[00:02:39] Stig Brodersen: So there’s a lot to unpack there, everything from Costco to central banks and I hope we can cover as much as possible. But let’s start with the central banks that you just mentioned there. So 2022, that was a record year and 2023, there was also well, that was the second consecutive year where central banks bought more than a thousand tons and so what’s a thousand tons of gold? How can we put that in relation to anything?

[00:03:02] Stig Brodersen: So this is compared to an estimated 2,500 to 3,000 tons of gold being mined annually but we also have a gold stock around 200,000 perhaps a bit more that’s ever been mined. Now, let’s start with, if we look at the aggregated central bank balance sheets, how much of that is allocated to gold and how do you expect that to change over the next 5 to 10 years?

[00:03:26] Lyn Alden: So they have an amount that’s like 30 some thousand tons, all central banks combined and the history of that is that during the 80s, 90s, 2000s, that overall tonnage was generally on a gradual decline in the world. And it bottomed in 2009 and then started gradually going back up from there is kind of the history of central bank gold holdings in absolute tonnage.

[00:03:51] Lyn Alden: We’re also seeing that back around 2013, 2014 is about a decade ago now, foreign central banks in aggregate kind of stopped loading up on U.S. Treasuries and there’s a number of reasons for that. Generally speaking, whenever the dollar index is strong, somewhat intuitively, some of the banks are not really buying treasuries much when the dollar index is strong and that happened around 2014.

[00:04:15] Lyn Alden: And so, we’ve kind of been in this like stronger dollar environment to varying degrees since then and there’s been less treasure buying in largely because of it. There’s a couple of different reasons. One is that about a decade ago, China announced that accumulating treasuries is no longer in their interest.

[00:04:30] Lyn Alden: And so we’ve seen a shift from them toward diversifying of their portfolio strategy and including more illiquid investments, things like. Lending to other markets for commodity deposits and or infrastructure, basically the belt and road initiative type of activities. That’s kind of been 1 of the areas as well as increasing their gold holdings.

[00:04:49] Lyn Alden: And so there’s been some strategic aspect to it, but there’s also just a strong dollar aspect, which is that whenever the dollars in one of its big weakening cycles, like it was in the seventies or like it was in the late eighties or like it was in the two thousands, generally, other currencies are therefore doing pretty good.

[00:05:06] Lyn Alden: And sometimes they even want to weaken their currency a little bit. And one thing they can do is increase their reserves. They can create more of their currency and buy foreign assets. It could be treasuries, could be gold, whatever. So generally they tend to accumulate assets, including treasuries on a weaker dollar trend, but when the dollar is strengthening or it’s kind of holding at a strong level, they’re generally more in currency defense mode, and so they’re usually not increasing their reserves by very much.

[00:05:30] Lyn Alden: Now that’s as a group, you could still have individual countries that are acting out of, the average, but as a group, their debts, they’re like dollar debts are generally harder because the dollar is stronger now, their currencies are a little bit under pressure. And so, if anything, they might be selling some reserves to buy back their own currency, but at the very least, they’re often just not really accumulating reserves aggressively when they’re trying to keep their currency propped up to a significant degree.

[00:05:55] Lyn Alden: That’s the environment we’ve been in and so, but around the margins, they are pointing more toward gold than treasuries over the past 10 years or so. And I think there’s a number of reasons for it. I mean, basically, during the entire kind of post GFC decade treasury, short term rates were held at near zero.

[00:06:13] Lyn Alden: You also had this increasing kind of, I would argue a multipolar tendency in the world. So any sort of U.S. security, treasury security, stock security, corporate bond security, whatever the case may be. Those are freezable assets. They can be unilaterally frozen by the U.S. government and so there’s a number of entities that are either frenemies or competitors, or just for their own, even if they don’t see like as a high possibility that their reserves be frozen, they say, look, I mean, we, we might be pressured at some time in the future.

[00:06:43] Lyn Alden: We don’t know who’s going to be president for election cycles from now. So let’s diversify into a little bit of other currencies. Let’s diversify it to gold. These are kind of the options that they have available to them. And I think those are some of the trends that we’re seeing in that kind of central bank world.

[00:07:01] Stig Brodersen: I would talk about 5 percent of central banks’ balance sheets that’s allocated to goal is a 10%.

[00:07:07] Lyn Alden: Last I checked it’s over 10%. I don’t have the numbers in front of me and it depends on the central bank. I mean, Russia, for example, even before their reserve freezing, they had a very high percentage of gold.

[00:07:17] Lyn Alden: Canada’s like, I think they have like no gold anymore. A lot of the European ones are fairly high. Italy, Germany, they have a fairly high gold percentage. The United States, because they’re the axiom of the current system, they have very minimal foreign currency reserves. Their gold holdings are still substantial.

[00:07:33] Lyn Alden: And so in aggregate, I believe it’s low double digit percentage, which makes it one of the larger reserve holdings, but still notably smaller than their collective treasury holdings.

[00:07:44] Stig Brodersen: Yeah, and just to continue that, whenever you say reserves, like you’re referring to treasuries because there are interest bearing, it’s not like the actual currency, but you’re talking about treasuries and that can be frozen. Is that correct?

[00:07:57] Lyn Alden: Yeah, I’m referring to foreign exchange reserves. That’s different than bank reserves. So yeah, it’s good to bring up that distinction. Bank reserves in any given country are part of their base money, along with currency and circulation. That’s a direct liability of their central bank.

[00:08:10] Lyn Alden: Whereas foreign exchange reserves is, a country is operating, basically there’s 160 currencies in the world and you kind of think of them like arcade tokens where they’re all these kind of some of them are pegs. Some of them are free floating and with more capital is kind of flowing into that currency.

[00:08:25] Lyn Alden: It’s generally strengthening more capitals leaving that currency. It’s generally weakening. Partially dependent on supply and demand of that currency, right? If Argentina’s currency is expanding at a very rapid rate, not a lot of people want it. And also the supply keeps increasing. So that’s going to keep deteriorating, diluting against other currencies.

[00:08:43] Lyn Alden: For example, I think that’s a fairly extreme case. But in a more marginal case, generally speaking, if a currency is weakening too much, they want to be able to have something that they can sell and then buy back some of their own currency with. Basically, all these currencies are being bought and sold many of them.

[00:08:59] Lyn Alden: So something like 90 percent of FX transactions and FX is a massive market. Something like 90 percent of them have the dollar on one side of the transaction. And so there’s not a lot of volume between different currency pairs. They’re mostly like, if you want to go from one currency to another currency, it’s often your currency to the dollar.

[00:09:19] Lyn Alden: And then the dollar to that other currency. That is changing a little bit because, say, China and Russia are doing more direct, swaps now and things like that but in general, that’s still the case globally. And also, for example, most oil, most international contracts are denominated in dollars.

[00:09:35] Lyn Alden: Most global capital, like if a company in, if an investment company in Germany lends to a corporation in Brazil, for example, even though the dollar is neither of their currencies, that’s likely going to be in dollars. The Euro is the second biggest, but it’s a distant second. So the dollar is by far the biggest currency used for international lending.

[00:09:54] Lyn Alden: So denomination of international contracts, denomination of international lending, and most for oil sales, that’d be part of international contracts. And so the purpose of having reserves is a few fold. One is that they can defend their own currency. They can sell some of their reserves to buy back some of their own currency or inverse if they want to weaken their currency, they can create more currency and use it to accumulate reserves.

[00:10:15] Lyn Alden: That’s one tool. The second one is that if they have various entities in their country, for example, corporations or banks that are doing dollar financing in one way, they might have dollar debt. This is particularly true for emerging markets. The central bank wants an option to be able to bail those out if they have a crisis.

[00:10:32] Lyn Alden: So they want to put a lend dollars to those corporations so that they don’t just nominally default every time there’s a recession. And so they kind of maintain stockpiles of that. And of course, central bank swap lines can increase that flexibility, but they don’t want to have to rely on those necessarily because they might not be given them by the federal reserve.

[00:10:52] Lyn Alden: And so they often hold a number of quote unquote kind of hard monies. And the dollar is considered hard just because, for example, if Brazil’s holding dollars, they can’t print dollars from their perspective. That’s a hard asset. And from the international perspective, even though it is diluting over time, but because that’s what, a lot of their contracts are determined in their debt nominate in.

[00:11:11] Lyn Alden: That’s a big tool for them. And gold is something that is, over time it holds up well versus dollars and treasuries, but it can have a decade where it, underperforms. And then also it is volatile compared to the unit of account. Of those liabilities and those international contracts. And so from that perspective, it’s maybe a little bit less useful as a reserve asset in this existing kind of international system but it still works as a significant percentage because, the volatility is not huge and on average that over time, the value holds up well compared to dollars.

[00:11:46] Stig Brodersen: So if we go back to the central bank’s aggregated balance sheets and like you mentioned 2009, there was, bottom in recent times.

[00:11:54] Stig Brodersen: So it was around 30,000 tons at the time and now it’s close to 36, at least according to the official numbers. We’re going to talk a bit more about perhaps there are some unofficial numbers, but now we might be looking at something more than 36,000 and so what am I comparing that to? Am I comparing that to the M2 money supply, whenever I’m looking at an increase from 30,000 to say 36,000, it sounds like a lot, so it’s 20%. But what else has grown 20%? Is it even so that you can say that the aggregated gold as a percentage of the balance sheets are smaller than it’s been a long time?

[00:12:30] Lyn Alden: Yeah, so in general, because you’ve been in a strong dollar environment for the past 10 years, there’s not been a lot of net reserve accumulation, even though there still has been money supply growth, broad money supply growth.

[00:12:41] Lyn Alden: And so on average, the level of reserves is been decreasing relative to M2 for a lot of countries because most of them are more in currency defense mode than reserve accumulation mode. Now, if we get a big dollar down cycle, you could see a big multi year period of reserve accumulation, but that’s not the environment we’ve been in.

[00:13:01] Lyn Alden: And so, yeah, a lot of them are going down in terms of reserves compared to broad money supply. There’s a couple ways to look at it. You can look at it as a percentage of their GDP. You can look at it as a percentage of their broad money supply. You can look at it as a percentage of their external debt.

[00:13:15] Lyn Alden: So for example, if a country in aggregate has, a hundred billion dollars’ worth of external debt to either its sovereign or its corporation denominated in currencies, they can’t print. You might want to then compare their reserves to see, how if they had to, how much of their reserves would they have to sell to cover most of their debts?

[00:13:33] Lyn Alden: That’s another metric to look at. So it depends on what exactly they want to do with their reserves. That’s it. That those are all useful metrics to be familiar with. Because a less indebted country might need fewer reserves. Also, in general, developed countries tend to have less reserves relative to their GDP than emerging markets because developed countries tend to have most or all of their liabilities finest in their own currency.

[00:13:57] Lyn Alden: And so they’re less likely to, kind of need to support their own banks with foreign currency, for example, compared to emerging markets to where that’s a bigger deal. So reserve practices will vary. And it’s not always like that higher is better. I mean, basically if a country is having a current account surplus and a trade surplus and its currency strengthening, that would otherwise go toward, wage earners in that country that would go toward savers of those currencies in those countries and instead when a country is accumulating reserves, it’s making sure that it’s currency is not getting stronger, which actually takes away from the wage earners. It takes away from the savers but of course, down the line, they could use it to defend the currency should it weaken.

[00:14:42] Lyn Alden: But in general, a country that’s always accumulating reserves is generally running a rather mercantilist policy. Which is that it’s trying to keep its wages and it’s kind of citizenry like not super wealthy so that they remain very kind of competitive on the global scale in terms of labor costs and instead a lot of that capitals flowing up to the top, the policymakers who then have more control over it rather than kind of letting that flow into the country in a more decentralized way. It kind of flow to more toward those individual entities.

[00:15:15] Stig Brodersen: So if we look at the data from the world gold council, which is an excellent resource, I should say, if you want to learn more about the gold market. So China is currently the biggest central bank buyer of gold. And if you look at the list and they have monthly updates and then they also do some aggregates, but you also have countries like Poland, Turkey, Singapore, they’ve recently bought up heavily but whenever you look at the list, you don’t see a lot of Western Europe or say the States. Why is that?

[00:15:41] Lyn Alden: Their liabilities are denominated in their own currencies. So most European entities, their liabilities are in Euro, North American companies, their liabilities are dominant in dollars.

[00:15:51] Lyn Alden: Same thing for Australia. Same thing, Japan’s not exactly in the West, but it’s kind of Western aligned. Same thing’s true for that most of their liabilities are in yen. If anything, yen is actually the third biggest foreign currency financier after the dollar and the Euro. And so they just have general less need of reserves period.

[00:16:07] Lyn Alden: And then, Europe, for example, and the United States, they already have a lot of those countries already have fairly large gold reserves as a percentage of their reserves. And so we just don’t really see a lot of, reserve accumulation. A lot of them are not running big current account surpluses that would lead them to have a lot of ammo to accumulate reserves.

[00:16:25] Lyn Alden: And so a lot of that reserve accumulation would probably have to come out of other holdings. They’d have to like sell treasuries and buy gold, which is somewhat of a political message. And so, yeah there’s kind of not been a lot, the incentives don’t really align currently for a Western country to kind of step out of the pack and just start rapidly accumulating reserves, let alone gold reserves specifically.

[00:16:46] Stig Brodersen: So let’s say that you’re not one of those countries and you have a central bank and like all central banks, they can print money and then say that you’re also a country that with a very unstable currency and you would benefit from having more gold on your balance sheet, why would a central bank not print a very significant amount of whatever local currency that would be and just buy gold?

[00:17:07] Lyn Alden: So because it risks inflation and devaluing the currency, basically, you mentioned, for example, an unstable currency, if they already have an unstable currency, then they’re in a difficult position of accumulating reserves because they ironically might have to make their currency even less stable while they’re accumulating reserves.

[00:17:24] Lyn Alden: If they’re printing a lot of their currency to buy gold, it means more of the supply of their currency is hitting the market. And so, if they’re already dealing with double digit CPI, for example, and there’s popular unrest because of that civil unrest, last thing they want to do is maybe add another 10 percent to currency supply and increase their gold by a lot.

[00:17:44] Lyn Alden: So some of them do it despite high inflation. They might do it in fairly small amount. So they’re saying, look, we got to think longer term. I know inflation is high, but we still want to increase our gold reserves. They might do it anyway. But in general, reserve accumulation tends to happen more from a position of strength.

[00:18:00] Lyn Alden: A country is running a big trade surplus, current account surplus, their currency is holding up well compared to the dollar. And then they say, look, now we’re going to use this opportunity to keep our currency from strengthening. So we don’t like kind of, make our labor too expensive as far as they see it.

[00:18:15] Lyn Alden: I would use that to that context, you accumulate reserves. Whereas usually when they have currency instability, if anything, they might be selling reserves or they might be trying to hold reserve steady because they’re trying to reduce the instability of their currency in the moment. It’s hard to think 10 years in the future when you’re worried about, the public unrest about inflation this year.

[00:18:36] Stig Brodersen: Perhaps looking away from Zimbabwe, which is we can probably do an entire series just about Zimbabwe but why wouldn’t you have, let’s say a country like Argentina? And then, who has a triple digit inflation number, and then, they talked about de-dollarization, why not go crazy with the printing press, some people might say they already done that, but why wouldn’t they go crazy, then buy a ton of gold, and then dollarize or have their own currency backed by gold?

[00:19:02] Lyn Alden: Well, so once if you do it, if you do it very rapidly, the race is on, I mean, your currency is going to start collapsing, and you’re going to get reserves, you’re probably not going to make friends in the international community, like the IMF. So there’s kind of a sort of a hierarchy there or, there’s a club there and if countries find themselves kind of out of the club, things are going to be rougher and different for them going forward and so there are kind of certain international frameworks.

[00:19:27] Lyn Alden: Also, countries can be labeled as part of this club. They can be labeled currency manipulators. If a country is purposely keeping its currency very cheap, it is rapidly accumulating reserves to keep its currency cheap. The United States or other countries might call them out and then that could have political implications. It could have IMF implications, things like that. So there are kind of these dissuading methods to kind of represent, like kind of diminish these more outlier type of activities, at least as a large percentage of their GDP or large percentage of their M2 from happening at a quick basis.

[00:20:01] Stig Brodersen: Where would central banks buy, let’s say a hundred tons of gold with the go directly to the producers with the buy from other central banks with the buy, quote unquote, in the market?

[00:20:11] Stig Brodersen: And then what is the market? Whenever you’re looking at those type of quantities, not like they will go down to the local dealer the rest of us. So how does the system work?

[00:20:19] Lyn Alden: A lot of them are going to do like over the OTC purchases. So you’re not going to a defined exchange. They’re making a more kind of peer to peer private agreement to accumulate it.

[00:20:29] Lyn Alden: For many of these countries, they’ll buy it from their internal producers. So for example, Russia, China, Turkey, they have decent gold production. So you’ll generally see purchases from them. They also can buy from international producers. They can buy from international large refiners. That are capable of kind of brokering pretty big contracts for these things.

[00:20:50] Lyn Alden: And then, yeah, there also are exchanges, for example, London, notably, where fairly large amounts of gold could be purchased. So it really kind of depends on whether they have internal production and what size they’re buying in. But yeah, a lot of that’s going to be off exchanges.

[00:21:04] Stig Brodersen: So the question then remains, let’s say, and I’m going to put on my tinfoil hat, at least to some of our listeners, whenever I say, what if we had a gold standard, what if we, for whatever reason, needed a reset of the system and we went back on a gold standard, who would proportionally benefit the most compared to the system that we have today?

[00:21:24] Lyn Alden: Most countries don’t have an incentive to do that right now. So most countries, if you kind of poll political leaders, most of them would not find it in their favor to do that. It’s also important to kind of talk about a couple different types of gold standards. So a true gold standard is generally like a, where the retail people using banks and stuff could redeem their currency for gold.

[00:21:44] Lyn Alden: So you have a lot of points of conversion to reinforce that gold peg. Right? In over time, as when you kind of saw the transition from gold standard to Fiat standard, they generally, their gold holdings as a percentage of their monetary base or as a percentage of their M2 kept decreasing. So they would start to add more frictions for that redemption process.

[00:22:04] Lyn Alden: They say, look, you can redeem it, but only if you’re going to do a million dollars or more, right? Or they say, you can redeem it, but only if you’re foreign central banks are actually our own citizens, not really on a gold standard, but we were going to maintain this peg. With international markets that kind of maintain the validity of this peg, but there’s kind of like different levels that it can go toward.

[00:22:23] Lyn Alden: One of the challenges is that when you have a multi layered banking system, so when you have a central banking system, like you have banks built on a central bank, built on gold, the problem is that individual banks. Don’t have any tether to that gold. So they’re required to maintain a certain percentage of their reserves.

[00:22:42] Lyn Alden: I mean, of their assets and reserves, for example, or they’re required to maintain certain capital ratios, which could include reserves, but they can lend quite liberally and when they lend, they create more M2 money supply. And the central bank is also fraction reserved. So they might have, back in the old day, they might have 40 percent of their.

[00:23:02] Lyn Alden: Monetary base backed by gold. So you have M2, which might be, it might be 5 to 1 or 10 to 1 compared to the monetary base. And then the monetary base might only be 40 percent gold, for example, or less if they’re running into a problem. And so that’s a, that’s a, there’s multiple entities that when they lend, they’re not even thinking about how much gold the sovereign’s holding.

[00:23:24] Lyn Alden: It’s just not their concern. And so you generally see an expansion of the money supply. There’s no real kind of method to contain the money supply relative amount of gold when you have that multi-tiered system. And so, I mean, I would argue that’s why they all broke is that they’re, they kind of shifted from, back in a free banking environment where each individual bank has gold or gold, assets that could be liquefied into gold. They’re making loans. They’re trying to monitor their own reserves but when you have that multi-tiered system, everyone’s kind of removed from the problem and so money supply tends to grow and proliferate, whereas gold reserves don’t. So I think that if they were to try a gold standard, it’d be a big reset, but then over decades, you probably would break all those pegs again, because there’s no firm tether between the amount of gold and overall loan creation.

[00:24:16] Lyn Alden: Notably in the United States, there is, for example, if you look at the Fed’s operating handbook, they have a mechanism for gold revaluation. It’s actually initiated by the Treasury, not the Fed, but it involves operations between the Treasury and the Fed. I mean, they could do a reset that doesn’t involve going back on a gold standard.

[00:24:31] Lyn Alden: They can just reduce the, they can increase the official dollar price of gold. And that’s a mechanism where they would be able to get more money in their treasury general accounts without associated increases in debt, and therefore they could spend that into the economy without debt issuance. And so they could technically do a big, say, dollar devaluation relative to gold and kind of reset a lot of debts.

[00:24:53] Lyn Alden: That’s kind of a, one of the kind of the debt jubilee mechanisms that they technically have, although it’d be a, it’d be a huge political lever to pull should they do it. But it’s actually there in their handbook. And again, it’s different than going back at an actual gold standard, which would be that currencies are redeemable for gold.

[00:25:11] Stig Brodersen: And how would that work? If they would do that revaluation, would it be them basically saying now gold is worth I don’t know, 25,000 an ounce and then that will be a new standard without going on the gold standard. Could you paint a bit more color around what that change would look like for the States, but also for the entire system?

[00:25:30] Lyn Alden: Right. So back like something like 90 years ago. So it used to be that the Fed held gold and the treasury said, look, we’re going to hold the gold now. And instead, so the Fed had to give their gold to the treasury and in exchange, the treasury gave the Fed gold certificates as an asset. It’s most an accounting gimmick so that they don’t have a hole in their balance sheet.

[00:25:51] Lyn Alden: But basically, they were non-redeemable gold certificates. So they’re kind of saying, look, these don’t really mean anything, but they’re technically representing your ownership of gold held at the treasury. And what the mechanism can work, and that was the official price at the time. And that price is, like 42 now.

[00:26:08] Lyn Alden: It was revalued once, but it’s 42 now. It’s way below the actual market price of gold. So what they could do, for example, and say, well, now the official price of gold is the market price, or you technically could go above the market price. And if that happens, the value of the Fed’s gold certificates increase in dollar terms.

[00:26:29] Lyn Alden: So that’s an asset for them, and they provide an associated liability for them in dollars. In the treasury’s general account, which is an asset for them and a liability for the Fed, that’s basically the government’s checking account. And then what that allows them to do is they can then spend money into the economy that they did not issue bonds for.

[00:26:48] Lyn Alden: Because instead they got that through gold revaluation, and that would generally be fairly inflationary. It probably would increase the price of gold if they were to do that and so that’s kind of the mechanism. They can also, I mean, they technically have the kind of like how they can do open market operations with treasuries or mortgage backed securities.

[00:27:05] Lyn Alden: They can do open market operations with gold. They can start creating reserves to buy gold and so, and of course, that would generally decrease the value of the dollar, increase the value of gold. And so they have these kind of mechanisms that they can, these levers they can pull that would say sharply devalue the dollar based debts relative to gold, which means the reserves of central banks increase generally relative to their country’s liabilities, which are denominated in dollars.

[00:27:32] Lyn Alden: It generally means that you get more inflation, more money supply growth in the US and therefore various debtors would be partially relieved relative to their price of their nominal assets going up.

[00:27:44] Stig Brodersen: Thank you for paying some color around that. And then it was very interesting to hear. Let’s transition into talking about gold as a way of allocating some of your capital in your portfolio.

[00:27:53] Stig Brodersen: I mean, Ray Dalio just famously had this 7.5 percent gold allocation in this all-weather portfolio he talks about in his books. And, he has talked about the holy grail of investing, 15 uncorrelated bets. I’m curious to hear your take on this. Which place does gold have in your portfolio and why?

[00:28:12] Lyn Alden: So mostly in inflationary or stagflationary contexts and there’s a lot of nuance there. So basically there’s been four major inflationary decades in the Western world in let’s call it the modern era, the oil era, for example. So the 1910s, 1940s, the 1970s, and then to a lesser extent, the two thousands, these were big energy bull markets. They were elevated inflation compared to the decade before them and generally just elevated inflation in general.

[00:28:40] Lyn Alden: And so you generally had things like oil doing very well, commodities in general doing very well, gold and silver doing very well. And normally stocks and bonds as a group did not do particularly well in all four of those decades, especially in real terms, but generally even in nominal terms. So, for example, the bull market of stocks in the 2000s failed to kind of break out from the dot com bubble highs.

[00:29:06] Lyn Alden: Even like, 10 years later, for example, the markets in the seventies, the markets in the forties, the markets in the tens, 1910s, they were all weak in terms of stock market performance. And bonds also obviously did pretty poorly as well in those inflationary environments, especially if they entered them with fairly low yields, which was usually the case.

[00:29:27] Lyn Alden: And so during those decades where both stocks and bonds do poorly. The 60/40 portfolio is not very good. And instead having some of those exposures to those commodity energy, hard money assets historically would have been the diversifier you need in that decade. If you want to have this kind of like passive rebalancing portfolio, that is all weather.

[00:29:49] Lyn Alden: That’s where those types of assets come in for the commodity portion. Commodities in general are not good performers. They tend to have like two bad decades and then one good decade and then two bad decades and one good decade. But that good decade tends to be the one where stocks and bonds have a bad decade.

[00:30:04] Lyn Alden: And so it’s a useful diversifier in that sense. And among commodities, gold has been one of the best performers. And also, energy producers have been good performers. Those are kind of methods to diversify portfolio. And the inflation thing’s tricky because, if inflation starts to get hot, but then the market says, well, the central bank’s going to get very hawkish then, and they’re going to quash, they’re going to quell the inflation.

[00:30:29] Lyn Alden: Then in that particular year, gold might not rise. The higher real rates might deter people from buying gold because they’re confident that, look, I know CPI is high, but the central bank’s not on the case. Instead, where gold tends to go up is when money supply is increasing. And inflation is building, but the central bank hasn’t really acted yet, or they’ve tried to act and they’ve not really been able to contain it.

[00:30:53] Lyn Alden: Those are the scenarios where gold tends to do well at inflationary times. Gold can also do well in disinflationary times if you have a rapid fall in real rates. So for example, in 2019 gold had a good year official kind of, real rates in the U.S went from positive to negative. We had an economic slowdown, stocks were kind of chopping along and gold did fairly well.

[00:31:15] Lyn Alden: It was a useful diversifier in that environment. So there’s a number of different contexts where gold does well, but the really big picture view is that gold and similar assets tend to do well in decades where neither stocks or bonds do, which is. Basically the commodity capex cycle has run its course. There’s more scarcity. There’s maybe more money printing happening for various kinds of inflationary reasons. And that’s where gold tends to be a useful diversifier.

[00:31:43] Stig Brodersen: So far, we talked about gold as I’m going to say a concept here and I don’t know what the listener are thinking right now, if they think in an actual gold bar or how they picture it.

[00:31:54] Stig Brodersen: So let’s actually have a conversation about that. Some people talk about something called paper gold, and some people refer to like taking possession of actual physical gold. How do you think about that for your own portfolio and perhaps we can start with what is paper gold in the first place?

[00:32:10] Lyn Alden: Right. There’s a couple different types of paper gold. A basic one would be any sort of future or other derivative where, one entity is agreeing to be able to buy gold at a future date, but then the vast majority of the contracts are cash settled. So a lot of people are placing bets on gold in that environment, but then few of them are ever taking delivery of the gold.

[00:32:32] Lyn Alden: And in that context, you can have a lot more claims. So you can have a lot of the people that are like making those features to like sell gold might not even have the gold. They’re just knowing that look, I mean, if gold goes up 20%, and we’ll cash settle this and all have the dollars to, kind of settle that but if you get a major spike in gold.

[00:32:50] Lyn Alden: Some of these counterparties might not be able to make good on the actual delivery of gold should it be requested or the dollar price, if it kind of breaks and goes nonlinear and that’s happened on other commodities and the, for example, the London metal exchange had to kind of step in and do controversial actions because of that, where just there’s like a short squeeze and entities just like don’t have what’s owed.

[00:33:11] Lyn Alden: And so paper cold is basically claims for gold that are not necessarily backed by gold. Another thing that could happen is that some ETFs, for example, might hold unallocated gold, which means, they’re holding a custodian that says, look, you don’t have specific bars, but yes, you’re entitled to this much gold.

[00:33:29] Lyn Alden: But then that custodian could potentially lend that gold out to someone else and so again, they’re in a situation where there’s more entities that have a claim on gold than the amount of gold that is underlying. And that, that in different eras, that ratio of kind of paper gold to physical gold can vary.

[00:33:46] Lyn Alden: It’s also, it can be hard to measure some of that market will be opaque. And then there’s a spectrum. Of how secure your gold is, if you’re using kind of one of the ones using unallocated gold or derivatives at scale, that might be one of the ones that’s a little bit more, less certain if you get a really big gold spike.

[00:34:06] Lyn Alden: Whereas other ones might hold, for example, fully allocated gold, they might even be redeemable. Some ETFs are actually redeemable for gold if you’re doing it at scale. And then physical gold in your own possession. What makes that interesting is it’s a bear asset. So most of our investments are permissioned.

[00:34:23] Lyn Alden: We have an account in a brokerage. It could be frozen. It could be hacked. It could be confiscated. I mean, in the U. S. In the U. S. In Europe in modern times, these are generally not concerns we think about. But a lot of countries, these are concerns to think about. And so all of your assets are held on your behalf by counterparties.

[00:34:42] Lyn Alden: Which the government could just tell them to do something or the counterpart itself could have a problem. And so there are certain assets like physical cash that you can hold, but of course that is that you get diluted over time. And so there are assets like physical gold in your possession or, cold storage, Bitcoin in your possession, these types of assets where.

[00:35:03] Lyn Alden: You have unilateral control over that asset with no direct counterparty between you and the asset and having that appeals to some people, basically, they say, look, I mean, if I wake up and like my account hacked or the government did some sort of memorandum and just kind of froze all brokerage accounts in my country and said, you can’t own this assets or you’re being forced to sell this asset and buy this other asset because we have, national currency crisis or something.

[00:35:29] Lyn Alden: They hold that asset outside of that system in their own possession. It’s outside money. And so that appeals to some people. So it really depends on what exactly you’re trying to protect from. If you’re mainly trying to benefit from the fee at price of the asset, then things like ETFs could be useful in a portfolio.

[00:35:46] Lyn Alden: And you can always decide, you could pay a little higher fee for one that’s kind of fully allocated, for example. And or if you want to actually have kind of the full outside money experience where you have assets that are either in your possession or maybe add and add a custodian that’s not a bank, for example, or you could diversify them internationally.

[00:36:06] Lyn Alden: You can have international custodians hold some of your assets. Which again, sounds kind of like tinfoil hat if you’re in the US or Europe in the modern times, but it’s less tinfoil hat when you look around at the 200 plus countries that are out there. But then even in those countries, I mean, in the past, when we have wars or when we have kind of big wars Issues happening, like in the United States, gold was banned for like four decades, you could go to jail for holding a benign yellow metal, but ironically, a lot of people held it anyway, the market became very illiquid in black market for a long time, but there are people that has held for the entire four decades.

[00:36:43] Lyn Alden: Cause it’s a very hard thing to enforce. It’s very expensive to go door to door and get people’s gold or other kind of bare assets. And so it kind of imposes a cost for enforcement compared to if everybody has their assets in a brokerage account, one stroke of a pen, it can just, force everyone to sell this asset, buy this asset, or freeze this asset, give them the current price for it and take it. Even if there’s some sort of nonlinear price action that maybe happens after the fact, that’s where the physical comes in handy for some people.

[00:37:13] Stig Brodersen: Yeah. I think it said the 1933 executive order that you can hold five ounces of gold. If you help more, you could give up to, it was a 10,000 fee and 10 years in prison.

[00:37:25] Stig Brodersen: But it was also, it was a different time, obviously, but it was different in the sense that it was also very much framed like you are doing a service to your country. And so I, whenever you read gold books and I’m going to, I’m going to come up with this terrible assumption that people read gold books, but. The 1933 executive order and it’s always, one of the chapters and then Nixon taking it off in, in, in 1971, and then, Ford sort of like making that legal again, I want to say 1974, but the, it’s always one of those things where you think, can this happen again?

[00:38:00] Stig Brodersen: And again, we don’t know. I would say that it’s such a different world today. So also to your point, Lyn, it’s very difficult to enforce. And I would probably say that the way it was framed at the time about, I think it would be diff and this was also between two world wars. I think it would be very difficult to do the same thing again and have people comply with those rules.

[00:38:22] Stig Brodersen: And perhaps it’s just me who are saying that we’re not going to see gold confiscation again. Who knows? There’s this old saying that gold doesn’t matter until it matters. And that’s whenever you can get access to it. So who knows?

[00:38:34] Lyn Alden: I generally agree. I mean, back then gold was part of the monetary base and it was a bigger market relative to other assets.

[00:38:40] Lyn Alden: And that was generally an era of capital controls. And so capital generally wanted to flee from weaker areas to stronger areas. And the U. S. was in the position where they were one of the strongest areas, the capital wanted to flow to. And so they didn’t really have to worry about like their capital flowing to other countries, but they did have to worry about their capital flowing to gold, which is like the one thing stronger than the U.S. system. And so they basically said, look, gold. Like gold was outperforming their bonds and they needed people to own the bonds that were getting, they were losing purchasing power. And so that was the method they turned to. Now, to your point, that was like a, we’re all in this together, service your country mindset back then.

[00:39:19] Lyn Alden: I mean, under FDR, for example, there was a super majority in Congress, one party controlled kind of all the super majority levers of power. And the country like as a group was very kind of unified around an external threat. The environment is very different today. It’s hard to pass big sweeping draconian things like that.

[00:39:38] Lyn Alden: You tend to see it more in emerging markets. I mean, there are some countries where it’s legal to own dollars because people are turning to dollars to try to protect them like literally physical dollars. Or it could be illegal to, maybe it’s not illegal. Sometimes it’s legal to outright own them.

[00:39:51] Lyn Alden: Sometimes it’s instead they’ll crack down on the brokers that are making those dollars available to people. So they kind of try to reduce liquidity in the market. Same thing can happen with gold in a lot of countries now, including the U S and much of Europe. There are laws around if a gold dealer sells you gold in any sort of meaningful scale, maybe 2000 euros, maybe 10,000 depends on the jurisdiction.

[00:40:13] Lyn Alden: They have to then report that to the government. So if you, I mean, if you buy 20,000 of wine, they don’t have to report that. But if you buy a fairly small amount of gold, that report that because that’s a liquid monetary asset that they want to try to track. And so there are kind of around the margins, pressures against liquidity in these markets and trying to surveil these markets but I would agree with you that, wholesale confiscation or illegality of gold is unlikely.

[00:40:41] Stig Brodersen: We had some interesting discussions about gold throughout the years. And in some of my research to one of the previous conversation we had, I called up a gold dealer and to figure it out.

[00:40:51] Stig Brodersen: Cause I heard about to your point before about know your customer. And it’s kind of crazy how much information they need on you. If you want to buy gold. Also, one of the things, and I should say, I don’t buy 400 ounce gold bars, but I couldn’t help but ask, because I was doing research anyway, so I was asking, so what happens, like, what happens if I click buy to that 400 ounce gold bar, and he completely panicked, and he was like He didn’t know, no one had ever done that before.

[00:41:19] Stig Brodersen: And he was like, that was like a central bank thing. And he was like, I think they buy from the producers, but it is kind of like an interesting topic. Not because I’m by any means an expert, but like the plumbing into the gold system. It is like, I find it very hard to find good information on. And there were so many rumors, we briefly talked about China before and they have like the two biggest producers in the world. That’s Russia and China who are, notorious for not providing a lot of information. I would be curious to hear you then. How much do you, that’s going to sound too much like a biased question, but you have public numbers out there of Russia’s and China’s gold holdings.

[00:41:53] Stig Brodersen: How much do you think that there are understated? I think that there’s generally a consensus. There are understated. So that’s why I’m giving you that biased question, but I’m still curious to hear your thoughts on that and how you came up with that information.

[00:42:04] Lyn Alden: Well, so I have different thoughts on Russia and China. Russia reports gold reserves that are fairly large relative to their money supply, relative to their GDP, relative to their external debts, and that this was even before, the invasion. This was something they had already kind of been de dollarizing and focusing on gold. So I assume their numbers are probably fairly accurate.

[00:42:23] Lyn Alden: Chinese numbers were interesting because they have, it’s a pretty large amount in absolute terms, but it’s a small amount relative to the size of their economy and their amount of total reserves. And yet they’re in a position where you’d think that they’d want large amounts of gold because they’d be worried about Western sanctions.

[00:42:41] Lyn Alden: We don’t know what’s going to happen with Taiwan down the line. They want to transact outside of the dollar based system. If the U. S. sanctions some entity like Iran, for example, China wants to be able to just transact with them anyway. And so they have a lot of reasons to operate outside the dollar system to hold reserves that can’t be frozen and things like that most, so a lot of estimates, when they, when people kind of trace where gold is flowing, like it’s going to refiners and then where is this going afterward? A lot of the numbers show that massive amounts of gold have moved from West to East and particularly to China and so a lot of those estimates show there’s something like 20,000 tons of gold in some, call it 20 year period have flown, has moved over to China.

[00:43:24] Lyn Alden: Now, I think the big question is how much of that is officially or either in government hands and not being reported, or it’s maybe close to government hands. Like they might be spreading it out and they say, well, this chunk’s in the military, this chunk’s in this chunk isn’t this kind of local government.

[00:43:39] Lyn Alden: The technically like the, maybe the central government knows where they are and could absorb those if quote unquote needed versus how much of that is in fully private hands. A lot of the big Chinese banks, if you’re a retail customer, they will just let you buy gold from the bank. It’s kind of how it used to work in the West.

[00:43:56] Lyn Alden: And so gold is one of the like approved assets in China. There’s large private sector ownership of it. And so what’s pretty clear is that there’s a very large amount of gold in China. And what, at least from my perspective, it’s hard to know is how much of that is in control of or easily identifiable to the government.

[00:44:18] Lyn Alden: I would probably say it’s over the number they report by some meaningful margin, but I wouldn’t go as far as to say like all those 20, 000 tons are in their hands, because I think some significant percentage of that went to various private sector entities.

[00:44:32] Stig Brodersen: Yeah, and I think you bring up a good point, especially considering the capital controls in China.

[00:44:37] Stig Brodersen: It’s a very popular type of investment for the Chinese and I’ll just one, one quick story. I don’t know if anyone has this fascination with gold, but I remember, growing up and watching all these movies and then you had these gold bars and I would say that because gold is so heavy. They were actually very small.

[00:44:53] Stig Brodersen: So whenever we talk about 400 ounces or 12 and a half kilos, like it’s remarkably small and I’m not going to pretend like I’m buying gold in a quantity. I did have a chance in Perth when I was traveling one time to go into whatever kind of place. And there was like a gazillion cameras around me and then you could like put on the glove and put it into like a mantra.

[00:45:11] Stig Brodersen: And then someone makes sure that you didn’t run away with it and you really couldn’t and it’s crazy. Like it’s such a small bar is like, so, so heavy. And that has been how we traditionally have been looking at gold. Now today, at least if you read the gold magazines and because of this increased interest of gold, just specifically in Asia, like the standard has gone to one kilo bars away from the traditional 12.5 kilos.

[00:45:36] Stig Brodersen: Which is 400 ounces and we’re talking about like a million dollars is for like one of those bars the bigger one. So it’s a significant amount of money and if I can use that as a segue into talking about Costco. Costco is known for being a place to buy cheap quality goods and I have to say, I didn’t expect to see gold on the Costco shelves.

[00:45:56] Stig Brodersen: And so they had famously had these one ounce gold bars at a cheaper price, of course. And I will also say at a good price and what do I mean whenever I say a good price? Well, when you look up the gold price, say online, you get this so called spot price, but that’s not the price that you are, you’re paying at Costco or whatnot.

[00:46:17] Stig Brodersen: So then could we be practical here and say, if you want to buy gold, how much are you supposed to pay above the spot price? Why are you paying above the spot price in the first place? And how does that relate to like, whether you buy an ounce, a kilo and yeah, so I guess I’m throwing all of those questions over to you right now.

[00:46:36] Lyn Alden: Well, yeah, it’s a good set of questions. The premium you pay over spot will vary based on the situation. For example, people that were trying to buy during the pandemic when refiners were closed and people worried about the world ending or the financial system imploding, the premiums got very large in that environment.

[00:46:52] Lyn Alden: It’s kind of like buying insurance after you need insurance. If you buy it in normal market environments, it’s going to depend on what type of gold you’re buying. Costco is probably going to come in near the best, I assume, because they can do things at scale. They can lose money on some items and make money elsewhere.

[00:47:07] Lyn Alden: At normal places, generally speaking, if you buy something like a one ounce gold coin, even if you buy like 10 of them, you’re probably going to pay something like 3 to 5 percent above spot. Whereas if you buy a larger bar, you might be paying 1 to 2 percent above spot. And one way to think about that is there is a verification premium, which is to say that if you buy a very large bar, there’s some non-zero chance that someone has put tungsten into the gold bar because tungsten is nearly identically dense to gold and much less valuable.

[00:47:40] Lyn Alden: And so one of the, one of the common frauds is you put tungsten inside and a thinner layer of gold around it. So it truly is gold on the surface. It’s just not as much gold as you’re being sold. And those can be fairly hard to identify. You need fairly sophisticated equipment. And the only way to know for absolute sure that it’s gold entirely down to the core is to melt it.

[00:48:00] Lyn Alden: That’s one of the reasons that they melt 400 ounce gold bars and turn them into kilos. It’s kind of a verification method to say that this is actually fully gold. When you buy kilo bars, you’re probably going to get a little bit higher premium than the 400 ounce. When you buy one ounce gold coins, The advantage there is that there’s quite a lot of surface area relative to mass.

[00:48:19] Lyn Alden: It’s much harder to put a little tungsten disc inside of a gold coin than inside of a kilo bar or a 400 ounce bar because the work is similar and yet the payoff is much less. It’s a much less economic incentivized thing to do. So gold, the whole kind of invention of coinage, over, nearly 3000 years ago, is at least in the gold silver variety is that it’s a verification of how much is there?

[00:48:46] Lyn Alden: So you have kind of a surface like a stamp on the surface. You might have ridges around the edges It’s showing that this gold has not been shaved. It’s hard to counterfeit and it’s hard to cheat with and so one ounce gold coins are kind of a sweet spot because they’ll be liquid and the spot premium is not too high, but it still is pretty high at the end of the day.

[00:49:06] Lyn Alden: I mean, at over 2, 000 an ounce, you could be paying a hundred dollars above spot price for your gold coin. And then, when you go down to like smaller coins, there’s like one 10th of an ounce or even one gram. If you look at the numbers, they get kind of silly. You might be paying 50 percent above the spot price.

[00:49:24] Lyn Alden: The advantage is that at that scale, there’s virtually no way to get tungsten in there, but the expense you’re paying relative to the gold is extraordinarily high. And so that’s one of the challenges of gold in general is that gold does have a verification and transport cost. If you get it shipped at scale, you’re generally going to want insurance.

[00:49:44] Lyn Alden: If you buy it with a decent amount of surface area, intricate surface area relative to mass, you’re going to pay up compared to, if you buy it in these bigger forms. And so that’s all a cost to the physical owner. They want that extra assurance that gold is in their possession and that it’s actually, but yeah, whenever you could find a dealer that’s willing to kind of operate at scale and be a loss leader, you could get deals, but those are generally the types of percentages or numbers to be aware of.

[00:50:11] Stig Brodersen: Yeah, and I should also mention, I hope no one’s going to ransack my home. I have somewhere in my home, 1 10th of an ounce. And the reason why I say that is because it got lost 1/10th of an ounce, whenever it comes to gold is very small.

[00:50:23] Stig Brodersen: And we had a gold sponsor on at some point in time, and they said something along the lines of, we’re going to give you like one tenth of an ounce and I was like, oh, ship it to me. So I got this huge package, which probably cost way more than one tenth of an ounce in terms of shipping. And like it was sent with a kind of courier and I got like one tenth of an ounce sent to my home.

[00:50:41] Stig Brodersen: And it’s just so small. I’ve never been able to locate it ever since. And just one more, whenever we do the math on, we talk about like 400 ounces and what that is in kilos. So one tricky thing that, that I don’t know if anyone’s sitting there with a calculator, it’s like, oh, the math is a little off.

[00:50:55] Stig Brodersen: Whenever you’re talking about an ounce and you convert that to grams or kilos, it’s not a quote unquote normal ounce. This is a troy ounce, which is different, which is just confusing for everyone. So a normal ounce is 28 grams and a troy ounce is 31 grams and chains. And so I just want to clarify that.

[00:51:14] Stig Brodersen: Then I wanted to There are so many moving parts here whenever we talk about gold and the price of gold. And so I was wondering if we could do this, a small exercise where we say the everything else equal, which is, a fancy way of coming up with if this happens, what, what then happens. And of course, in the world of economics, it’s always tricky because so many things are happening at the same time.

[00:51:35] Stig Brodersen: And so. Perhaps if we can start with a spot price of gold and hold that constant, and we have that on one hand. Then on the other hand, we have a CPI, but we also have the overall money supply respectively. So what’s the relationship there?

[00:51:49] Lyn Alden: So it depends on the country and it depends on the time period for much of the past several decades. The biggest inverse correlation with gold has been real rates. So when real rates are positive, generally there’s been incentive for people to own treasuries rather than gold, like survey them. If you can get paid 5 percent on treasuries while inflation is 3%, you’re making a 2% spread, at least over official CPI.

[00:52:14] Lyn Alden: And gold, you get no yield, but it’s a scarcer asset and so generally people will flock toward those treasuries. On the other hand, if inflation is at or above the treasury rate, you’re saying I’m getting a negative real yield on this inflating asset. I might as well just hold something scarce that I earn no yield on gold.

[00:52:34] Lyn Alden: And so you generally see more capital flocking toward things like gold. And so the big kind of peaks of gold, like in 2011, for example or in, the early 1980s, or even kind of at the, in 2020, after it had a big run up and then kind of went sideways for a while, those kind of big peaks that it hit were kind of bottoms in real rates and real rates either went up or at least stopped going down.

[00:53:01] Lyn Alden: For a period of time, and then that therefore kind of the excitement of or the panic of getting into gold would decrease and start to reverse back into typical financial markets. So that has been a very big variable historically, especially when compared to the dollar. In general, when we look at gold price and other currencies, you’ll see a similar dynamic where if a currency does not have an attractive real rate, generally speaking, there’s a lot of incentive to flow out into either dollars or flow out into gold, depending on what the situation is in recent years, there’s actually been a pretty sharp divergence where real rates went up quite a bit because the Fed’s trying to fight inflation and normally you would have seen a pretty significant decline in gold, but instead gold held steady. And then even recently broke out new all-time highs in dollar terms, despite the fact that real rates are fairly high.

[00:53:53] Lyn Alden: Now that you can assign a lot of different things to that. One is geopolitics. As we discussed, there might just be more incentive for central banks to buy gold despite real rates because they say, look, we’re not caring about 2 percent real rates for the next five years. We’re worried about our reserves getting frozen, right?

[00:54:09] Lyn Alden: So we’re buying insurance. We want to hold some of our own assets in a sovereign way. That’s number one. Number two is that I would say that the U. S. fiscal situation Is fairly acute in the sense that, I described as being in physical dominance. Which is to say that fiscal policy starts to constrain monetary policy options, or another way of putting it is just the fiscal deficit relative to the size of private sector money creation.

[00:54:36] Lyn Alden: And so annual fiscal deficits in the U.S. are now larger than the sum of corporate bond issuance and new bank loans in a given year. And so overall, as the Fed increases interest rates. It actually blows out the deficit even more because, it’s not like the 1970s where we have 30 percent that the GDP, we have like 120 percent that the GDP.

[00:54:58] Lyn Alden: So if you’ve raised rates super high or even moderately high, the interest expense starts to become huge. And so I think there’s a number of entities kind of looking at this and I, I’ve talked to, there’s actually significant investment banks that will have like internal memos about fiscal dominance or fiscal problems in the U.S.

[00:55:16] Lyn Alden: There’s a number of entities saying, look, I know real rates look positive now, but the math doesn’t check out when you look 5, 10, 15 years in the future. It’s just very hard for them to ever maintain positive real rates given their debt situation. And therefore, even though real rates seem high now, I’m going to buy gold anyway, right?

[00:55:35] Lyn Alden: There’s probably some of that happening as well. So we’ve actually seen a pretty significant change in correlations where gold seems to be tracking things like the size of the deficit more so than just real rates. But yeah, there’s multiple factors coming together. There’s geopolitics, there’s real rates, there’s fiscal dominance.

[00:55:53] Lyn Alden: And a way to look at it is that on average in the US money supply goes up about 7 percent per year over the long run that’s in developed markets. You’ll generally see that 6 to 9 percent rate emerging markets. It’s usually double digits over the long term percentage wise per year. Gold refined gold increases in supply by about 1.5 percent per year worldwide on average, according to credible estimates, it can vary between 1 and 2%. And so, over the next 10 years, the congressional budget office expects about 20 trillion in net new treasuries will be issued. And so someone has to absorb all that, whereas gold at current production rates and prices, something like 2.5 trillion in new gold will be produced.

[00:56:37] Lyn Alden: And so there’s kind of a, at least the current prices and production rates, there’s a decent incentive to own the scarcer thing than the amount of treasuries that are going to be coming to market. And so I think there’s a lot of variables here. And like you said, I mean, five years ago, someone said, if real rates were here, what we expect gold to be, I would have guessed a little lower than now.

[00:56:56] Lyn Alden: But this is kind of an end game scenario for a highly indebted government, which is to say that even when they raise rates, The market doesn’t really believe it. The market says I’m going to own gold anyway, because the math is no longer checking out for you.

[00:57:14] Stig Brodersen: So on that note, then I wanted to tell you about a survey I recently read from the World Gold Council, and they asked the country’s central banks about what the reason was for them accumulating gold.

[00:57:25] Stig Brodersen: And they, at the very top of their list, they had historical reasons, performance during crisis, all that good stuff. Then at the very bottom, there was probably like 15 factors, whatever. It was a de-dollarization and so it, it made me think of a story. So the story is that there’s a father and two small sons and the father asked his sons to choose between a nickel and a dime and the oldest son he picks the diamond and the youngest the nickel. And then the father continues to play this game with the youngest son. And every time the youngest son he’s going to pick the pick the nickel. And eventually the oldest son says, to his younger brother, come on, like you must learn at some point in time, like a dime is worth more than nickel.

[00:58:06] Stig Brodersen: And the youngest son says, I’ve known that all along, but as soon as I tell father, he’s going to stop playing the game with me. So I’m going to stop the interview on that note and give you a hand off, Lyn and I want to just say once again, for the 10th time, this book Broken Money is just absolutely amazing.

[00:58:25] Stig Brodersen: So if you’re interested in currencies, not just gold, but currencies in general money. This is the book that you need to pick up. Where can the listeners learn more about Broken Money and you, Lyn?

[00:58:35] Lyn Alden: So I appreciate that. Yeah, people can check out Broken Money on Amazon or wherever books are sold and they can go to lynalden.com to see all my latest research, public and private on markets, including gold, including other assets. Thanks for having me on.

[00:58:48] Stig Brodersen: Well, thank you for making time.

[00:58:50] Outro: Thank you for listening to TIP. Make sure to follow We Study Billionaires on your favorite podcast app and never miss out on episodes to access our show notes transcripts or courses go to theinvestorspodcast.com. This show is for entertainment purposes only before making any decision consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.