you? The Austrian school? I don’t know. Jenny Yellen’s not an Austrian. Paul Krugman’s not an Austrian. Ben Bernanke is not an Austrian. Why should we listen to the Austrians?

Jeff Deist: Well, first I would say that you can be very, very, very intelligent and disagree. I mean, I think Bernanke is a very intelligent guy. Certainly, Alan Greenspan is. , and from what I’ve heard from people like Danielle DeMartino Booth, I know you recently interviewed her. I mean, Jerome Powell is, is a really smart guy. He’s a lawyer rather than an economist. So he just read and read and read to prepare himself for the role of Fed chair. So I don’t discount for a second. The intelligence of most, not all you know, of, of what I think he directly correctly describes as court economists. But I, I mean, we can view all these different schools. Obviously, I’m pro-Austrian, we can view all these different mentalities. We can view the politicization of central bankers. But at the end of the day, for me, it, it comes down to one of two viewpoints. I mean, take away total destructive Marxism or, or pure socialism or something like that where you’re not even really talking about an economy. At that point, you’re talking about a command and control world, but within economics itself, you know, there, there’s scarcity, scarcity means there’s choice and tradeoffs.

And so if we go back to Say’s Law from Jean Baptiste Say there are two ways to view the economy. One is that you have to produce things and that production creates its own demand. In other words, we all have to go out and do what we do to make a living. Unless we’re a trust fund kid or something, we have to go out and do what we do to make a living. And with that salary or pay or business income, that’s what allows us to purchase a home or to buy groceries or to do things with our family or whatever we might do. In other words, our production, and our work creates our ability to consume and demand. I think most of the modern economics relies in one way or another on turning Say’s Law on its head and saying no, no, no. What we need to do is stimulate demand through monetary policy or fiscal policy, we need to make people want to buy more stuff and when people buy more stuff, that’s how you create a healthier economy. I don’t think that’s true. I think you create a healthier economy by creating the conditions for greater capital investment and hence greater productivity. And so these two worldviews are awfully tough to reconcile. I mean, it’s not just a rhetorical or academic debate amongst economists. I mean, it’s a fundamental chasm, you know, production or consumption and obviously, they’re interrelated, but if you don’t accept the idea of Say’s Law. I’m not sure that there’s a lot farther we can go in a discussion beyond that.

Benjamin Nadelstein: Keith. I want to head your way. Say law. So do we believe that we can kind of centrally plan our way to prosperity? We can just regulate our way to riches? We need to stimulate some more demand. I think the central question which Jeff put so well is can we print our way to wealth? What do you think, Keith?

Keith Weiner: I could only share an anecdote. So my wife and some of her girlfriends at work wanted to go see Adele who is   in residence in  I think it’s Caesars in Las Vegas.  So she has a young kid so she just wants to park herself in Vegas and she has a 4000-seat theater that she plays to. I don’t know how many days a week and then they sell these seats. So apparently you can’t just go and like buy a ticket the way you could for a Phantom of the Opera or Blue Man Group or whatever. No, like you have to get into a process, you have to win a lottery to get a place in line where then they’ll tell you what at what your appointed hour is where you can log in and actually have the opportunity to buy the ticket. So she and her friends discussed what they’re willing to pay. Joyce was all excited. They all entered the lottery. Joyce was the only one who actually won and had the right to go participate in this. I don’t know if it’s an auction or whatever. Um, anyway, then her point of hour came up and the prices were like, triple what they had all sort of agreed as a group because she, you know, she was gonna buy the tickets for her friends. You can buy up to four if you win. So she was gonna buy anyway, there was a way about it was like triple what they had all agreed. And, , you know, just looking at that one incident right there, there’s an enormous amount of stimulus that’s still overstimulating people. This is not and people will just dismiss it as inflation and money printing, you know, whatever easing that the fed may have done and now is, is doing more of it this new term bank facility, whatever they’re calling it. Basically, none of this is making its way to consumers. People who work for, you know, my wife’s an engineer at a major tech company. These are engineers, nobody got raises like this. Um, and, , you know, who, who, who was outbidding, you know, senior engineers and, and, and people to, to go see this a concert, there are people out there, a lot of them that still are on an eviction moratorium or a foreclosure moratorium essentially paying zero for their living space. And, , so this is highly stimulative. These people are going to Las Vegas spending in some cases thousands of dollars a seat to go see. And that’s just one concert. I don’t know what they’re paying to see the sports game. I don’t know what they’re gambling. I don’t know what high-end restaurants are going to in Las Vegas. It’s pretty easy to spend $1000 a seat, for dinner. If you go for some wine or drinks at some of those restaurants and these people are spending up a storm, it’s all stimulated, semi-stimulated.

I don’t think very much of that is natural. Is that good? Well, people enjoy, the drunken revel, you know, they enjoy the orgy while it lasts anyway. Um, and the problem is, of course, it doesn’t last. And, you know, there’s a lot of different looks and he talks about the crackup boom. You know, if you just continue to try to force it, , to go on forever, you get the crackup boom. There are a lot of different ways of looking at it. I’m with Jeff. If somebody is in basic denial over this, if someone says it’s just a matter of managing the demand function Or were these, I call them the otherwise free marketers like George Selgin,  promoting this idea of nominal GDP targeting, essentially the Fed should print as much as necessary to keep nominal GDP. Not only, you know, steady but actually increasing whatever magic 8% per year that they think that it should be increasing completely, not only heedless but actually uncaring. Even if you explain it to them, they don’t care about that. Ok. Well, what you’re talking about then is consumption of capital. You’re just liquidating the very stuff that makes it possible for us to be wealthier and enjoy more. You’re liquidating that in one final orgy of, you know, drunken revel. They’re uncaring about that just, you know, keep the GDP up at all costs. Well, we’re keeping it up right now and this is how,

Benjamin Nadelstein: We’re lighting the furniture on fire to keep ourselves warm.  It’s true. We’re, we’re staying warm. The heat is high, but at what expense?

Keith Weiner: That’s how you get around, right? You have to produce in order to consume and they’re enabling the seaming consumption without production. Well, how, how is that possible? Well, you’re consing something that had been previously produced by somebody else that you got as capital and now you’re just burning the furniture and you can keep warm for an hour with that priceless furniture. Many

Benjamin Nadelstein: People call capitalism, free markets because they want to kind of highlight that voluntary aspect. But I’d like to focus on the actual capital aspect of capitalism which we’ve just brought up. Why, why is capital accumulation so important? Why is it more than demand?  What, why is capital accumulation so important to civilization? And Jeff maybe why do Austrians specifically focus on capital structure? And you know the nature of the capital structure in production? Why is capital so important?

Jeff Deist: Well, it’s interesting, one of the, one of the big differences between the Austrian perspective and other views is the idea that there’s a structure of production, that capital is not homogenous,  that capital you know, has stages of production and over time those stages lengthen and that’s the sign of an economy getting healthier and society getting more prosperous.  Whereas I guess what we might call Neo Keynes and mainstream economics just views capital as sort of you know,  excuse me, I said earlier, Austrians view capital as heterogeneous.  The mainstream view says, well, it’s just sort of homogenous, it’s just an input, it’s just a factor. And so on top of that,  the Austrian school has a perspective that the entrepreneur is actually an agent acting within that structure, production, making decisions, and taking risks.  Again, mainstream economics does not really have an explanation or an understanding of that person’s role. They just view that as, you know, entrepreneurs or widgets or, or inputs of some kind, which I, I don’t think is correct if you look at how the world really works. And so, you know, accumulating capital is what basically every generation has done for millennia. And that’s why when we wake up in the morning, we’re surrounded by roads and Starbucks and electricity and hot and cold running water and a refrigerator full of food and all, and mobile devices and all kinds of wonderful things. And so that capital accumulation, part of it is actually economic capital stock, you know, but part of it is also understanding education, know-how wisdom,  some of its cultural, some of it’s social, there are all kinds of ways to define capital, some of it’s human. But in the more narrow economic sense,  when capital accumulates,  people have the ability to forego current consumption and put that capital into other uses, to invest it, to put it into production, to put it into a new company, to put it into maybe spending money for a new idea or a new technology that won’t pay off for a long time in the future. And as a matter of fact, may never pay off, it may turn out not to work. They may risk that capital and lose it. But the market has a way of if left unmolested of moving capital towards people who are better at using it, and people who are not as good at using it tend to lose it over time. All things equal. Sometimes a rich kid comes along and blows his parents inheritance or something. It’s, this isn’t all an ethical thing. It, it’s, it’s more just the way capitalism works if allowed to work and that, I think that’s very important for us to understand that it is possible entirely possible for whole societies not only to go sideways but actually go backward. What, how did we get rich? And what if it all went away? Those are questions we haven’t had to ask ourselves in the west for a long, long time because unlike, let’s say our grandparents or great-grandparents, we have basically known a level of material prosperity, which makes us start to forget how we got here that somehow iPhones grow on trees. Well, they don’t grow on trees and if we’re not careful, if we if we’re consing capital rather than creating it,  we are going to leave future generations worse off. I mean, that, that really is a concern. I mean, that does keep me up at night. How, how did we get rich? It’s, it’s something that you think economists would be studying instead of writing stupid books like Nudge.

Benjamin Nadelstein: Keith, I want to send it your way. How do societies get rich? How is capital kind of involved in that? How did, let’s say a country like Hong Kong or Singapore become so rich while other countries have kind of stagnated?

Keith Weiner: I have a term for what  Jeff was just talking about at the end because I, I use the term when people are aggressively indifferent to something. They’re just curiously incurious, they don’t know and don’t wanna know and actually get annoyed if you try to explain because the answer, they fear that the answer leads to something that they would then have to check another of their premises and that would unravel everything that they believe. And so it’s much easier to just ignore it and move on.

Singapore I think is a bit of a different story. The Malaysians kicked the British out. OK. We’re gonna be independent, obviously, that was the post-war period and they’re having all these elections and everything else. And essentially the Malay decided they didn’t want Singapore. The rest of  Malaysia is Malay majority, which is a Muslim majority. Singapore is Chinese majority. So they’re like, go away. We don’t actually want you part of our country. So he became effectively the dictator of Singapore and his insight was to say nobody is going to invest capital. We’re just a third world country like so many others.

At that time in the world, Rand actually used the term she said, oh developing nations. That was the political track at the time, she said not developed, not developing, never, never to be developed. Well, there were two that did develop and is one in Hong Kong, you know is the other that were poor little island, you know, fishing village type places. At the time, Lee’s insight was to say, no one’s gonna trust us if they don’t trust the rule of law and contract the property rights. Therefore, we’re going to, as I understand it, he said, we’re going to say that  contract disputes, we’re gonna adopt English common law and contract disputes will be tried on the Chancellory Court in, in  London. And so if you invest here, it’s not in the, not in the hands of a jungle dictator to decide your fate.  but actually, you know, real a real justice court and that  made it safe for, you know, corporations and banks to invest. And it’s the investment that grew the Singapore economy and the Singapore landscape. And today it looks like a very, for the most part.

Hong Kong was a case of benign neglect. It was a British protectorate. The British didn’t care enough about it to bring all the really important things like socialism. , they just sort of ignored it and that was actually the perfect thing was it? Um, what was his name? Copperthwaite? He actually was opposed to the idea of measuring the GDP because he didn’t want the central planners to try to nudge people to get a better number that would look better on a report. So I actually didn’t even want to measure the economy with some of these macro aggregate statistics, like how much capital do we have? And they had the rule of law from the Brits and not a lot else and then built a thriving economy that was really the marvel of the world and not so much anymore, but that’s a whole different story. I, my informal definition, I’m not sure I would state this as a formal definition, but my informal definition of capital is that which gives leverage to human effort That multiplies human effort and, and production specifications. So that would include getting a degree that would include management and organizational DNA. So if you take 10 people that know a bunch of things and you organize them into a particular business structure. And over time make all the managerial and entrepreneurial decisions to slot everybody in the right role and build the right communication systems between them that actually represent a significant investment in capital. And then if the Fed hikes rates and then that destroys that firm and that firm goes away, all that capital is now lost. Irrevocably. And so obviously, capital also includes cranes and bill rigs and factories and machines and trucks,  ports, harbors, airports, all those things capital and it is totally heterogeneous. It was totally non-fungible if a company that had that capital in the form of not only human know-how but the organization to put those 10 people that know those things in the right structure organized the right way that company goes out of business that is not in any way additive to the oil company. And even if the oil company would hire those 10 people just randomly in the market and those 10 people slot into the oil companies, the corporate structure in some way, they’re not in any way leveraging what that, that little firm had built, that capital is gone. And then sure those people know what they know and they’ll be hired and made available, but something is lost and there’s a nonfungible to it that is not, as Jeff said, not well understood or even recognized outside of Austrian schools.

Folks with, with, with some exceptions, I think there’s someone on the moneterist side that kind of gets that to some degree. But they do, they do want to get back to their macro aggregate equations. They do want capital to be, you know, like a scale or like one number that you plug in or maybe two or three, I suppose. But which is just totally wrong. It’s not modeled that way. The other thing that I remember really thinking about, I think, talked about this a bit is if you’re trying to write an equation to describe the economy, like you’re modeling particles of an ideal gas in physics. The problem is people are not particles of an ideal gas, they’re pesky because they have reason and volition and preferences and they react and then they remember they’re stale as well. But you know, like, so, you know, you, you, you run them through a boom-bust cycle and then you try to stimulate the boom again and you don’t get the same response function out of people because they remember they’re still smarting from the last one and their balance sheets are impaired from the last one. So there’s all this stuff going on, the particles of hydrogen gas bouncing around the container but people do. And so that whole approach of just writing an equation, you know, let alone the entrepreneur, just even the consumer’s right to multiple consumers is a fool’s errand at best and maybe a completely disingenuous court economist trick to nudge people and into accepting the central plan at worst.

Benjamin Nadelstein: Jeff, I want to bring it to you. Why don’t we use terms like aggregate demand to just get a function? I mean, I, I do ask myself this some time if it truly is math. Are you saying that the thousands of phd economists to the fed hires can’t do math? I mean, if it’s just one simple equation, you would think after a while they’d figure the economy out…

Jeff Deist: Well, MV equals PQ I suppose. I mean, it is, it is interesting that they call this physics envy. When the, when the social sciences want to use the methods of the natural or physical sciences to prove things.  In other words, you look at some data, you create a hypothesis and then you go out and test it empirically well, and that’s all well and good. And that has certainly has a place in economics. But the idea that human beings are not atoms, human beings are not molecules, human beings are not the same thing as physical elements in the natural world. And so as Keith mentioned not only irrational and spiteful and they have memories, but they also can be irrational. They can also be unpredictable, they can do all kinds of things that make in, in my view anyway, modeling,  AAA fool’s errand. And we saw that, I mean, we saw some of the most brilliant, academic economists in the United States dead wrong in that period, like oh five to oh seven about the state of the economy, about the state of the housing market, for example, a rational exuberance I, I mean, so if, if models are wrong, then maybe the actual idea of modeling is wrong. Human beings don’t fit into these categories. We can’t test them the same way we test things in physics or chemistry. But beyond that, I think just the idea of looking at economics more broadly again as scarcity and within that context of scarcity making choices and taking actions really helps us understand that economics is for everybody, right? It’s not some highly specialized thing that only a handful of really bureau brilliant phd technocrats should even attempt to understand. Now, clearly we should have and we need phd economists but not everyone’s a phd in math, but we certainly wouldn’t send our kids out in the world unprepared to make change at a cash register, right? We wouldn’t want to send our kids out into the world, unable to write grammatically correct complete sentences, but we don’t expect them all to be English professors. I would argue that some basic economics and economic competence ought to be a mainstay of at least high school programs. I personally I didn’t have econ in high school. I didn’t have it until undergrad. I don’t know how, if that’s common or not these days. It’s unfortunate because there’s, there’s twin and forces at work. One is just mass widespread economic ignorance and he said this sort of aggressive ignorance towards things people would just consider economics completely outside of their, of their world or their worldview and not something they need to consider or when or that economics is this incredibly specialized hypertechnical discipline that you have to have a phd. And if you don’t have one, you should just shut your pie hole, Jeff. I disagree.

Keith Weiner: Who was it? Which, which phd Nobel laureate was it? Who said if you don’t have a phd in economics, then basically shut the hell up. This was like 10 years ago, I think,

Jeff Deist: I don’t know the answer to that, but I, I could think of a few who, who would think that way for sure.

Keith Weiner: There, there was somebody who said that and it was basically an attempt to say, yeah, sure. Everything I’m saying is completely irrational and I’ve been proven wrong on so many occasions. But unless you have a phd, you don’t even count. Go away.

Jeff Deist: You, you you don’t know why I was wrong in effect. But let’s not forget it wasn’t that long ago.  For instance, when Hayek’s road to serfdom came out In the late 1940s that was actually condensed and serialized in reader’s digest. OK. So we’re, we’re the average layperson in the late 1940s was thought that they could, they could grasp and understand a book like that and actually enjoy it as pleasurable reading in their free time at home with readers digest. So this idea that economics is beyond most people’s ability to comprehend, I think is just dead wrong.

Benjamin Nadelstein: So Jeff, I want to kind of as we end here, ask you an important question which is, listen, I do think the Austrians are right. I think we should think about capital. I think we should use economics to kind of further civilization well being, but most people aren’t listening. Most people are continuing to do things that we know are wrong that are consing capital that are harming people. So at this point, why not just wait, let all those fiat currencies collapse, they’re gonna let the dollar eventually fall and then me and you can take our Austrian flag, we can stand on the pile of rubble and wave it and say I told you. So I mean, why, why come to monetary metals? Why not get in your bunker and just say, well, I’ll wait till Janet Yellen blows the whole thing up.

Jeff Deist: Well, I think we all have a responsibility to ourselves and to the truth, first and foremost, I mean, it, it doesn’t do you much good to in a Mad Max world to plant your flag and say, see, we are, we were right, that Say’s law was correct. While we’re foraging for food or something and I think it would be interesting someday to have a show about where Keith and I might disagree. It would be, it would be interesting to have a show on Austrian orthodoxy maybe versus heresy.  I think that would be fun as well. But no, I don’t like the idea of acceleration is this has sometimes been discussed in, I guess what we call free market or libertarian circles that with the entitlements and with the structure of debt and the dollar, this is all going to hell. So just don’t worry about it. No, I disagree. I think we owe it to ourselves and to our prosperity, to fight and try to make things better. And because that’s our obligation to have, the material, the wonderful material level lives that we have relative to our grandparents or great-grandparents, we owe them that and more importantly, there have been much darker times in us history. I mean, people have been through all kinds of terrible things. The Great Depression, the Civil War, I mean, for given the relative comfort in which we sit. I think it would be absolutely braven not to go out there and try to have some effect on the world, and Monetary Metals is trying to do that. In a business setting, profit is proof that gold works. And the idea that the aforementioned CEO of Honda has to sit around worrying about monetary policy along with everything else. He has to worry about making Hondas to strike me as an absolute tragedy. And if, if we could get money right in this country and in this world, an awful lot of human time and energy could then be expended on the actual production of real goods and services instead of having to worry about how to constantly hedge against these terrible depredations, these central bankers. So, no, I think we have an obligation, not in the sacrificial altruistic Randian sense, but in the sense of standing as beings who want to have self-respect. I think we have an obligation to be forthright and forceful in what we see as truth,

Benjamin Nadelstein: Keith. It’s gonna be hard to go up after that, but I’m gonna send it your way.

Keith Weiner: I’m trying to remember who said this but, suppose, your girlfriend or wife, somebody you love is about to fall off the edge of a cliff and you see this and you’re like a mile away and you’re not necessarily close enough to stop the tragedy. Do you just sit down and have a beer and just say, oh, well, or do you run for your life to try to get there? Hopefully, maybe you don’t necessarily have hope but you just have to run because you have to. I’ve said this many times but the collapse of the currency coincides with the collapse of our civilization. The nearest analog we have is 4 76 ad when that civilization collapsed, at least, in western Rome. The city of Rome had a population of well over a million people. And after the collapse, it was like 6000 or 8000 people. So there’s enormous loss of life associated with us and you can get a bunker, right? So in, in, in 2009, 2010, I looked around the world and kind of found South Island New Zealand to be an interesting place to try to survive a collapse because it had basically the combination of fertile land, plenty of rainfall. Because you’re not gonna have electric pps in that world. So the water has to fall out of the sky. A livestock-to-people ratio of 20 to 1 or something like that. Good, strong work ethic. That was not gonna be a mad max, sort of a place. But even now when civilization is holding together, it’s a bleak place. I mean, you’re, 15 miles from, I mean, and you’d be picking it deliberately. You didn’t want to be near a city because the cities are gonna collapse 15 miles from a crossroads town that has a little sort of half grocery store. Barely any internet and all these things even now. I looked at this and said, ok, you’ve been assing you survive the mad max zombie apocalypse of the collapse itself and you have sufficient storage of dried food and all those things. When you reemerge, the best possible hope is to reemerge into an 18th century agrarian world. And let’s not forget that was a world where 14 hour days, 66 days a week of backbreaking toil produced a bare subsistence. And that’s when there wasn’t some sort of pestilence that wiped out your crop or potato famine or whatever. Life was very hard, very meager and it was a young person’s world. Life expectancy was 35 to 40 in those days. So I looked at that and I was already past my shelf life even then, back in 2009, let alone now. I said I don’t necessarily expect that I would survive in that world. I don’t necessarily think I would want to try.

And I went all in to try to avert that disaster. That’s what Jeff describes it as a proof of concept. But  I’m trying to avert that disaster by bringing monetary change, the bottom up entrepreneurial way. Now there’s no hope or, you know, certainly no guarantee. It seems in a way crazy and, and audacious that we’re gonna run that mile before she, you know, falls over the edge of the cliff and she’s two ft away and we’re trying to run a mile. But doesn’t, doesn’t seem to be any other choice if you see the facts that way as I do, what else could you do? And I, I think there’s a responsibility if you want to live and you want to enjoy your own future and if you care about anybody else in this world,  then you do what you can and, and not out of any sacrificial duty, but out of a profoundly selfish sense of I like civilization. I think man has achieved quite a pinnacle of you know, it’s not just that we have lives of comfort and ease, but just, there’s so many great things that all of virtually all of human knowledge is available on the internet. And, you know, if I’m sitting there at dinner,  arguing with somebody over some fact or another, all of that is actually accessible from a little skinny little phone that I have in my pocket. I mean, you, you know, it, it’s great in every, in every level, medical science has improved. There’s, so many things that, you know, why would anybody want to give that up? That’s my answer to that.

Benjamin Nadelstein: And, and I do want to let the audience know Michael Malice just wrote this book. It’s called The White Pill. And it kind of does discuss this kind of hope. Not that there’s a guarantee of winning, but it’s not certain that we’re going to lose. And he kind of goes through some of the worst periods in time when communism was just a sure thing, communism, communism would never gone away, that iron curtain is going to be up forever. And we just live in a bipolar world. And then peacefully, almost overnight, we lived and the Soviet Union fell. I’m lucky enough to be here because of that fact. Um, so Jeff, I kind of want to say what is a question now that we’ve kind of painted a scene here of the importance of obviously what monetary metals are doing in the kind of dire circumstances we’ve been put in by this kind of central planning regime. What’s a question that we should be asking all our future guests on the podcast? And maybe what do you see as kind of a path forward here? And, and, and how does Monetary Metals play into that?

Jeff Deist: That is always the thought, what to do? I think that’s a great question for any guests. How do we move forward? What’s, what’s the path forward and in the entrepreneurial world, you’re always dealing with tremendous uncertainty. Every entrepreneur is groping in the dark. Our future is unwritten and you have to build it. It’s not just out there to be discovered. And so I think that’s the question for any guest you might have to give, given what you’ve said about the state of things or the money issues or central banking or whatever it might be. What should we do? What do you recommend to people for some people that could be just recommending a book or something to them that might be eye-opening? And there are other people that you might say, hey, look because of where you are in life, use the levers which Keith mentioned too, to help us tilt the access of this world and, and everything in between. But none of this matters. If we’re not acting on all of this, no amount of theory works if we’re not attempting to apply it. So that’s, that’s the question, and of course, I was asked that a lot at the Mises Institute. Well, what should we do? What should I do? What can I do? And, there’s no one answer for everybody, but some of your guests have a lot of special knowledge, some of your guests are probably wealthy and some of your guests are very accomplished and have a lot of education and knowledge. And so they’re particularly well suited. I think to answer that question, what should we be doing, Jeff?

Benjamin Nadelstein: Great question. I will be asking that for future guests. I want to thank you so much for coming to the Gold Exchange podcast. Your first but not your last Jeff. Thanks so much and we look forward to working with you at Monetary Metals.

Jeff Deist: Thanks, gentlemen.

Keith Weiner: Welcome aboard.


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The New Way to Hold Gold

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