Uncharted Territory

A transcript of the Lew Rockwell Show episode 331 with Bill Haynes.

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ROCKWELL:  Good morning.  This is the Lew Rockwell Show.  And how great it is to have as our guest this morning, Mr. Bill Haynes.  Bill’s president of CMI Gold & Silver in Phoenix, a company that he started in 1973.  Every week, he gives King World News the update on what’s happening in the precious metals markets.  He used to be a broker on Wall Street but he went straight and got into the gold and silver business.

So, Bill, tell us, first of all, what the heck is the government and the Fed doing to the economy?

HAYNES:  Well, basically, it appears that they’re attempting to destroy it.  But, Lew, in reality, I think what we’re dealing with here is we’re dealing with an uneducated public that’s permitting it to happen.  We’re dealing with special interest groups who want it to happen because they want their beds to continue to be feathered.  And we’re dealing with a problem that the people in the Austrian camp have been battling for a long time, and that’s called Keynesian economics.  Basically, I view it that the establishment has been very successful at selling Keynesian economics to the point where it’s almost universal thinking.  You see it in all of the financial publications that all we need to do is to print the right amount of money and some how or another this economy will all correct itself and we’ll all live happily ever after.  You know, one pundent called it the Goldilocks Theory; you know, they’ve got to get the soup just the right temperature.  They’ve got to print just the right amount of money and everything will be fine.  But as students of Austrian economics, we know that we’ve really entered into the dreaded uncharted waters about what happens when there’s absolutely unlimited money creation.

ROCKWELL:  In fact, I wonder why there have to be taxes.  In fact, why do any of us have to work?  Why don’t they just print the money and hand it out to us?

HAYNES:  Why do they go through the charade of borrowing money from the Federal Reserve?  Why doesn’t the Treasury just print it, the Bureau of Engraving?  Print it in the Treasury.  Why do we need the Federal Reserve in there?

ROCKWELL:  They set up the Federal Reserve to try to trick the public.  And, of course, it’s been very successful, too.  And they sold it, first of all, as an anti-inflation institution and that it would prevent inflation, and that you sort of couldn’t trust the Treasury but you could trust this institution set up by the big banks at Jekyll Island, Georgia — J.P. Morgan and Rockefeller and all the rest of them.  So it was a trick.  And I guess it’s been pretty successful.

If the Treasury just prints the money, it doesn’t go through the banking system initially, whereas, the Federal Reserve inflation operates through the banking system.  And, of course, it’s a huge benefit to the banks.

HAYNES:  Well, the special interests certainly know what they control there.  It is a wonderful franchise to be able — (laughing) — to create a nation’s — in this case, Lew, as we all know, create the world’s currency.

ROCKWELL:  I always remember a cartoon that Gary North had in one of his publications many years ago, and it shows a guy running a counterfeiting press in a basement.  And there’s a chart on the wall and it shows the value of money going down and the price of paper going up, and they’ve just crossed, and one guy says, “Stop the presses”!  So — (laughing) — of course, this actually happened in Zimbabwe, didn’t it?  And it happened in Uruguay and other countries where actually they couldn’t afford to buy the paper to print the money.

HAYNES:  Well, Lew, you yourself have been a student of Austrian economics for decades now.  We have an entirely different situation today than we had in the Weimar Republic or the French Revolution, South American countries, in that we’re dealing with the world’s reserve currency.  Now, it is our currency, issued by our Federal Reserve legally under our laws, but the currency is used worldwide.  So I’m of the thinking that we’re not going to see the demise of the dollar in the rapid speed that we saw the demise of other currencies in those famed hyperinflations, that this will drag out for a long time.

Gary North has written in some of his articles on Lew Rockwell that this economy is so complicated and integrated, but more properly, he spoke, it’s highly specialized in the division in labor that you have to have a currency to make it work.  You are not going to barter iPhones for oil.  So people will cling to a currency for a long, long time.  And that’s why I think that this battle, trying to get people to realize the dangers of the central banking and this fiat money, is going to go on for a long time because there’s a need to hold on to that currency.  So this is a battle that we will fight for a long time as I see it.

ROCKWELL:  I think you’re right.  We’re not going to face a Weimar Republic or a Zimbabwe situation or a Serbia or some of the other famous inflations for exactly the reasons you outline.  In fact, if this were sort of a one-country currency, given what the Fed has done so far, we’d have hyperinflation right this minute because the expansion of the monetary supply has been so great.  But starting with, certainly, fully, with the Bretton Woods monetary system — and it happened before that — but with Keynes’ Bretton Woods monetary system where the rest of the world was on the dollar standard and the U.S. was allegedly on the gold standard, you had the U.S. able to push it’s inflation off on other people so that other countries would pay the price.

And probably no coincidence that both Iraq and Iran, and Libya, too, decided they weren’t going to use the dollar any more and then they got destroyed.  That’s a threatening thing.  And I must say I was thrilled to see recently that — of course, the U.S. has got sanctions, horrendous sanctions against Iran, including banking sanctions.  And so Turkey paid for shipments of natural gas from Iran with shipments of gold.  I don’t know to what extent the Iranians are dealing in gold versus dollars or other currencies that will have to go through the banking system but certainly it’s an interesting phenomenon.

HAYNES:  Lew, our hero, Ron Paul, often talks about blowback and these unintended consequences of these government activities.  And as you know, the State Department, working with the Federal Reserve, shut Iran out of the international monetary system in order to exchange currencies.  And I remember seeing a report where Iran said to China, OK, we’ll take your currency in exchange for oil.  And so there we have just a little nick in the armor of the dollar.  Here’s one country that says we’ll take this upstart China’s Renminbi currency.  And so who is next?  Somebody in Europe?  So we have these consequences of intervention worldwide in the financial affairs of other countries.


ROCKWELL:  And, of course, it’s all being done for the banks, isn’t it?  When they talk about bailing out Greece or bailing out Spain, bailing out Ireland, they’re not actually bailing out those countries, let alone the people who live in them.  It’s the banks that hold their notes, the government notes, who are being bailed out; and, of course, apparently, endless bailing out.  And, of course, the same thing has happened in this country, too.

HAYNES:  And, Lew, that’s what’s driving the gold market right now.  We talk with the people — I talk with my brokers who talk with the people who call in here, and I can say that the people who have read — they don’t have to be capable of explaining it in front of a classroom but the people that have read the Austrian economics, who have read the great books that the Mises Institute has made available to people — Rothbard’s wonderful books on What Has the Government Done to Our Money?, The Case for A 100 Percent Gold Dollar, The Case Against the Fed — the people who have read those books are more solidly entrenched in the gold market than, say, a very successful businessman — I would equate them to a Mitt Romney type — who can make money in this system but they really don’t realize the dangers of fractional-reserve banking, of the Federal Reserve and what the Federal Reserve is doing.  They just know something is wrong.  And they are coming to the market in droves.  But the people who are really making the big money are the people who maybe came to the market a little bit early because they said we cannot continue with the monetary policies that the U.S. government has had.

And what I would point out also is that — I’m paraphrasing now of what Ludwig von Mises said — that once you enter into an artificially induced boom that boom will continue until either the credit expansion is stopped or until the money is printed until it is destroyed.  And I’m now of the age that I remember when credit cards were introduced and when credit cards were then foisted — not forced — but foisted on unsuspecting people, and so that was a massive credit expansion that just coincided with Nixon taking us off the gold standard finally on August 15, 1971, and right in that area.  So we have the Federal Reserve.  We also have fractional-reserve banking, which is also a huge source of money creation.

ROCKWELL:  No, that’s right.  And, of course, that’s why we hear the constant calls for everybody to go into debt, to spend every dime they’ve got, that that will be good for the economy.  If only you spend every dime, don’t save anything.  And this is, of course, sort of a vulgar form of Keynesian economics.

One tragic thing is Keynesian economics sort of works.  It works for the government.  Joe Salerno always points out it’s the economics of government power.  It works for the fractional-reserve banks.  It works for the big economic interests that are in cahoots with the government.  It just doesn’t work for the people.  So, of course, one way people are protecting themselves, they are getting into the precious metals markets.

HAYNES:  And they are coming big.  But I will have to tell you, it’s my observation that the average person doesn’t yet know what’s going on.  It has to be somebody who is out on the cutting edge trying to figure out what’s going on.

ROCKWELL:  No, and they’re not going to know until the roof falls in on them, is the tragic thing.  Families are going to be destroyed.  Communities are going to be destroyed.  Nobody I think realizes quite what’s in store.  And it probably will be a long, slow decline of the sort that Japan has been experiencing.  But, of course, it could also be — since we are, as you point out, in unchartered territory.  There has never been a case where every country had a central bank, every country had a totally discretionary monetary policy with no reins on it whatsoever, no even partial, little bit of a gold standard, like the one that Nixon abolished.  So every single country — and, of course, under the direction of the Fed, they’re all massively inflating.  Whether it’s the Bank of England or the Bank of Japan or the European Central Bank and Swiss Central Bank, Italy, they’re all aiding in pumping out the new money.  Again, this is something we’ve never faced.  My guess is we can’t know entirely what’s going to happen; we just know it’s going to be bad.

HAYNES:  I would agree with that.  It’s going to be bad.  We just don’t know how bad it’s going to be.

ROCKWELL:  Well, Bill, tell us, if people want to listen to your weekly commentary on the markets, where do they go on the Internet?

HAYNES:  Well, Lew, it’s posted on Saturday mornings.  It’s called King World News.  And they have to search for it.  It’s called the Weekly Metals Wrap.  Usually, they open up the website and scroll to the bottom and it says Weekly Metals Wrap.  And I make the commentary, along with a technical analyst, about what the gold and the silver markets are doing that week.  We are heavily steeped in Austrian economics, although I would not claim to be a Thomas Woods when it comes to Austrian economics.  But we believe we’re on the right track here.

And the American people need to be listening and educating.  And I would encourage them to go over to Mises.org and pick up those books that you guys provide free on PDF and start reading so they can get a grasp.  You can’t just get into gold, buy it at — pick a number — $1,600 — see it rise to $3,200 and say, gee, I’ve made a great profit, I’m getting out.  I really believe that there’s a lot of people getting into gold today that will never sell it.

I often get asked, OK, you tell me now’s the time to buy; how will I know when to sell.  And the only answer I really can give people is when you see something you want to own more than you want to own that gold.  Maybe it will be a business.  Maybe it will be a house.  I don’t know what it will be.  But that’s when you decide to get out of your gold.  But I think there’s a lot of people that will never sell their gold.  They’ll just accumulate it and pass it on to their heirs.

ROCKWELL:  Well, that’s certainly the right thing to do.  I know the late Burt Blumert,

your colleague in coins and gold and silver bullion, used to say that when he was asked that question, he said, well, when you’re going to send a grandchild to college, when you’ve got to pay medical bills, but he said it’s got to be something significant, something serious, not something frivolous.  These are like your core savings and your core protection for the long term and maybe for your children and your grandchildren, too.

HAYNES:  I agree with that completely.  We sure miss Burt.

ROCKWELL:  Sure do.

Well, Bill, thanks a million for coming on the show today.  And, of course, we’ll link to your website and also to King World News.  Keep spreading the message.

HAYNES:  Thank you very much, Lew.  It’s been a delight to visit with you.

ROCKWELL:  Thank you, Bill.  Bye-bye.


ROCKWELL:  Well, thanks so much for listening to the Lew Rockwell Show today. Take a look at all the podcasts. There have been hundreds of them. There’s a link on the upper right-hand corner of the LRC front page. Thank you.

Podcast date, December 14, 2012

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