THE REAL WORLD OF MONEY
Andrew Gause may just be the top man anywhere for the highest quality analysis into the world of money we all live in. Andrew is a currency historian, an internationally recognized expert on the United States monetary system. He’s written two books, “The Secret World of Money” and “Uncle Sam Cooks the Books”. You can order these books as well as speak to Andrew personally. As a One Radio Network listener, you’ll have highest priority in his phone time. His # is 800.468.2646
-Goldman Sachs has been around since 1869, as well as J. P. Morgan. They bought bills of exchange at a discount from the merchants. Money in the bank meant it was at risk back then.
-Treasury Secretary Mnuchin’s proposed tax bill incorporates a 15% corporate tax. Current tax rate is 35%. 15% of payroll rolls into treasury every week as employers’ payroll tax, plus 20% from workers’ income tax. Bringing corporations back to the US will create increased payrolls across the nation, leading to an increase in revenue to the treasury. Increase in 1% in GDP leads to $20 billion more for Uncle Sam.
-Dynamic scoring vs. static scoring. Static scoring says 15% corporate tax rate means $200 billion less in corporate tax revenue. Dynamic scoring recognizes the impact of increased payroll tax revenue from a lowered corporate tax rate.
-Apple builds an iPhone for $30 in China because they exploit workers, the environment, and natural resources. Their Chinese workers are indentured servants. iPhones sell to Apple’s Irish corporation for $300. Profit in the difference of $300 minus $30 is booked in Ireland at 12.5% tax rate. Phones sell in US for $400. After deducting expenses, there is no profit on the books that is subject to US taxes. Apple can do that because iPhones are imported to the US at no tariff.
-Will manufacturers return to the US when corporate tax rate is 15%?
-Why may Congress not pass the 15% corporate tax rate? Because of static scoring showing our $20 trillion deficit will increase.
-Simplification of the US tax code proposes no tax on income below $50,000. Tax cut on the bottom is more effective than a tax cut on the top. Corporate tax cut is even more effective.
-Stock hits today to lumber companies and US Steel because cheap imports of their products from Canada and China will be taxed more.
-We don’t need a wall. Can surveil Mexican border with drones, satellites, and monitoring systems. Bring home the troops from overseas and use them for surveillance of the borders.
-We had a housing bubble in 2006; predictions now of an echo bubble. Housing in prime areas is higher now than it was then. People priced out of the housing market still need to live somewhere; they go into rentals. H41 Release – US Treasury Securities is what treasury owes the bankers. Change from last year is $3 billion more. Fannie, Freddie, Sally Mae mortgage backed securities (MBS) is $20 billion more than last year. Increase means it’s business as usual – the government is still buying MBS.
-MBS are divided into tranches of risk, creating synthetic securities of varying interest rates, which derive their value from the actual mortgages. Statistically 20% of mortgages will fail, but we don’t know which ones. Synthetic securities are worth more than the face value of the actual mortgages. Buyers of MBS dragged the housing market down in 2006, not people who didn’t pay their mortgage. MBS market got burnt in 2006. Now the Feds are buying them. Taking a debt instrument and turning it into money.
-There are no practical limits to the amount of Federal Reserve Notes that can be created now because of the ability to monetize debt. We can only crash now if the boys want us to.
-How can we profit from this situation? Don’t buy MBS, municipal bonds, debentures, CDs, annuities. Don’t buy debt, only buy equities. If we were in a falling interest market, the advice would be reversed – i.e. to buy debt. But interest is rising now. If an annuity is now paying 6% or less, get out.
-Chinese are buying a lot of gold.
-No reaction to stock market on proposed tax plan. Buy the rumor, sell the news.
-To understand today’s money situation, look at H41, MZM, and Velocity of Money. In the 37 years since Reagan, people have 15 times as much money as they did in 1980. Float has widened between what is on the books and what is in circulation. 96% of all representations of wealth today are in electronic money. The boys like that because they know where the dollar flows are. They don’t like it when people go to the bank and ask for paper money.
-Velocity of money has dropped. Went from 2.5 in 1997 to now practically zero. Reflects loss of confidence – it’s not being spent, it’s being parked in an account. TEFRA in 1982 raised payroll taxes across board and increased revenue across the board, which allowed Clinton to say we had a balanced budget. Based on untruths, because the money was being spent by the gov, but confidence rose until late 1997 stock market bubble.
-3 factors give us inflation: 1) Increase in the money supply. 2) Monetary velocity – turning money over quickly. 3) Resource slack. If there is job opportunity and factories are slack, as these factors turn around, pent up inflation will release itself. All indicators are for a strong upward flow in inflation. For the first time in 10 years, resource slack is tightening up, confidence is increasing. We’re in for a 1977-1980 inflation style cycle. Had double-digit inflation then. Gold prices peaked. Now that we have 15 times as much money as then, what will gold prices rise to?
-Don’t buy coins all at once. How do you protect yourself when it’s time to sell your stash? Coins are personal property, can pass them on to your kids but still retain possession.
-Listener asks: Can Andy recommend a book or video to improve Trump’s diplomacy? Trump is from the world of New York politics and contractors. We’ve tried nice with Obama, but got no results. Sorry to offend you Canada, but policies and trades with Canada are incompatible with US interests.
-Was Smedley Butler a communist? He revealed the existence of the Prescott Bush coup, when a bonus army was matching on Washington because they didn’t get their WWI bonus. Before that, he took care of United Fruit company interests in Central America and the Caribbean. Wrote “War is a Racket.” Was FDR a communist? Compare his accomplishments to the Communist Manifesto.
-If you’re tricked into something, it’s not a valid contract. US citizens have been tricked with IRS adhesion contracts. Good book: Otto Skinner “If You Are The Defendant”.
-Italian court found that cellphones caused tumors. Tumor problems will be revealed in the US after the problem has been fixed. E.g. no admission of thimerosol problems in childhood vaccines, but it was quietly removed (supposedly, but not really).
-Non-circulating legal tender coins are honorary legal tender.
-Justin teaches a group of boys about US history, but they feel it’s irrelevant to their lives and aren’t interested. Andy’s game playing setup to teach inflation to students. Will donate 15 copies of the Secret World of Money to Justin. For world history, Patrick recommends Richard Maybury’s three books, the Uncle Eric series.
-What will pop the bubble of stocks? Stock prices now are not driven by earnings. Look at P/E ratios.
-Whole Foods to be taken over unwillingly?
-Some lots of Evanger’s canned dog food adulterated with pentobarbitol. Other brands also tainted. Best canned dog food is Cornucopia.
-Dark Net TV documentary series about dark web activities and using computer power to create bitcoins.
-In Puerto Rico, bond holders not getting their bond payments.
-Global equity market cap rising off the charts since the election.
Andrew Gause and The Real World of Money, April 26, 2017, Part One 1:20 length
Andrew Gause and The Real World of Money, April 26, 2017, Part Two 1:15 length
April 27, 2017 @ 6:56 pm brian
Thanks so much for the chronological show notes. I sometimes don’t have time to sit down and listen to the whole show, so it’s nice to get a glimpse at what was covered, and try to find specific parts that are of interest to me. Much appreciated!