A Gold Standard Just Doesn’t Make Any Sense Today - Inc’s Ledbetter

Gold has a long and volatile history, to say the least. But its history in America is one worth learning about. That's why our next guest has dedicated an entire book to the precious metal. He joins us here today in studio: James Ledbetter. He's the editor of Ink and author of his latest book One Nation Under Gold. James, welcome to the show. Thanks so much for being with us.

Thanks for having me.

I read your book with great enthusiasm. Thank you. And I guess the first question is: why now? What made you look at the topic?

Sure. The actual inspiration started in January of 2012. I was watching the Republican presidential primaries, and it dawned on me that there were seven men on stage, six of whom said if elected they would either restore the United States to a gold standard or seriously consider restoring the United States to gold. And that ended up in the Republican party platform of that year and also 2016. And it just dawned on me: nowhere else in the world is that discussion happening at that high a political level in a major political party. And why is that? And so the more I looked into what is the appeal of gold to this audience, to the Republican voter, primary voter particularly, the better the story got, and I just got deeper and deeper into our history.

Well, let's look at the gold standard, because I've been covering gold a long time and it's probably one of the most heated debates, you know, whether we should return to a gold standard or not, or whether it's viable. And you make arguments, I guess, for both sides, but you don't really see it happening, right?

I don't see a return to a gold standard making any sense, either for the United States or for the world economy. First of all, it would be tremendously disruptive to the financial system. Some people see that as a feature, not a bug, but I think when it comes to actually pulling the trigger, that's something that responsible governments have to take into consideration. Second of all, we can't really grow an economy if all you do is buy and trade with gold. Third of all, we had a Gold Commission in the 1980s study this question, and one of the things we learned is there's not even agreement on what a gold standard is. There's lots of different ways to define it, and the people who care most about it hate the other guys the most. And so I just don't see it as practical in any.

How do you view gold? Is it a safe haven for you? Is it a currency? Is it just something you keep in your...

I'm not personally invested in gold. Not because it's a contradiction or a conflict of interest for the book, but rather it just doesn't appeal to me. It's certainly a viable part of a portfolio. I think most experts will tell you to try and keep your holdings under 5% of everything, just because of safety. Like anything else, it's subject to market timing. People, if they bought at the right time and sold at the right time, could make a lot of money, but there's many people on the other side. It's also very difficult to invest in gold without falling into various traps about fees and shipping and all that kind of stuff. So I view it as something that's essential to the American character. We will never, for better or worse, be able to iron it out of who we are, because it's built into our DNA. And I certainly believe that the prohibition against owning gold, which occupied most of, I should say, about 40 years of the 20th century, that was wrong. That was a policy that should never have been in place for that long. And a lot of this book is really about the struggle to make gold legal again in the 50s, 60s, and 70s.

So much great history and stories in this book. So in your research, what struck you? What do you think, you know, that's an interesting story?

The craziest thing I came across... I actually always sold the book when I found this. In the 1960s, the United States government, whether the Johnson administration and a few sympathetic members of Congress, embarked on what can only be called a 20th century alchemy quest. The problem was that the Bretton Woods system was in the process of breaking down. There wasn't enough gold to go around the world to back up all the dollars and dollar-backed securities that were out there. And one of the solutions that was very appealing was: let's find some gold where it's never been found before. And a secret program called — of course because it was 1965 — Operation Goldfinger was put into place, using a kind of slush fund from the Treasury. There was no legislation, there were no debates. And all of these scientists set out all across America, actually all across the world really, to try to find gold where it hadn't been found before. Is there gold in plants? Is there gold in meteorites that hit the earth? Is there gold in deer antlers? All these things were actually studied. And of course the inevitable answer was: yeah, but not much. And to get it out of the deer antlers, given the fixed price at $35 an ounce that obtained at the time, would be ridiculous. And so after my check — I don't think they were in deer antlers, it's like parts per billion, it doesn't make any sense. But it's a wonderful tale that I was able to find through my archival work.

Do you think we'll see the day where central banks will move away from having gold in their vaults?

I can't imagine it anytime soon. I mean, there are very few alternatives that make any sense. I suppose you could stockpile something radioactive, that could also be very valuable but it's also extremely dangerous. You could stockpile silver, but silver would take up so much room that you would need like a whole state to have a vault. No, I think gold has a place in the monetary system, both in the United States and globally, but it's just not at the center.

What about these comparisons that we're now hearing between gold and the new wave of digital currencies, of Bitcoin?

Yeah, I mean, it's curious because in one way they're complete opposites. One is the physical embodiment of money, and the other is completely non-existent in the real world. But at the same time, I think that they do appeal to at least maybe not the same group of people, but an overlapping group of people: people who are skeptical about central banks, people who believe that paper currency has all these weaknesses and will eventually fail. I think there are some interesting proposals out there to apply the blockchain technology that Bitcoin users to some form of digital gold. Is that ever going to really be a large viable way that lots of people officially or unofficially trade with each other? I kind of doubt it. It's more of an intellectual experiment for me. But there are breakthroughs that are possible.

James Ledbetter, One Nation Under Gold. I urge everyone to get a copy. It's a great book. Thanks.

Thank you for having me.

And thanks for watching this edition of Caicos Gold Report. We'll be back tomorrow.