When we went off the gold standard, our government became a government of counterfeiters. This surprising claim begins to make sense as our guest on Off the Grid Radio today, Porter Stansberry, explains what coming off the gold standard actually meant for our country.
Off The Grid Radio
Released: February 18, 2011
Brian: Ladies and gentlemen, welcome back, once again, to Off the Grid News – the radio version of offthegridnews.com. I’m Brian Brawdy, here as always with Mr. Bill Heid. Bill, good morning, sir.
Bill: Good morning, Brian. I’m giddy, as you know, this morning because no sleep last night. The power went out. Something from a newsletter that we read a while back about there being coming power shortages, but I have to tell you, this is really unique. This is the first time this has ever happened. We called the power company to report the power outage last night and instead of saying there’s a line done – they usually have some kind of thing that they say – they said something unusual this time. They said something to the effect that the company that supplies our power is unable to supply power to us. The first thing I thought of was one of Porter Stansberry’s newsletters. I don’t know that that’s what happened, but we still don’t have power and it’s because some power company can’t produce the power. I don’t know if maybe it’s a scheduled and rolling brownout or, in our case, blackout, but that’s what we’re experiencing. Not here at the studio, obviously, but for a whole big section of northwestern Illinois – folks have no power.
Brian: Given your experiences last week, being down in Dallas for the Super Bowl, and the rolling blackouts that were going through that area. The rolling blackouts seem to be following you.
Bill: They do. But I have to say something, the rolling blackouts only follow hospitals and poor people. If you stay at a nice hotel or you go to the Super Bowl, there’s always plenty of power. I say that tongue-in-cheek because that’s the world we live in. One way or the other, people can interpret that any way they want to, but that’s kind of the world we live in. There’s power if you have money, I suppose, and if you don’t then … you run out.
Brian: I think our guest today, Bill, is going to be excited to talk about a wide range of topics. I’m excited for him to be able to talk to us about a wide range of topics.
Bill: It’s great to have him back.
Brian: And maybe even include – maybe he’s got some insight as to how what you’re experiencing today and last evening could be replicated across our country. You’ve already alluded to him, but let me go ahead and give the official intro. We’re very fired up to have with us, Porter Stansberry, who founded Stansberry & Associates Investment Research – a private publishing company based, of course, in Baltimore, Maryland, in 1999. His monthly newsletter, the Stansberry’s Investment Advisory, deals not only with safe, value investments that are poised to give subscribers years of exceptional returns, but I’ve got to tell you, Porter, as I get ready to throw it to you, there’s so many things on your website – both the website out front at Stansberryresearch.com and now that I’m a member, I went ahead and signed up, inside of the subscriber login there’s so much cool information. I’ve got to, before I throw it to you, tell you that one of the first things I take a look at every morning on your website is the Daily Crux. Ladies and gentlemen, once again, Mr. Porter Stansberry.
Porter: Guys, thanks for having me back. Glad to be here.
Brian: That Daily Crux, Porter, I’ve got to tell you – you go to the wires, you go to Reuters, you go to CNN, you go to FOX and the like – I’m really digging the front end of your website.
Porter: Crux is a fun project for us. We basically read 70-80 news sources first thing in the morning, at 6:00 a.m., and then we gather the six or eight most insightful articles. Provide links and summaries, put it up there for you. It’s like somebody read every newspaper in the world for you and then provided you with the stuff that we knew that you’d want to read about.
Brian: Porter, honestly, I go from Drudge and then I go over to your website. I go over to Huff. I see what’s going on there. But it really has become a staple over the last month of where I get my information from, bright and early in the morning. Then from there start doing some of my own research. I know that’s in addition to the great things that you have inside of your website as well, but I wanted to say that – personally, for me, I really enjoy the Daily Crux.
Porter: Thanks, I’m glad you like it. We work hard on it and I’m glad it’s gaining acceptance around the internet.
Brian: Can I ask a quick question then? Because in this morning’s, it talks about Doctor Doom. Forget the financial crisis, this crisis could topple world governments. I don’t want to give away all the thunder, but it’s about a topic, Porter, that’s near and dear to our hearts and that has to do with food around the world. Could you go ahead and comment on that a little for us?
Porter: As you guys know reading my newsletter, over the last six months or so I’ve been warning that a global food crisis was under way – not going to happen, but happening right now. For me, that started with a meeting I got invited to – the CEO’s of some of the largest food companies in the world invited me to sit down with them in New York last November. They invited also a bunch of senior people from government. What they were trying to explain to the people in government is that the inflationary policies of the world reserve currency, the US dollar, were causing food prices to spike and that they were doing everything they could as far as increasing production but that there was no way they were going to be able to meet the demand based on the soaring prices. They were begging the government to prepare some emergency resources because they were saying very clearly that places like Pakistan and Tunisia and these sorts of places are going to have big problems. Of course now we’ve seen that actually under way. As you know, any kind of food stuff has doubled in the last 12 months, if not more. I think that this is one of the times where you’re going to see a very mixed message about what’s going on, where the government’s going to blame farmers; the government’s going to blame food producers; the government’s going to blame speculators. But what the heart of the problem is, is that people are abandoning the dollar and instead they’re trying to save in the form of energy and in the form of agriculture. Those are two critical signs of a hyper inflation that’s beginning.
Brian: You know, Porter, I was in a meeting last week with some officials from a company that manufacturers freeze-dried and dehydrated foods – not the high level meetings that you get invited to but in my circles it was a pretty big deal. We were talking to the CEO and doing some other things. He clued us into something – Jeremy, do you remember the name – it’s a request for product? Porter, I‘m going to say it’s an RFP. I think it was request for product, but that the federal government had contacted this particular company asking them for their ability to supply 40 million meals over a 10-day period. The government’s short. They’re going ‘give us all the dehydrated and freeze dried food that you could possibly imagine.” The moment he said that to me, Porter, I thought of you.
Porter: Yeah. WE don’t … guys, I feel like the boy who’s crying wolf, except for everything I keep saying is going to happen, keeps happening, so it’s like the boy who cries wolf and then the wolf shows up and still people really don’t seem to be paying attention. You can’t go and print $3 trillion worth of new money and not expect there to be catastrophic consequences. That’s exactly what our federal reserve has done. It’s sad and it’s disturbing to see that so few people understand the basics of economics so that they’re completely unprepared for this.
Bill: Porter, this is Bill. I saw two words this morning in my perusing around. Those two words on a website were “food envy.” This website went on to talk about, obviously you have geographic and multi-national envy. Egypt, if you’re hungry there, you make $2. We’re exporting our inflation so then they’re food prices rise. At some point there starts to become envy and that can boil into things that are somewhat predictable. This article – one of the interesting things – we always see that as globally, but as far as it affects someone on the street – a lot of people don’t think “how does this affect somebody?” You produce all this inflation, prices go up, people lose their jobs – whatever happens, you create the conditions for theft at the retail level in a grocery store. This article, one of the things that’s making a contribution to rising prices is what’s happening is more and more people are stealing food because they don’t have money for food. That shrinkage has to be built into the cost. So a lower social strata maybe starts stealing food; middle class people wonder what in the world is going on? My food prices are rising. So in addition to all these other factors there’s all these other little mini swans popping up here and there, that you could never really predict, but they’re there nonetheless.
Porter: Inflation produces enormous strains on society because, basically, it’s an abrogation of a promise. The government made us a promise when it provided us with a currency. The implied promise is that you can save this money; this money is good for all debts. You can rely on this and we’re going to monitor its value. That lie – that’s just a lie. As that lie has come to bear, it has radical impacts on every part of society. A lot of people don’t understand that the key function for money is to transmit information. Prices are information. When prices go up, entrepreneurs know we need to produce more of that. When you have an inflation, it completely drives all the communication bonkers, so none of the signals are real. So you do things, like build a million new homes in Las Vegas in the middle of a desert where there’s no water. A lot of these things that have happened in our economy over the last decade have been driven not by true demand, not by real economic signals, but by inflation. Of course now that’s spinning out of control. To your comment about a rise in crime, it has happened to my family. My parents had a mountain house – a vacation home – that they built 12 years ago. It’s in a very rural part of northeast Tennessee. There’s only maybe 5000 people in the entire county and my parents are good friends with basically everybody that lives there. It’s a small town America kind of thing. They leave the house vacant for months at a time. They came back two weeks ago and every single thing in the house had been stolen. Every single thing. Down to the picture frames on the wall. The silverware out of the drawers. Everything was gone. Of course they were able to find the people that did it because it’s such a small town. But that tells you the level of desperation, where in a town of 5000 people, someone would take every single thing out of another person’s house.
Brian: Porter and Bill, we’re going to run to a quick break here. When we get back, if you could expand a little more, Porter, because I like your idea of how it’s the transfer of information and how a broken promise interrupts that whole communication chain when it comes to investing. So, ladies and gentlemen, we’re going to run to a quick commercial break. When we come back, Mr. Porter Stansberry. He is here with us for the rest of the hour. Thank you so very much for hanging out with us, here at Off the Grid News.[0:12:03 – 0:16:17 break]
Brian: Ladies and gentlemen, welcome back, once again, to Off the Grid News. Brian Brawdy here, as always, with Mr. Bill Heid and our very special guest for the entire hour – Mr. Porter Stansberry. Just an absolute wealth of information. Porter, before we went to the break, you and Bill were discussing this concept of money really being the mode for communication – how it’s able to tell us stories about what’s truly going on in the economy as opposed to maybe some of the smoke and mirrors things. I thought that was a really creative and unique way of looking at it. Most certainly a way that I had never looked at it. Could you expand on that a little more for us?
Porter: Yeah. You guys know that the global economy is incredibly complex. There’s no one person that controls any individual market. The way that information is widely distributed across the global economy is mainly through prices. Prices tell you a lot about what people need more of or what people have too much of. That’s crucial to a healthy economy. One of the main reasons why socialism fails is because the price impulses are restricted and constrained – so people are meeting a quota, maybe, but maybe there’s no demand for that quota. Or maybe the quote isn’t nearly large enough to fill the demand if there’s always shortages. You remember the images of the Russian grocery stores before the fall of the Soviet Union – all the shelves were always empty. One of the reasons why that is, is because communication is disrupted by price controls and quotas. In a free market economy, one of the big advantages is nobody has to tell the farmers what to grow. Nobody has to tell the entrepreneurs what to make. Instead, prices transmit that information across the entire economy, almost instantly. I understand this is an idealized version of a free market, because markets aren’t actually that free, as you guys well know. There are lots of different constraints upon that information. But one of the biggest problems with inflation is that when you have a huge credit bubble or when you have the ability to print unlimited amounts of money, a lot of those signals get mixed up so people do things like build way too many houses. Right? Because the prices of the houses were kept artificially high by the fact that Fannie and Freddie were providing unlimited amounts of credit for housing. That’s an example of misinformation in the economy that was caused by the inflation of a credit bubble. Today, you’re having an enormous inflation in food because the government is printing tons of money and that makes people not trust it, so they’re fleeing – the value is leaving the currency and it’s going into energy and going into agriculture and going into precious metals. Those are the three things that always tend to receive value during an inflationary period. That’s exactly what’s happening right now. That’s going to cause lots of problems down the road. Farm prices are going to go way too high; too much credit is going to be put into the farm complex. Too many new mines are going to get built and way too many marginal energy projects will be invested in. Sooner or later, when the inflation stops, those are going to cause big problems.
Bill: Brian and Porter, I’ve got a little bit of a mini analogy. Porter, you made reference to this very complex economy – the invisible hand as it were, if Adam Smith were here. Very complex. But I have a little shorthand version of what happened to – actually a friend of Lech Walesa from Poland told me this story. This was during the ‘80s. In Poland, what happened was, the government decided in their infinite wisdom that they would make sure that there was plenty of milk so they subsidized the dairy industry and paid them actually more than the market price of milk. What that did was drive milk prices up in Warsaw. So they made a rule that said you can only charge so much for milk in Warsaw. You’ve got the farmers being pushed on one side and you’ve got the profit sucked on the other side, at the retail end. This was actually happening .What ended up happening – there was such a disparity in the pricing mechanism that farmers actually were going into the grocery stores, buying the milk, dumping it into their bulk tanks and selling it back to the government and back into the distribution system again. So when the average family – and this affects poor people – I think, Porter, that’s what you and I are talking about here. Really, when it comes down to it, some of these things hit poor people the hardest.
Bill: So there wasn’t any milk because they thought, in their infinite wisdom, they played God – they were good Hegelians – the government is God walking on earth. What they did was create no milk at all in Poland. And if you think that can’t happen here, you don’t know your history.
Porter: No, it happened here in the 1970s and there’s no doubt that as this inflation continues the government will blame speculators and things like that. They’ll set up price controls and of course that will lead instantly to shortages. These things are underway right now. The National Guard got called out in Wisconsin. That will not be the first time that happens this year; it won’t be the only state. You’re going to see more and more and more of this. The reasons are so simple to understand. Every single citizen can understand this if they’re willing to think about it. The matter is very, very plain, which is our government is bankrupt. There are probably a dozen states that are bankrupt and the federal government is bankrupt. Instead of making our creditors take a haircut, writing down the losses and reorganizing these debts, what we’re going to do instead is try to borrow more and more money. And when we can’t, we’re going to print it. That is going to lead to a catastrophe for our country. It can be stopped. But it won’t be stopped as long as people think that corn prices are going up because there’s suddenly a tripling in demand globally for corn.
Brian: You know, Porter, when you talk about the boy crying wolf – what do you got to do? How do you get up in the morning and you go “you know what? I know this is going to happen” – and for the few people that may not know you, in terms of your prediction of Fannie Mae and Freddie Mac and all the other things that you’ve been able to foresee, reading these trends over the years – how do you go out the door and go “what else do I have to do to get people to wake up and pay attention to the inevitable?”
Porter: I have to tell you, one of the fun things about the internet is you can type your name into Google and you can see what people are saying about you now so much easier – from all over the world. It is amazing to me the things people are willing to say about me and my company who have never even read a single one of my newsletters. Of course, the more people say lies about you, the more lies that get made up. It’s amazing to me. But the same thing happened when I was telling people that there was no way that General Motors could escape bankruptcy. I kept telling people – the unions would say I’m a union basher. On the other side, General Motors would say that I’m a stock fraudster. You’re going to get it from both sides. The fact of the matter is, General Motors owed $450 billion. That’s a private company not a state government. $450 billion. They couldn’t even afford the interest for 19 out of the last 20 years. There was no doubt they were going bankrupt. There was no question about it. And yet, for years and years and years and years, I kept saying the simple truth. Wall Street kept lying and selling more bonds. And people kept calling me names. This isn’t my first rodeo and I was certain when I began to point out the fact that the federal government and a dozen state governments were absolutely, positively bankrupt today, there is no way those debts can be financed let alone repaid, that people would of course blame the messenger. So I’m used to that. But what I tell people in response is, look at the numbers and explain it to me. If you can explain it to me, then I’ll change my mind. Right now Americans owe $55 trillion. That’s not a made-up number. That’s real. You can look it up for yourself. It’s on debtclock.org. That’s local government, state governments, federal government, private debt, corporate debt. $55 trillion. To pay the interest on that debt is $37,000 per American. There’s no way that we can afford it. It’s not even close. So until you can explain that to me, then my prediction is that we’re going to have a massive inflation, because we have the printing press and that is the way our government will default. It will absolutely happen. It’s happening right now. If you don’t want to open your eyes to that risk and to the inevitable consequences, that’s fine with me. But don’t call me a bad name. Don’t say that I’m a liar or a fraudster or I’m really trying to make you buy gold because I own a gold mine or something like that. It’s all nonsense. Just explain to me how we finance $55 trillion in debt each year.
Brian: Porter, we’re going to run here to a quick commercial break. When we come back, I want to get you to expand on that a little more. I would say to you my grandfather said to me when I was a little boy “the biggest tree grabs the most wind.” So to the degree that you have all these people logging on going “Porter does this … Porter does that,” you’re doing a great job. You’re doing great work. Your work is helping people. End of America 16, I will tell you and we will reference that more in our next segment – absolutely changed the way that I looked at things, not only my own life but for the life of my family. The biggest tree, my granddad would say, grabs the most wind, so I think you’re doing the right thing. Ladies and gentlemen, we’re going to be back right after this quick commercial break with Mr. Porter Stansberry.[0:26:18 – 0:30:36 break]
Brian: Ladies and gentlemen, as the announcer says, welcome back to Off the Grid Radio. Off the Grid Radio – our audio version, if you will, of offthegridnews.com. Here today, with Mr. Porter Stansberry and as always, Mr. Bill Heid as well. Bill, you were saying to us during the break – and I love this one – about the frog sitting in the pan of water that’s on the stove. Tell us what happens to a frog if you turn the temperature up real slow. Then, as I’m sure our listeners already know, what happens if you throw them into the boiling water right off the bat.
Bill: It’s a little bit of a play on Porter’s newsletter and what he’s been talking about for a long time. It’s a trend that I also see. It’s a dangerous trend. It’s a historical trend. I don’t know that it’s a trend that’s ever really been broken because the populace just sees themselves where they are and it’s because it’s gradual – the change is gradual – they don’t really see it in a profound sense. This happened in Nazi Germany and folks were … Jews were attacked and as long as it wasn’t you, you were OK – as long as you didn’t lose your job, you were OK. I think this country’s no different historically, and I think if you have that in your mind that this country’s different than any other people of the world, then you’ve got an arrogance that probably needs to leave. We’re human beings. We’re sinners, just like every other country. And we’re subject to the trends and changes and issues – this frog in the kettle issue. What’s your phrase for it, Porter? It’s the normalcy bias, right?
Porter: That’s right. Human beings have a really difficult time imagining that there could be a fundamental change in their lives. If you’ve ever known anyone that had a medical problem, for example, it could take them a very long time to get their head wrapped around the idea that they really are facing a serious medical problem. Do you know what I mean? You’ve experienced that, I’m sure, at some point in your lives. Another thing I like to point out to people is just because something has always been, doesn’t necessarily mean that it’s right or that it’s useful. I tell people a lot, imagine if a Martian – some guy from outer space – landed on earth. Please understand, this is just an analogy. I’m not actually expecting anyone from outer space.[laughter]
Porter: I know that if I don’t say that I’ll get dozens of emails from people saying that they met that guy last week.
Bill: You could start a trend too – that could be the next Tom Cruise movie.
Porter: No, no, no, no, no. Imagine if a complete foreigner landed on earth and you tried to explain our monetary system to them. You tried to explain to him that we work hard and save our whole lives to get these pieces of paper and that there’s a wizard in Washington, D.C. who controls the value of it. All of a sudden, the value of it begins to evaporate and we all pretend like we don’t understand what’s happening. If you were from outer space and you saw this going on, you would think we were all crazy. It just doesn’t make any sense at all. I can imagine at some point I’m going to try to explain to my – I have a three-year-old son – at some point I’m going to have to explain to my son why you work hard and why you save. He’s going to look at me like I’m crazy. What do you want these pieces of paper for? It’s going to be worthless over time because it’s going to get inflated away. So why are you working for it? Why are you trading with it? Why don’t you use something that’s more reliable? Why don’t you use gold? Why don’t you use silver? Those seem like such logical statements to make, don’t they? If you didn’t know anything about our monetary system, wouldn’t you think that we would all work and save in something that couldn’t be counterfeited?
Brian: Absolutely. I would say that would absolutely be the way the son will look at you. Your son will look at you when he grows up and is old enough to articulate that being like “why would you ever do that? Why would you fall for that?”
Porter: And yet, if you go around today and you tell any economist – any economist, any university in the United States – you tell him “I don’t really think the paper system is trustworthy. I don’t think it fundamentally makes sense. I think it’s a bizarre tradition that has evolved, that we all work for worthless pieces of paper. It doesn’t make any sense, fundamentally.” But if you were to say that, they would all look at you like you were crazy, like you were the madman. So this is what I mean by normalcy bias. You become accustomed to things that don’t make any sense in the world and you stop questioning them completely. The moment that you stop questioning them completely, you become part of that system. You become controlled by it. One of the things I try to challenge people to do when they’re reading my newsletter is, let’s think of things from first principles. Does this make sense? If it doesn’t make sense, then how can we prepare? How can we protect ourselves?
Bill: Porter, Bill again. One of the things I would reiterate what you’re saying is I was in China not too long ago. I said to my friend there – our solar panels are made in China, we have a factory over there. I said to my friend that is the owner of that factory, do you have any gold? Do you save gold? He said “I don’t save gold; but my wife does.” We went on and had a discussion about how the government is actually encouraging them and challenging their paradigm and telling them to buy gold. So if you go to the airport in China, or in a lot of businesses, a lot of jewelry stores, you can buy really small incremental pieces of gold and they do. The housewives, who are traditional savers in Asian cultures – this is true in Japan; it’s true in China as well – where it’s up to the housewives to take care of the savings. They’re still saving because they have a great savings rate. You probably actually know what it is. But Americans – if you said to the average American – you walk down the street and said “what do you got in your savings account?” I mean, we want to save. We want to capitalize industry. We want to have savings account. But what we’re doing right now is destroying that. Destroying the concept. When a father’s going to try to tell his children “you should save money,” he has to really make sure that he qualifies that – what’s money, right?
Porter: Yeah. I think it even goes even deeper than that. Our society has gotten so turned around on this issue that we have come – it’s almost uniformly believed that the way to manage our debt crisis is to spend more money. Does that make any sense at all? Is there any logic to that? Do you know what I mean? OK, so we’ve got this big problem, we can’t finance our debt. So here’s my solution – we’re going to borrow more money than ever before. On the face of it, it doesn’t make any sense. Or you guys – we talked a lot about the coal-fired power plant problem – does it make any sense that the coal-fired power plants, their input cost is coal, which is a free global market for coal. Then their export – the power prices – are determined politically. You can tell there’s going to be a problem right there. Sooner or later, coal prices are going to be higher than the power plants can get in payment because the politicians are never going to allow the prices to be passed on to the public.
Brian: Porter, when you say that – and we hear a lot of the, about the, at Off the Grid News where everyone’s like “we’re down with politicians; we’re down with the government; we’re down …” And I get to say this – it’s like why I get to make fun of people from West Virginia, because I’m from West Virginia – I blame the media that there aren’t more portals of access for Porter Stansberry, to be able to get out and tell people the truth. And if not tell them the truth, ask them questions that lead them to the truth. It’s the media that I’m taking more and more of an issue with of late. They’ll be the ones that say “these things affect poor people.” Well, just last week in Egypt, you saw how it at first affected poor people. Then basically, eventually, brought down the guy that was worth 40, 50, 60 billion, depending on what you think Mubarak was worth. So doesn’t the media share a little bit of the blame for this?
Bill: Porter, you get to say here too “you can’t handle the truth.” Isn’t that part of this too? It’s a double-edged sword.
Porter: No! You know, I produced our first television advertisement on the back of the end of America ideas. Trying to warn people about what’s happening. It’s a 30 second TV ad. There’s nothing graphic about it at all. I just say the facts. There is not a single network in America that will run the ad.
Bill: You got bumped – Porter, our TV commercial for running nothing more than telling people that they ought to plant a vegetable garden – that got bumped by FOX, of all people. I run it on Beck. That got bumped. We couldn’t run it.
Porter: Yeah, FOX will not run my ad. And my ad says nothing. All it says is, there’s a guy in Baltimore who’s making a prediction about the dollar. You should go to this website. You should understand what the risks are to the currency. That’s it.
Brian: That’s unbelievable. I guess you would say then – you shared that a little bit with me – as much to blame of the media, because they’re the ones in fact protecting all the other shenanigans going on.
Porter: I met with Scott Pelley of 60 Minutes. I explained to him the entire problem in Southern Company’s balance sheet and AEP’s balance sheet and the whole problem with the whole coal-fired power plant complex. It’s right there in black and white. And he understood it all. You haven’t heard a word about it.
Brian: Alright. Ladies and gentlemen, unfortunately we have to run to a quick commercial break. Probably a good thing for me so I can take a couple of deep breaths and not continue to get worked up about the media’s collaboration in all this. We’re going to go ahead, run to that break. When we get back, Mr. Porter Stansberry, from Stansberry Investment Research. He’ll be back with us for one final segment. You do not want to miss these last few minutes with Porter Stansberry. Back after this break.[0:40:23 – 0:44:39 break]
Brian: Ladies and gentlemen, welcome back to the final segment – unfortunately, our final segment here this morning – with Mr. Porter Stansberry, the founder of Stansberry & Associates, Investment Research – a private publishing company, as you well know, based in Baltimore, Maryland. In 1999, he kicked it off. His monthly newsletter – I am a member, I’m a subscriber. I dig it. I read it every day. The Stansberry Investment Advisory deals with safe value investments poised to give subscribers years of exceptional returns. Ladies and gentlemen, say hello one again to Mr. Porter Stansberry. Porter?
Porter: Glad to be here. I think we’re going to spend a little time talking about interest rates, aren’t we?
Brian: I would love … that’s the thing, whenever I get a chance with you I just want to step out of the way and let you talk to us about whatever you think, Porter, we need to know. I sense just from our energy levels you and I could talk about how the media is complicit in all these types of things but you and I will save that for some time when we’re having a beer. Let’s jump right to interest rates. What do you think our listeners need to know right now?
Porter: The key thing to know is that you’re going to see much higher interest rates for things like mortgages. For bond investors, higher interest rates are a threat, because as interest rates move higher, the value of current run bonds will fall. So if you can go out and get a new bond that’s going to be yielding six or seven percent, then that bond that you own right now that’s only yielding four or five percent is going to be worth less. That’s a big threat to people’s wealth. And as you probably know, most people hold tremendous amounts of investment in bonds, whether it’s through mutual funds or through their 401Ks or through other kinds of derivative products. But a lot of investments end up in the bond market. So even though stock markets on the nightly news every news, the much larger amount of wealth is concentrated in the bond market, and the Fed’s money printing is a big threat to the value of the bond market. I’ve been warning people for the last, as you know, several months, that they have to be really careful when it comes to long-duration bonds – bonds that aren’t going to mature for six, seven, eight, nine, 10 years. The value of those bonds is very likely going to fall this year and fall significantly.
Brian: Porter, then can I ask again, not being the sharpest knife in the drawer, but for some of our listeners – some of our listeners, they know exactly what you’re talking about. Other listeners like me may not. So when we watch – I don’t know anymore who still watches the nightly news, but from time to time if you happen to be in a room and it’s on – they tell you “the stock market is breaking 12,000 today” – my first question would be, that’s not always a cause for a celebration for us regular folks, is it?
Porter: No, it really depends on what’s driving the market. If the market is going up because business is improving, earnings are getting bigger – those are all fundamental reasons why stocks would go up. But right now one of the reasons why stocks are going up is simply because of inflation. As the government prints more money, people would rather own stocks than own bonds or own fixed income, because the fixed income is threatened by the additional money. So people are moving money from the bond market to the stock market, which will make the stock market go up, which in a sense is good, but it really doesn’t matter if you lose as much value in the bond market as you gain in the stock market, then the country as a whole hasn’t gained anything.
Brian: Gotcha. OK, for me that’s a new way of looking at it. Can I ask you another – for you it’ll be a layup question, but for me it’s ricocheting around in my mind, if you don’t mind. Talk to us about the gold standard. You hear that President Nixon went ahead and took us off the gold standard and you’re in different chatrooms and people are talking about it. What does that mean to our listeners – whether we’re on the gold or off the gold standard? And how could we even redo that, if that’s something you thought we’d ever want to do as a country.
Porter: Yeah, let me answer that question by pointing out something that you could look up for yourself on Yahoo! Finance or any of those online financial charting sites. Look at a chart of gold and look at a chart of long-term US Treasury bonds. The symbol for gold is GLD and the symbol for long-term US Treasury bonds is TLT. If you look at those charts at the same time, you’ll notice that they’re the mirror image of each other. That is, as gold goes up, the Treasury bonds go down. And it goes up and down in almost exactly the same amount, so gold is up say 15 percent over the last six months; the Treasury bonds are down 15 percent in the last six months. It’s a mirror image and the reason why is because as the Fed is printing money, it’s impacting on the value of the bonds negatively in the same proportion that it’s impacting the price of gold positively. That is a perfect explanation of why printing money is bad for the bond market and why it’s good for gold. That’s exactly what’s happening right now and you can see it in the chart. It’s a perfect mirror image. The point of the gold standard, to get back to your question, was the gold standard makes it impossible for the government to counterfeit new money. That’s the whole point of it. The whole point of it was to limit the power of the government to debase the currency. It was a tremendous accomplishment for people who believe in free markets. The gold standard was set up in the United States in the late 1800s and it continued to be very strong until the first World War – until about 1917, when we got off of it. There were increasingly weaker variations of the gold standard until 1971 when Nixon said “forget it; you cannot exchange gold for dollars at any price. The dollar is going to be nothing more than a debt instrument.” That was a sad day for people who believe in freedom and for people who believe in free markets, because it gave the power to create unlimited amounts of money to the federal government, which is very dangerous and now we’re reaping those dangers.
Brian: Porter, if I could ask again – I’m learning from you as much as I hope our listeners are learning as well – why would President Nixon do that? What would have been – in that day, is there any reasonable rationale for why he would have done that?
Porter: There is. Because what had happened was during the ‘50s and ‘60s, we had borrowed tremendous amounts of money to pay for the Vietnam War and to pay for Lyndon Johnson’s social programs. The government had begun to run huge debts. Nixon had the choice of either paying back those debts and limiting the scope of the federal budget and living within our means, or turning loose from the tie of gold and giving in to inflation. You remember that the 1970s were a terrible decade for inflation. The reason why is because we let the dollar go. We decided we would rather have a fallen currency and a bigger government than have a sound currency and a smaller government. We’ve been making the same choice repeatedly, ever since.
Brian: Then, if I could, which leads me to my third question, and I don’t want to envelop you in a political debate – unless of course you want to – when you hear Ron Paul fans or Judge Napolitano fans – calling for ending the Fed – do you feel comfortable giving me a thumbs up or a thumbs down on whether you think that’s a good idea?
Porter: I think it’s a great idea. The Founding Fathers of the United States specifically put into the Constitution that Congress would have the power to coin money. It said nothing at all about giving Congress the power to use Fiat money or use paper money. I really, truly believe that the Fed is wholly unconstitutional and should never have been created. We do not want to live in a country where the government has the power to counterfeit, because if they control that power, we will never be economically free.
Brian: Aright, Porter, unfortunately I know we’re going to start to run out of time and I want everyone to know about endofamerica16.com. It truly is something that I’ve enjoyed tremendously and I want you to comment a little bit on it because that’s your attempt to help the rest of us, notwithstanding the absolute lack of any help you’re getting from other forms of media, isn’t that your attempt to help the rest of us – it’s almost like an alarm clock going off in the morning. I wanted you to comment a little bit about that, if you would.
Porter: I understand that most people don’t spend their time thinking about economic theory or really thinking about the consequences of $3 trillion of new paper money. I produced a video; I worked hard on it. It took me two or three months to get this thing together, and it’s free. You can listen to the whole thing for free. It’s going to tell you exactly why I’m concerned about the ongoing inflation. It tells you what things to watch for, to see if it’s getting worse. And it tells you how to protect yourself.
Brian: I’ve enjoyed it tremendously and I’ve learned a good bit. At times, Porter – in terms of all the interviews you do – it may not sound like I have the sharpest questions, but I’m coming new to this, do you know what I mean? I’m one of the people learning right along with you. So I want to make mention of it again. As I said, it’s not just something that I’m fired up about because I know Porter. What was that old – I’m not just the president of the Men’s Hair Club, I’m a client – I believe in it. I subscribe to the newsletter. I put down my own credit card. I got the information and it’s been invaluable for me. Again, endofamerica16.com. It’s just a wealth of information. Porter, I should say, you’ve put together a heck of a team as well – Dr. Steve on down. You’ve got all kinds of cool people there. Smart, intelligent people, trying to show us the light at the end of the tunnel.
Porter: I’ve been real lucky. If you hold yourself out and you say “we’re only going to have the best products,” and I have an analyst that’s not doing a fantastic job, he’s out. When you really hold a tough line on quality, you can attract some great people to your banner, and that’s what we’ve done.
Brian: Well, Porter, I want to thank you again for spending the entire hour with us. Before I do our normal close, I want to remind folks endofamerica16.com. It is absolutely worth your time. When you’re done watching Porter’s video, you’re going to feel as I did – I went to it going “I’ll listen to it, and if he moves me than I’ll become a subscriber; I’ll become a client.” It will move you, I’m confident, the way it moved me, and you’ll become a subscriber as well. Mr. Porter Stansberry, thank you again so much, as always. And again, for putting up with my questions that I’m sure are softball questions for you, but for some of our listeners, I think that’s what they would ask you if they ever had a chance to meet you.
Porter: I’m happy to do it. I hope you’ll have me back.
Brian: Thank you so much, sir. Ladies and gentlemen, as always, thank you for listening to Off the Grid Radio. Be sure to email us with questions, comments, critiques, even suggestions. We want to hear from you at [email protected]. You can find us on Facebook, as always, Facebook.com/offthegridnews and, of course, follow us on Twitter @offgridnews. On behalf of everyone here at Off the Grid News and also Mr. Bill Heid who had to run out for another radio interview, I want to thank you for your time. We know that an hour is a lot to ask for. Thank you so very much for sharing it with us, here at Off the Grid News.[0:56:07]