The U.S. is headed for bankruptcy and economic decline, and the best way to protect your wealth is with #gold, said Yaron Brook, managing partner of BHZ Capital.
"[Hyperinflation] is quite unlikely because we know how to deal with inflation, we know how to stop it, it's just very, very painful. I think what we're really in for is a very long period of stagnation, maybe combined with inflation, maybe now. One thing we're not going to see is significant economic growth," Brook told Michelle Makori, editor-in-chief of Kitco News.
Follow Michelle Makori on Twitter: @MichelleMakori (https://twitter.com/MichelleMakori)
Follow Yaron Brook on Twitter: @yaronbrook (https://twitter.com/yaronbrook)
Related Articles:
0:00 - Direction of U.S. economy
4:15 - Inflation and the U.S. dollar
7:34 - Assets to buy, assets to avoid
8:44 - Bitcoin as a store of value
9:27 - Gold as legal tender
11:00 - Central bank digital currencies
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Michelle Makori: Hello I'm Michelle Makori coming to you from Freedom Fest 2021 in rapid city South Dakota and joining me now is a leader in the libertarian movement Yaron Brook is the best-selling author of several books including Free Market Revolution How Ayn Rand's Ideas Can End Big Government he is the chairman of the board at the Ayn Rand Institute he can be heard weekly on the Yaron Brook show and he is also the Managing Partner at BHZ Capital, Yaron great to have you with us here
Yaron Brook: Thanks for having me on
Michelle Makori: All right here on one of the biggest ideas you champion whether it's a speaker as a hedge fund manager as the chairman of the Ayn Rand Institute or as an author is this idea of restricted government capitalism and pursuit of individual interests
Yaron Brook: Yes
Michelle Makori: Now the US government has taken on a different role due to the pandemic at least that's the premise that's been given and we've seen benefits expanded across the board now there's talk of making some of these more permanent what does a signal to you about the direction of the US economy is headed into
Yaron Brook: It's very scary not only have we seen a massive expansion in government spending in government programs in the dependence of people on government we saw lockdowns who would have thought that the American government could lock down its citizens for months and months not just a flat in the curve of hospitals but because some bureaucrat has decided that you know he knows better how you and I should live so generally I think what covert is in is provided us with information about is the fact that the American people are willing to behave like sheep when the government dictates what they should and shouldn't do and also the government is willing to take on these massive powers so I think economically we're seeing the US move slowly but systematically towards bankruptcy
Michelle Makori: Towards bankruptcy?
Yaron Brook: Well who's going to pay this debt there's no way to pay this debt back if this debt leads to inflation interest rates will go up and the national debt will be unmanageable because the our government raises capital, raises bonds short term so they issue one year three month bonds if interest rates go up the cost of that alone would wipe out that everything that that is provided through taxes so you know we are we are approaching levels of debt that we saw in World War II, but in World War II right after the war we ran surpluses so we paid it all back nobody's gonna run a surplus today politically that's impossible they're just talking about spending more and spending more on spending more and raising the debt even to new heights so that scares me, but what really scares me is the fact that the American people now view themselves as completely dependent on government right we had lockdowns so what's the solution we'll give you a check to stay home we shut down businesses what's the solution we'll give you a check to stay open everything now depends on government and that is destroying the sense of entrepreneurship the sense of individualism that Americans have and that's scary culturally
Michelle Makori: Well it hasn't pervaded everywhere yet but that certainly has been the predominant theme and the predominant message and a lot of people have been to your point just relying on government benefits now you touched on inflation and you said if it seems to me as though inflation is already here although Fed chair Jerome Powell is insisting that it's transitory, it's temporary that they've got the tools to fix it but nonetheless this is leading to tremendous concerns about dollar debasement if we aren't able to pay back this debt if there is a situation where inflation becomes hyperinflation if the Fed is in a position where it does have to raise rates and there's a taper tantrum all of this is not painting a picture of confidence in the fiat currency which is the us dollar are you concerned about that
Yaron Brook: Very much so I think there are real issues that you just specified you know we've got inflation, inflation is rising whether it's temporary right now or not long term this level of spending is just unsustainable the only good thing the only thing going for the US dollar if you will is that everybody else is doing the same thing, the Europeans are printing money like crazy and increasing debt like crazy their central bank is buying up government debt just like our central bank is, the Chinese are doing the same thing couldn't even switch to Chinese currency there is no good currency in the world but this is a global phenomena and it's going to be a global crisis and it's a global problem and what I think rather than hyperinflation which I think is quite unlikely because I think they you know we know how to deal with inflation we know how to stop it, it's just very very painful I think what we're really in for is a long period of stagflation/stagnation may be combined with inflation maybe not but one thing is guaranteed we're not going to see economic growth significant economic growth in the United States or in the world for a long time
Michelle Makori: Well the argument could be made look at the growth that we're seeing now subsequent to the reopening
Yaron Brook: Well that's fake right because once you dip down dramatically we're barely getting back to where we were before the crisis see yes everybody goes back to work everybody gets you know gets a check from the governor goes spends it you're seeing that but once this stabilized once the effect of covert recovery goes away then the question is what is long-term growth and long-term growth I'd be surprised if it was over 1% and it's in it if you combine that with inflation it could be devastating so I just don't see good things happening in the US economy, you've got massive mal investment you've got money flowing to the wrong things and all this is leading to long-term we are all not going to be able to benefit from what's possible
Michelle Makori: So you're a free market champion what is the free market solution to this then
Yaron Brook: Well the free market solutions get governed out of our lives get governed out of every aspect of our lives get government out of our business the business of business which means get them out of the get the regulatory state shrink it and eviscerate
Michelle Makori: How do you get government out of your life
Yaron Brook: Well the only way to get government out of life is to convince people you the viewer of this all of us that government is destructive the government is a destructive force when it comes to economics now I'm not against government I'm not an anarchist I believe government is good at one thing that's protecting our rights but what it does today is not protect our rights it's violating our rights and it's intervening in every aspect of our lives and we saw that during Covid when it was at a max point of intervention so we need to educate people about the proper limits of government and to start phasing government out you know it when it comes to the dollar when it comes to that you know we didn't always have a Federal Reserve people don't know this but there once was a time when America prospered, grew at very high GDP rates and there was no central bank we somehow managed
Michelle Makori: So let's put on your fund manager hat on and give me some practical advice as an investor to deal with this
Yaron Brook: Well it's really a difficult time as an investor right now because the fact is that if inflation happens then bond prices are going to tumble and if you stay in cash and there's inflation the value of your cash is decreasing I mean the fact is that if if there really is inflation you want to be in something like gold because gold actually maintains its value it's not an investment as much as it is a store value it's an ability to actually maintain the value, you know stocks don't do terribly under inflation but you better not be in long-term bonds, long-term bonds are crushed in an inflationary environment of course the slow growth is bad for stocks, you know government intervention in the economy and slow economic growth are not good for investors, we want as an investor I want freedom and freedom means government to separate itself from economics, from economic policy
Michelle Makori: Well on the idea of freedom you have those championing bitcoin and cryptocurrencies as an alternative store of value asset what are your thoughts on that
Yaron Brook: I'm not a big fan of bitcoin cryptos I think it's still too early to tell I think we'll see how they evolve I don't think crypto is going to be a store of value I think crypto is going to facilitate / be a facilitator of transactions so smart contracts are something I think that is very interesting the whole blockchain phenomena is an interesting phenomenon I don't think it's a currency, you know I like gold as a currency I'd like to see cryptos backed by gold but at the end of the day gold is money, money should be a commodity money should have some reality to it it's a physical reality
Michelle Makori: Although there's been a push to make a gold legal tender by some members of congress that's not going to happen
Yaron Brook: No, but I also don't like the idea of legal tender I'd like the government to stop having legal tender um they should have they the only sense in which the government should intervene in the currency is say okay we accept gold as payment for taxes that's it other than that they should have no involvement in currency but you know gold is a good way, you know the idea would be shut down the Fed it would take some time you'd have to phase it out but the idea would be private banking where the banks issue the currency, it used to be that on a dollar bill you had the name of the bank that issued the currency and that money in order to be legit from the marketplace's perspective would have to be backed by something I think the best thing to back the best thing to back it up is by gold but it should be private banks it should be competitive, different currencies can compete if you want to start a currency on bitcoin if you want to have a currency that's backed by plutonium I don't know whatever the hell it is, let the market decide what the best currency is I think it'll be gold but
Michelle Makori: So free market principles applied to the idea of currency it's a great idea and we're actually moving in the opposite direction
Yaron Brook: Yes we are
Michelle Makori: Especially if you look at this idea of a central bank digital currency which as we know is being led by china and there's talk that the US may move towards a digital dollar the Fed currently preparing a paper that it's going to release at the end of summer in September what would a US digital dollar mean
Yaron Brook: I think the only real thing that the digital dollar adds to the ready status system, system where the government controls pretty much everything that it wants to control um the thing the digital dollar adds to that is, that now they monitor everything that you do basically the digital dollar is really there to replace cash because we already have digital everything right use your credit card for everything they're monitoring everything that you do financially but once you have a digital dollar and you're not allowed to use cash which I think is with getting to the day where they will ban cash already some Scandinavian governments have tried to ban cash, by banning cash they want to control and monitor every transaction that you engage in they want to make sure you can't cheat on your taxes on one cent because they'll know everything you spend your money on that's scary that is now tracking everything
Michelle Makori: That is not scary many would say that that is downright terrifying when this is something that's championed by the people's bank of china the PBOC
Yaron Brook: You can understand it
Michelle Makori: You can see why it would be appealing to the CCP, but when you take into account that every yuan will be monitored by the government they will know exactly what you spend it on who you pay to who pays you and more importantly you could be cut out of the system if you don't play by the roles if it's all digital, if you're saying that the idea is potentially to move towards a cashless society in the United States and we would have the same restrictions with a digital dollar where the US government knows every single time you make any kind of transaction and they take paper money out of circulation meaning that those dollar notes are practically worthless is that not against the very ideals of American liberty and freedom
Yaron Brook: Absolutely and look one of the arguments for cryptocurrency and legitimate arguments is that's a way around the system so it's really to preserve liberty because they can't trace that now I think when we get to that point I'll ban them and they make it very very difficult for you to transact, but yes we have already moved so far away from American liberty that the founding fathers if they showed up in America today looking at the level of freedom they couldn't recognize the place, we already are being tracked by the government just you know remember Snowden, remember the NSA and what they're doing and what they're listening to and what data they're accumulating on us the Federal Reserve doing this would be just one more step, think about the lockdowns that's a police state the lockdowns were a police state
Michelle Makori: But a Fedcoin seems to me to be the ultimate step of regulation of control of monitoring the fact that it is something that is being contemplated and granted I would imagine that Congress would have to vote on it but the fact that it's being contemplated and the narrative is put forward the US is going to have to do it or be left out do you think it's an inevitability
Yaron Brook: I don't see who's resisting it I don't see the American people standing up for their freedoms they didn't
Michelle Makori: Should it be resisted
Yaron Brook: Oh absolutely but so should have locked down so should much of what's happening in the world today so should be the very fact that the NSA has a file in every one of us so there's a lot that should be resisted and the fact that the American people are acting like sheep and accepting what government tells me that liberty, the spirit of liberty is kind of dying in this country and it's tragic and sad and this is what needs to be fought and we need to resurrect that spirit and maybe it'll take a shock to the system like a Fedcoin but I doubt it because the shock should have come during the lockdowns I mean to me I keep repeating that because to me that's so shocking the idea that you would be told you have to stay in your apartment for X number or you can walk for a block or two blocks from your home and then everybody would go oh okay we'll do that that to me is so anti-American that to me is so, I mean imagine George Washington saying yeah okay the government can tell me what I can and cannot do and when I can stay at home that is a travesty, the government has no business in this unless it's an emergency for a couple of days because I don't know the hospitals are being overloaded but it's not about hospitals anymore it's about central planning, trying to run our lives and digital currency is not about a better economy, it's about control nothing else this is about controlling our lives and managing our lives by people who want to accumulate more, look the Federal Reserve already is a gazillion times more powerful than it should be, it shouldn't exist we should have competitive free market banking so we already live under significant control I think this is just one more increment in the slow death of American liberty but every increment needs to be fought as if it's the you know as if it's going to be the one that kills us because it could be the one that ultimately kills us
Michelle Makori: Yaron on that's a very pessimistic note yeah but it's sobering though
Yaron Brook: So let me let me just say let me just say it can be fought and it should be fought and if it has to be fought in this country there's no other country in the world that has a in a sense tradition and a legacy of liberty a legacy of the founding fathers who, look the founding fathers fought the mightiest military force in human history for what for freedom and liberty, you'd think we could muster the energy muster the courage to fight a bunch of bureaucrats in Washington who are nowhere near as powerful and as strong as the British were who are not going to unleash the US military on us and we fight by speaking, we fight by talking about it, we fight by educating people, we fight by going out there and explaining
Michelle Makori: And I think if we do our job we can still reverse this it's not too late well you're certainly doing your job of speaking and educating and being very vocal so thank you for speaking with us here at Kitco News, Yaron Brook we really appreciate it
Yaron Brook: Thank you it's a pleasure
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