Gold & Bitcoin: The Monetary System's Navigational Beacons (w/ Simon Mikhailovich)

Video Transcription:

  Gold & Bitcoin: The Monetary System's Navigational Beacons (w/ Simon Mikhailovich)

SIMON MIKHAILOVICH: My name is Simon Mikhailovich. I'm the managing partner of the Bullion Reserve. My background is for the past 35 years has been in the investment business. Personally, I was born in the Soviet Union. I lived there until I was 19. Came to the United States in 1978-- '79, I'm sorry, left in '78, came in '79. Ended up in the investment business, went to Johns Hopkins, got my degree there and then got business degree and then ended up in the investment business for 35 years primarily dealing in credit, in distressed credit, then structured credits such as CDOs, and credit default swaps. For the past five or six years professionally, I've been fully focused on gold, not because of some affinity for it, but for the reasons of my opinion, professional opinion, to which I came based on my credit experience as to the solvency of our current financial system, and the prospects for fiat money and financial instruments going forward. Rather than getting into a deep history of money and all the details, I'm just give you some very basic common sense things, because that's how things evolve. When things evolve out of natural market processes, usually it's a logic, history and common sense that dictate how things work out. Clearly, if you want to, if I have chickens and you have cows, and we need to perform some exchange transaction, it's complicated to equate chickens to cows. How many chickens, how many for how many cows and so forth. Over time, commerce started with barter and fairly quickly, it evolved to some exchange, medium of exchange money. What is money? Money is some a substance that usually has to meet three criteria. One is that it has to be a store of value. Store of value meaning that if you store purchasing power in this medium, it will maintain its purchasing power over some period of time, so that you don't have to buy anything for a while, you can just defer that purchasing power until later. The second one is a unit of account. How do you keep track of transactions? Because chickens and cows are incomparable, it's important that whatever we transact with be comparable, and that we're speaking in the same language when we're speaking about it. If I say a certain quantity of something, then you need to understand exactly what I'm talking about and we need to agree on what that is. That's part of the importance of unit of account, so we could keep track of what we're doing in some form on which we agree. These days, they're called accounting standards but in the old days, it was something else, something similar to that. Finally, it has to be a medium of exchange. Medium of exchange means it's something that we all accept as something that we are comfortable taking in exchange for our goods. For us to be comfortable to take it as an exchange for our goods, it has to be a store of value, because often, we don't immediately translate it into something else, get rid of it like hotcakes. Those are the three attributes. If you think about those three attributes, going back to the earliest mentions of money, in Hammurabi Code, Mesopotamia, 1700 BC or something like that, so this is almost 4000 years ago. They're talking but first of all, they have financial system, they had lending, they had derivatives, they had crop financing, all of that existed already then, and they talked about money as a weight of silver. In other words, there were no coins. It was a weight on silver. Now, this concept of weight is actually very important. We still have it here today because the word pound, the British pound, for example, that's a measure of weight. That is something that comes from the Roman pound of silver at the time, which was smaller than today's pound but still, it's a measure of weight. In the English language, they were to spend. We all know what it is, to spend money. That actually comes from the Latin word expendere, which means to spend also to expend, but it also means to weigh and to judge. It's clear why it's common sense to take weight as a common measure because whether you're measuring in kilos or pounds or stones or ounces, these are very easily interchangeable and translatable notions. There's never any question as to what people are talking about to each other when they measure things in a certain weight. It's a physically measurable, clearly understandable, transcends all cultures, all languages. Those are the important things in the emergence of money. Now, many things have been tried, cowrie shells, tally sticks, stones, pieces of paper, all things have been tried. Gold emerged as the preferred money for reasons that have nothing to do with ideology or anybody's edict or anybody's law. It's just something that emerged completely independently and in fact, gold has been valuable for as long as civilization has been developed. If you look at for example, the Mayan civilization, this is even pre money almost, it's 4000 years ago. If you look at the Mayan civilization, if you look at the Indian subcontinent civilization from 2000 BC, if you look at the Egyptian civilization, which is 5000 years ago, 3000 BC, all of them may not have used gold as money but they've all revered gold as a valuable and as wealth. When we look at the pharaohs, when they open the crypts, death in common, gold was buried with the pharaohs because that was the wealth they were taking into the world beyond. The concept of gold being valuable and the concept of gold being money is thousands of years old and these are the emergent properties of gold itself in the market that has selected it as the medium of exchange, the store of value and a unit of account. Nobody else ordered that. I think that's very important. It's also very important to understand or to realize that the Mayan civilization, the Egyptian civilization, and the Indian civilization had no connection to each other. They came up with these ideas completely independently of each other. It has to do with the chemical properties of gold, of its divisibility, its inertness, that it doesn't corrode, it doesn't react with anything. In fact, all the gold that's ever been mined, still exists. It's also lasting. It's beautiful. It's lasting, is divisible, it's workable, it's ubiquitous. Everybody knows what it is. It's rare, which is what imparts some value. It continues to this day to exist as a valuable even though financial markets in the United States and Western Europe, let's say, or investors in these parts of the world don't particularly value it, it is valued by the rest of the world, which is fine. What was the point of having, let's say, gold as the basis of money? Well, clearly, if we are transacting in something, as I said before, it's important that it'd be a store of value and for it to be a store of value, it's important that it'd be scarce. Imagine a very simple example, let's say tomorrow, the US government prints enough money and every citizen of the United States receives a check for $10 million. That would be wonderful. Everybody would be rich. One would think $10 million, what would people do with these $10 million dollars? Well, they would all go, take their 10 million, they would want a bigger car, they would want a bigger house, they would want better furniture, they would want better shower and they would want to remodel their house. But think practically what would really happen to the price of all these services if all of these people suddenly came up with all this money to start buying? There are only so many plumbers and there are only so many contractors and there's only so many construction materials. It's intuitively clear that the value of each dollar would lose its purchasing power dramatically in such a scenario. Now, I know it's an extreme scenario, but it basically demonstrates the point. Gold standard is nothing more than putting scarcity on money, making money scarce, and that's what makes it valuable. That's what also prevents inflation. It what prevents money from losing value from there being an unlimited quantity of more, more and more of it. That's why for thousands of years, the monetary system was based on commodities, not necessarily gold, also silver. There were times in Greek civilization when it was bronze, iron, but in all of those periods of time, these materials had scarcity. The way to debase the money in those days was not print more money, but would make the content of valuable scarce commodity less. Clipping coins, making coins, for example, pennies used to be made out of copper but if they were made out of copper today, the weight of copper and a penny would be worth many times over a penny. Therefore, now they're made out of some base metal that is just coated with copper, even to that point. Of course, also, the US coins in the 1930s were made out of silver, which is why we referred to change of silver. Of course, they're not made out of silver because they would be way too expensive by their weight relative to the value of a 25 cents or 10 cents or whatever it is. The whole point of the gold standard was simply to constrain human propensity for making more and more of something. If they can do that, the governments overspending, the kings overspending on the wars, it was simply a constraint on the ability to spend money you don't have, and to create credit backed by nothing, which is where we've been for the past 50 years. Money that's based on nothing and credit that's backed by nothing. That's the difference between a fiat system and a gold based system or some other scarce commodity based system, where the government and the issuing authorities are constrained by how much money there is, and money has value versus a system where there are no constraints and we haven't yet seen the total outcome of this experiment but we will. Let me give you some context for the role of gold in the monetary system of the world. I'll show you some pictures, some things that are easy to see. The first known, coin. Even though gold has been valuable and a source of wealth and associated with wealth for many thousands of years, actually, the first gold coin was minted in Lydia which is Turkey, by King Midas and it looked like this. Serendipitously, these are cufflinks from Metropolitan Museum of Art. It's a replica. It's a copy of this coin that was given to me by my father, these cufflinks, 30 years ago, this is way before I got interested in gold. It talk about serendipity. This is what the original gold coin look like. Then from roughly 50 BC, and until 1971, there has always been a gold coin that was the currency of the realm. In other words, the reserve currency, and it ranged from Roman coins to Byzantine coin to Florentine coin, and then to British coin culminating in a British sovereign which is from 1816 and still made by the by the Royal Mint. The interesting thing about all these coins that existed for the past 2000 years, one is that there was only one period, before 1971, when there was no gold coin circulating, there was a reserve currency and that was the darkest of the Dark Ages, roughly from 950 to 1250, something like that. That 300-year period, the darkest of the Dark Ages, there was no reserve currency gold coin, and the next period is the past 48 years. That should give you some context for the history of money for the past 2000 years. Now, the interesting thing is that all of these coins that I've just mentioned-- the Roman coin, the Florentine, the Floren, the state, whatever-- they pretty much all weighed approximately like this coin. Seven or eight grams of gold. They pretty much all had the same purchasing power for the entire period that we're describing, it was either a monthly salary of a Roman soldier, a couple of these coins. A family could feed itself for about a month with about half an ounce of gold. The purchasing power has been remarkably stable over time. Now, Britain went off the gold standard more or less with some brief interruption prior to World War II, after World War I or during World War I, and it was necessary because the credit creation was constrained by gold and they needed to finance the war. What did they do? They created more pounds. The consequence of this, just to give you a sense, this is today's pound, up until 1914, this coin, the British sovereign, that was pound, that was one pound sterling. That was understood as one pound sterling and circulated actually as such. Today, this is what circulates as a pound. I checked the website today, the Royal Mint, the Royal Mint, thousand-year old mint, this is 300 pounds. 300 of these coins for one of these coins. That means that the pound in 100 years since whatever, 1914-'15 through today, lost 99.7% of its purchasing power. The British Empire had declined during that period and the American empire has ascended during that period. Yet the US dollar lost roughly 96%, 97% of its purchasing power during the same period. Now, it sounds like, okay, 97%, 99.7%, it's pretty much they lost the same, except that if you actually do the math, you would realize that for the dollar to match the debasement of the pound, it would need to drop by another 90% from here. Those who don't think we have room to go, we have plenty of room to go. That's would not get us there. Now in regards to fiat money, which is printed money, people tell all kinds of stories. We don't need to tell any stories. I travel. I've been traveling for many years for business, 35 years for work and I like-- I just happened to like to collect samples of foreign bills. Over the years, I've collected all samples from the countries where I've been. I can just show you all this money. I didn't bring all of them, I have a whole pack of them. None of them are worth anything. These were all money that I used while in these countries when I was there, but today, they're nothing and I have samples. I'm sure all of you have seen this. This is 100 trillion Zimbabwean dollars, which, of course, are now worth about $8, $9 on eBay. It's worth something as a collectible, it's not worth anything as money. This is a Russian ruble, which was in circulation when I was growing up in the Soviet Union. I can tell you that my mother, who was an engineer with 20 some years' experience used to get the 170 rubles a month. Today, of course, there's-- well, this is three rubles, I don't know where the ruble went. This is three rubles. It says, by the way on this three rubles that it is backed by all of the assets, gold and precious metals of the Central Bank of Russia. That's what it says here. Today, this ruble has roughly been devalued one to 700,000, or something like that, or 70,000 I'm sorry, one to 70,000. Because today, when I was growing up, the parity, the purchasing power parity between the dollar and the ruble was roughly one to one. I know you couldn't buy as nicer things but in terms of basics-- food, bread, and so forth, it was pretty much one to one, where today, 70 rubles equals $1, except that they cut out three zeros at some point. This is 100,000 rubles, and then it's 100 rubles after the three zeros were cut off. Finally, I'd like to show you this piece of paper, which is Indian money, where it says in plain English that the money is guaranteed by the Central Bank of India. That's right here, 10 rupees. 10 rupees says guaranteed by the central government. Now, those of you who know, just very recent monetary history know that in 2016, British minister or Indian Prime Minister on the night of the American elections where Donald Trump was elected, went on the television at 8 P.M. and essentially demonetized 80% of these notes. Now, it so happened that this note is worth about 15 cents. This one did not get demonetized, but anything over $7 worth got completely canceled. Now, it does say that it was guaranteed by the central government until the central government decided they didn't want a guarantee it anymore. That's the problem with fiat money. Fiat means the law, the regulation, it's by regulation, it's not by any other objective measure that doesn't depend on the good wishes or goodwill of the government that issues these certificates of confiscation, which is this paper money. I often get asked, obviously, given what I do what I think about cryptocurrencies and how do cryptocurrencies connect to gold. Clearly, I've given this a lot of thought and I continue to give it a lot of thought. Some people seem to have a lot of clarity in their mind about issues about I don't think most people should have a lot of clarity, because they're not clear objectively. Rather than tell you what I really think about cryptocurrencies, let me preface it by saying I think there is speculative potential in cryptocurrencies and I own some for that reason. If we're comparing gold and let's say cryptocurrency, as a safe haven, or as something that is a source of independent store of wealth, then I think it behooves one to ask some questions. I would like to pose some of these questions to you. I'm not going to answer the questions. I will let you answer your own questions, and then maybe you can come with your own conclusions. Let me ask you this question. If you were outfitting a ship to sail across the ocean, knowing that you might face some pretty severe storms, and you were buying equipment, particularly safety equipment for that ship, would you buy equipment that was very highly technically sophisticated, brand new but never been tested in a storm? What percentage would you buy that hasn't been tested? Would you buy half of it not tested because it's really good looking, or looks very efficient, looks very good? Would it be 10%? Would it be none? That's something for you to decide. The reason I'm asking this question is because we know that cryptocurrencies have never been tested in a real crisis, systemic crisis, capital control crisis, not by country like Venezuela, but by the major countries that do have control of the networks and the internet and do have capabilities. Let me ask you another question. If you are seeking financial independence and privacy for your assets, for your wealth, do you think it's a good idea to have every transaction you perform with your money indelibly and forever recorded in a distributed database, which you do not control, which no one can control, where the only thing that prevents it from being audited and brought back to your doorstep five years from now, 10 years from now, 20 years from now, 30 years from now, is state of the art cryptography of today or maybe that's not a good idea? For instance, would you have put all your money into a Commodore 64 computer which those of you who don't know what that is, in 1982, that was state of the art computing system which by the way still holds the record for the biggest selling computer product ever until now. Now, the only reason it's the biggest selling until now, not because it really was the biggest selling, it was the only one and so that was a company that came up with the state of the art computer. It laid the groundwork for many more computers that were better and more wonderful and more capable but who remembers about Commodore 64? When you look at cryptocurrencies of today, first generation technology, just like Commodore was, do you think it's wise to put a lot of your wealth and a lot of your hopes into a first generation technology that may have tremendous future, but actually maybe 1.0 version in a long string of improvements that are yet to come? It's for everybody to answer for themselves. Let me ask you another question. In a difficult situation where trust is lost, where the crisis happens where people lose faith in institutions, financial instruments, in things that they don't understand, what is more liquid and more easy to pass as a form of payment, something that everybody knows what it is, or something that's fairly complex, sophisticated, and maybe wonderful, but not known to the vast majority of the human population, and not really transactable in most ways? I don't know, you answer for yourself. I know my answer to that question. I think, keep it simple stupid is what they say, or there's another great saying, simplicity is the ultimate sophistication. Simpler probably is better than complex. Here's another question that to which there's really not a very good answer. Imagine a situation where you need to transmit a message on which may be your fortunes, the fortunes of your family, your life depend on or imagine you're an intelligence agent who needs to transmit an urgent message to his government from a hostile territory and you have choices, you can mail a letter through regular post. Now, you do know that this is a time of trouble and that the government opens every envelope that goes for the mail. You have very thoughtful encryption methodologies how you can encrypt this letter, but you know that that letter will be tested by specialists in cryptography, or would you rather send this message by maybe several couriers independently in handwritten form but completely outside of the definite examination of the postal network? Essentially, what I'm asking is, is reliance on a network that is controlled by governments and is not controlled by you in any way or shape or form, is that a point of failure, or is that a point of strength? That's up for you to decide. Now, given what's going on, for example right now in China and Hong Kong, we know the power of the governments to control the internet, to block certain sites, to block certain traffic, to unpack certain data packets that go through the internet. Essentially, cryptocurrencies are using public postal service, which is the internet, which is controlled by their respective governments to very large degree, to send encrypted messages with today's state of the art cryptography, which may or may not be state of the art tomorrow, and which is subject to vigorous examination, potentially, by the entities that control these networks. Is that a source of independence, or is that a source of vulnerability? I think one should answer to oneself this question. Now if you take the totality of these questions, and you look at gold, it answers all these questions very straightforwardly. It is the only financial asset that is completely independent from any network, any counterparty. It doesn't need anything. You can just pass it to somebody else directly, just like $100 bill, and it's over. Unlike $100 bill, it's not even issued by anybody and it can't be canceled by anybody. It just the thing. Another question I didn't ask is the lasting nature of data in general, not just cryptocurrencies. If we really think about it, the entire data, electronic digital data is what, like 50, 60 years old computerization, the advent of computer science. Do we really have the information or any knowledge as to how these bits of information will survive over the next 10, 20, 30, 50, 90 years? What about a solar storm? What about some electricity disruption in the world? We just don't know. It's not been tested. We don't really know, never mind the crypto currencies. We don't even know how robust our data storage is for all of the information that we're storing. We think it's robust under normal condition but under adverse conditions, we just don't know yet. Again, untested. Gold has been tested for thousands of years, all the gold that's ever been mined still exists. It is lasting. It is immutable. It is genuinely scarce unlike electronic bits, these types of bits, those types of bits, this brand, that brand could be replicated. Maybe this particular can't be replicated, but something similar can be created. There's only one kind of gold, it's atomic number 79, there is no other element. There's no gold 1.0 or 2.0 or 3.0, 3.1, there are no versions. There's only been one version in the history of the world, and it's still the only version that exists. It is immutable and permanent. Its scarcity, its prominence, its lasting nature and its independence and its ubiquity in the world. Its worldwide liquidity is what makes it what it is. Whatever people think about it, or not thinking about it, it is actually an official global reserve currency, whereby about 10% of central banks foreign currency reserves are kept in gold. It's not like one can accept it or denied or reject it, but that's just the fact, that's what it is. Gold is a globally recognized official reserve currency stored by central banks, and used by half of the world population is a store of wealth. China, India, 3 billion Asians use it so you know what, it's like I've said that before. If you don't like a Picasso, you don't have to buy it. Doesn't mean it's not valuable. Doesn't mean that there isn't a market for it. It's the same thing with gold. If you don't believe it, you don't have to. There's 3 billion people do. That's a big enough market for it to be transparently priced 24 hours a day, pretty much, seven days a week. Well, actually to be exact, 22 hours a day, five days a week. It starts trading in Sydney and it rolls through the time zones. Let me ask you another question related to cryptocurrency. Would you want to have a form of payment, where every time you bought a cup of coffee or anything you bought, went to the supermarket, you would have to record exactly how much you spend and report this transaction to the tax authorities, would that make a lot of sense? I don't think it'd make a lot of sense, but the fact of the matter is that today-- and this is not just a question about cryptocurrency, it's the same question about gold and any other barter type commodity because cryptocurrency today is treated as an asset, and so is gold-- by the taxing authorities. Every time you spend cryptocurrency or every time you spend gold, you're essentially selling a small portion of that gold in exchange for whatever good, cup of coffee or whatever it is you're getting. That is a taxable barter transaction. It is reportable and if you're not reporting it, you're breaking the law. I take you back to the other question, is this a good idea for every transaction you ever do to be immutably and perpetually recorded on a database that you do not control and can be audited by the government later on going back to the very beginning? Because if you're doing this and you're not paying the taxes, you're committing tax crimes for which you can be prosecuted in the indefinite time in the future. That's one question you should think about. One more question. Is it a good idea for example, why do we store cash in the bank? Why don't we just carry it all in the wallet? It's a wallet, it's inconvenient, but what if it were convenient, would you carry all your money with you all the time? What if you get robbed? What if somebody puts a gun to your head and says your wallet or your life and you get your wallet, you just gave your whole life away. A lot of people in cryptocurrency world are very confident in the encryption, in the private keys and the level of privacy that that provides. Well, I recently read about situation in UK where a hacker who stole a bunch of Bitcoin was arrested and they wanted him to return the Bitcoin for restitution. Well, they didn't have to crack his wallet, they just had to crack him and it didn't take long. They said, you can go away for 20 years if you don't give us your private key, or we can cut a deal with you and you'd go away for four years or something like that, if you give us the private key and give up all the Bitcoin that you have stolen. What do you think? How long do you think it took? It didn't take very long at all. They broke him. They didn't need to break any codes. The problem with carrying stuff with you, that knowledge, that private key is essentially you are giving license to anybody to take your body or take your person, whether it's the state or a robber and break you as to where you give it up. Now, if you have gold stored in a different country, or if you have cash stored somewhere in the bank, they can break you but getting to actually your gold and your money is many additional steps because those are stored by fiduciaries who would be checking whether this is a coercive withdrawal, or whether this is a legitimate withdrawal by you under without duress. That's another question that I think everybody should answer for themselves, whether that's a good idea or not. Let me give you another example, for example, around these questions why it's important sometimes to not necessarily have records of everything you do forever, because we don't know the future and we don't know what happens. Right here in the United States, we don't need to go far, in the 1930s during the Great Depression, for obvious reasons, a lot of people turned to socialism and communism and were very active in various Communist Party of the United States, the social revolutionary parties and so forth. It wasn't considered illegal or anything. These were alternative freedom of expression. Come 1950s, McCarthyism, and all of a sudden, people started losing their jobs, their livelihood. Some people committed suicide, because they were actively pursued by authorities for something they did 20 years earlier. If you're buying pot perfectly legally today in the state of Massachusetts using, let's say, Bitcoin, and then it again becomes a schedule-- by the way, it's a schedule on federal drug still. Is that a good idea if 10 years from now, the government decides to investigate who was doing that 10 years ago and then go after them to prove a point, prove some lessons or something, or teach people some lesson? No. People's lives were destroyed in the 1950s for something they did 20 years earlier, which was not illegal at the time. I think that that's something one should consider when putting faith in this type of technology. Let's go back to what I was talking about, reserve currency and the importance of some common denominator for the financial system. Everybody knows about the moon and the sun. Some people can name a few planets, but a lot of people know about the North Star. Most people have heard about the North Star. What's so special about the North Star? It's not the best star in the sky. It's not particularly a pretty star, just a star, just one of the stars. It has one unique feature in the Northern Hemisphere that no other star possesses and that is it's always in the same place. It's above the North Pole. As the Earth rotates, the North Star stays in the same place. The North Star has been used by humans from the dawn of civilization as a navigational beacon to find their way in this world. In the same way, gold essentially for a millennia, has served as the North Star of the financial system. People say it's inert, it doesn't do anything. That's right. It doesn't do anything. It's the same thing. It doesn't change. It's an immutable same thing that's in the same place, and against which everything else rotates. It's something by which you can navigate. Now, for the past 48 years, if my math is correct, from 1971, we have been without a navigational beacon. We're essentially sailing in a fog on a ship, where many people say we're in uncharted waters, and then they proceed to tell you exactly where we are. No, no, when you say you're in uncharted waters, it means you don't know where you are. When you don't know where you are, and when you don't know where financially you are, because you're not seeing any stationary targets, the values of everything, the values of all the assets, the prices of all the securities, they are real in this fog that we're in. They can be monetized and exchanged in the fog that we're in. What we don't know when the fog clears and we do see the stationary navigation beacon, only then will we find out where we actually are. Are we on the rocks, actually, or are we three feet away from the rocks, or a we in clear water and smooth sailing? We just don't know that. What happened in the United States in 1971, is essentially by disconnecting the money from any scarce tether, you can say that the-- first of all, the reason it happened is the United States defaulted on its obligation. It could not pay, the French sent the destroyers across the ocean to pick up the gold in exchange for the goods. They said you want to keep buying the goods for IOUs, send us the real thing. They essentially called us out. We had to close the gold window. Otherwise, our gold reserves would have all gone overseas, and we went off this gold standard. This precipitated inflation that wiped out in the course of a couple of years, a few years, the 60% of the purchasing power of the US dollar. From then on, it opened up the unlimited window to credit creation out of nowhere and money creation out of nowhere. When people quibble about we're seeing inflation, we're not seeing inflation, I don't want to get into that subject because these are various measures of inflation, but all I can tell you is that the fact that we have negative interest rates indicate that capital is losing its value, because what is capital? Capital is some good that you have to give, that you give to somebody for which they pay to use it. The more valuable this capital is, the more they pay to use it. Ask yourself this question, if I'm giving my capital to somebody, and I have to pay them to use it, what is happening to the value of this commodity? What is happening to the value of these commodities is it's declining. It's declining and the declining interest rates, and now the negative interest rates are essentially asset inflation. They are indicating that there is more money created out of nowhere, chasing a limited amount of real world projects that offer real economic returns. That is what is happening and even though we're thinking of it as a bull market, in fact, we are watching capital devaluation, capital being devalued. What we have not seen as the moment of truth, when all of that, when the skies clears and we see the North Star and we bring our sextant and we're really calculate the position of where we are and we find out whether we're rich or poor in real terms, that moment remains ahead, but the signs, the outer bands of this hurricane, if you will, are right here with us. If you're not a meteorologist, you may think this is just a drizzle, but it isn't. If you're looking at a bigger picture, what you're seeing is the going off the gold standard has essentially set up a crisis, which has been now going on for 50 years that will resolve itself. It's a super cycle, it's a debt super cycle, that will resolve itself with essentially devaluation of either financial assets or currencies in which they're denominated, one or the other and because every dollar of debt is somebody's asset, then for the loss of every dollar of debt they write down, that asset disappears as well. You can think of it as overvalued inventory on the books that nobody wants to write down. It's the same thing. Nobody wants to write down, the auditor's don't want to write down because they've been pining on the value of the inventory for the last many years and if they write it down now, they will say, where have you been all this time? You're culpable. The management can't do it because they're culpable. The banks can't afford to do it because that means they finance the inventory. If the inventory is not worth what everybody says it is, then they need to take huge write downs to their books, they go bust. Regulators can't afford for this to happen on their watch because they have been sitting and overseeing this system and nodding their head and not doing anything about it. In fact, they've been doing the opposite. They've been doing whatever it takes to protect the value, the overvaluation of this inventory through lowering rates, through monetization, through all of these different tools. I think we're in a moment in history where the next 35 years, next 40 years are not going to be like the last 50 years. Rates can't go from 20 to minus one, they can't go from minus one to minus 20. It's just not going to happen. As scary potentially and as disturbing as that prospect may be, it's time to outfit one ship for turbulent seas. How you choose your equipment and your mates is probably what will determine the outcome of your journey and I'll leave you with that thought.