1672: Leaving the Gold Standard, Operation Twist 2.0, Treasury Yields & Future of Inflation with George Gammon

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Welcome to episode 1672. 1672. And we've got my buddy George Gammon back on the show today. I think you'll find this to be an interesting discussion and I am speaking at a live event that he is hosting. Got top billing there by the way, folks, and you're welcome to come join us. He's got early bird tickets on sale now. It's June 11th through the 13th in Miami, Florida, just south of where I live here in South Florida in Miami, June 11th through the 13th. You can go to Rebel Capitalist Live for that. And check that out. And I just was looking at something today that I thought was darn interesting and wanted to share it with you. And that is the whole topic that is really in the news a lot nowadays. What is that topic? Is it the immigration disaster at our southern border? No, it's not that topic. Is it these multi trillion dollar spending programs? No, it's not that topic. This year is the 50th anniversary of an important event. Some of you know what I'm talking about, don't you? Don't you? Yes. You know, right. That event is back in 1971 when we went off the gold standard. And you know, we went off the gold standard in steps, right?

This was just the final step where.

We were completely untethered to gold. And I've talked about before how Nixon's famous trip to China was right around that same time. Cannot possibly be a coincidence. I've theorized forever and I've never heard anyone else do this. It's just my original thought that Nixon was thinking we need a whole bunch of cheap labor because we're gonna have inflation. Well, let's see, if we were right back in 1971, a brand new beautiful home would cost you $25,000. The average income was $10,600. A new car was $3,600. The average rent was 150 bucks a month. And tuition to Harvard University, which last year, of course, was on Zoom for 50 grand a year.

Talk about a ripoff.

I mean, talk about a rip off. Well, back then it was only $2,600 to go to the movies. It was a buck fifty. Now, by the way, I remember actually, as a kid, they had matinee movie specials at this one theater, this one cheapo theater. I don't know, I could be wrong about this, but I think at the Pickwick Theater on Pico Boulevard in Los Angeles, those Saturday afternoon matinee movies that we used to go to, I think they were 50 cents. They were so cheap gasoline was 40 cents per gallon back in 1971. Actually, you know, this is actually wrong. I remember seeing lower gas prices than that, where it was like 28 cents a gallon. Postage stamp to send a first class letter was 8 cents. Eggs were 45 cents a dozen. I almost said dollars. Fresh ground hamburger was 62 cents a pound. I don't know how much it is now because I don't buy that. But a loaf of bread was 25 cents.

I know that's about $4.50 now.

So, yeah, there you go. There's no inflation. But the amazing thing is that really, really, I mean, it is out there. Everybody's starting to say inflation is coming. In fact, hyperinflation is coming. Now, I've been saying there's just got to be a lot of inflationary pressure for a long time. So take it for what it's worth, folks. But that's the 1971 prices. And we are in the 50th anniversary year of that final tether being severed once and for all. No more link of the dollar to gold. No more convertibility. And here is President Nixon himself saying that it's temporary. Remember what Milton Friedman said? There's nothing so permanent as a temporary government program. Listen in for yourself. Let's go back to 1971.

The third indispensable element in building the new prosperity is closely related to creating new jobs and holding inflation. We must protect the position of the American dollar as a pillar of. Of monetary stability around the world. In the past seven years, there's been an average of one international monetary crisis every year. Now, who gains from these crises? Not the working man, not the investor, not the real producers of wealth. The gainers are the international money speculators. Because they thrive on crises, they help to create them. In recent weeks, the speculators have been waging an all out war.

He's referring largely to George Soros there, I bet, I'll just bet you. But isn't it interesting that he says protect the dollar, the stability. The complete opposite has happened. He had to know that, right? He had to know that this would be disastrous for the dollar. And it has been. And it has not helped the stability of the dollar at all. It's only hurt it. So it's like everything that happened is the opposite of what he's promising here.

On the American dollar. The strength of a nation's currency is based on the strength of that nation's economy. And the American economy is by far the strongest in the world.

And he didn't help, you know, like he said, the working person, right. The complete opposite happened when Nixon severed the link to gold. The cantillion effect ran rampant. And every time we see another bailout, another anything, the cantillion effect where the people closest to the money, the banksters, the Wall street people, they get the richest. The politicians, of course, they get the richest. And a little bit, you know, just some crumbs trickle down to the working class person. So is it a scam? Of course it's a scam. Everything's a scam nowadays. And listen, by the way, I want to just in defense of Nixon for a moment, okay? I'm not sure that any other president would have been able to do differently. I just want to point that out. Given the circumstances at that time, with a backdrop of history, I think pretty much any president would have done what Nixon did. He just happened to be the guy.

Who was there at the time.

So, you know, I'm not actually picking.

On him too terribly much. I'm just picking on all of them.

I'm picking on the system because I think that it would have just happened anyway. But the one thing really good that Nixon did do that muted the effect of this dramatically, like I said, and you know I'm the only one saying this, you know, if you, if anyone else has said it, please go to jasonartman.com ask and let me know. But he opened up China and that was historic.

And I give him huge credit for.

That because without that, the inflation would have been insane. It was already bad enough, but it would have been much, much worse. So, so that's enough of all that, folks. Without further ado, let's get to our guest today. Let's talk to George and hear what.

He has to say.

Hey, it is my distinct pleasure to.

Welcome my good buddy George Gammon back.

To the show and he's been doing a little dancing, learning the Twist.

And not that kind of stuff, but the Federal Reserve has been doing some dancing.

You know, back around, I don't know, maybe 2011. They were, were trying to find more creative ways to print fake money out of thin air.

It's always what it boils down to in some way.

And they did something called Operation Twist.

And George says there's a new version of this happening.

So George, can you give us a history lesson? You're so great at that.

Tell us what the original Operation Twist was and what's going on now.

Sure. Well, the Fed has what they call, you know, we'll call them, quote unquote, assets on their balance sheet. Those are usually mortgage backed securities or Treasuries. And these Treasuries can be different. Some of them can be what we call T bills, which may mature in three months, a month, something like that. So short term. And then others may be very long term, what we call notes or bonds. So 10 year or 30 year treasuries. And so with Operation Twist, what they do is they try to buy the long dated Treasuries to try to bring down the yield curve, in other words, bring down interest rates in the real economy. So let's think about mortgages. If mortgages are loosely tied to the ten year treasury, if they can artificially bring the yield down or the interest rates on 10 year treasuries, effectively they're going to bring the interest rates down on mortgages or that's kind of the goal. Right. So what they did at the time is they didn't, they actually didn't want to print more bank reserves, believe it or not. So they sold some of their short term Treasuries, some of the T bills and they bought some of those longer term Treasuries. So they're trying to get the yield curve down, get those interest rates down in the real economy without having to create any new bank reserves or expand the size of, of their balance sheet on net balance. So that was back and I don't know if that was 20, 10, 11, something right around there, but now they're considering doing it again. And they haven't outright come out and just admitted it, but Janet Yellen is in charge of the treasury now. And the treasury has an account with the Fed. It's a checking account, just like the primary dealer banks have. And it's just like your checking account that you have at bank of America or Wells Fargo, except that it's not at a commercial bank. It's with the Federal Reserve. So this TGA is the checking account, if you will, for the Treasury.

What happens when they collect taxes or they sell bonds at auction? All the funds, the proceeds, go into the tga. And then when they write stimmy checks.

Stimmies. I love the new lingo we're getting, George.

Stimmies. Yeah.

Or bottom line is, when they spend money back into the economy, that check is written, and when it's deposited, it's deducted from the tga. There's a bit of a difference there because it's creating a bank liability, a commercial bank deposit. And so then that's a liability of the commercial banking system. So it has to be matched up with an offsetting asset.

So the asset will.

Or the bank reserves going from the TGA into XYZ bank, wherever the check was deposited. But that kind of takes us down a rabbit hole. Bottom line is the TGA prior to the GFC would usually float around $4 billion. $4 billion with a B. As far as the balance, pretty much when the money came in, the government would go ahead and spend it, and it was just kind of this revolving door.

I have the feeling you're about to share a giant number with us that's much more giant than 4 billion, but go ahead.

Yeah, now it's 1.6 trillion.

Oh, my God.

So we'll go right to the punchline. I was going to tell you what happened between the GFC and now, but that's.

Go ahead.

Well, with Obama, he took it up to about 200 billion. Trump took it up to about 400. At one time over a trillion. And now Janet Yellen is sitting on $1.6 trillion. So why is this important? Goes back to what I was saying when the treasurer. When Janet sends Mr. Hartman a stimmy check.

I don't get a stimmy check. I feel so left out.

Yeah, you can go on TikTok and show the world. But let's say that you get xyz, person gets a check again, they deposit it at their Wells Fargo. So then the bank reserves, the offsetting asset has to go from the tj, which is the account they have with the Fed, to the Wells Fargo account with the Fed. So there's an offsetting asset to match that liability, the check that you just deposited at your local bank. So let's think this through. Janet Yellen has come out and said that she's going to draw down the TGA by 1.1 trillion. Dollars over the next four months. Maybe she doesn't want to issue any more new bonds at auction.

Maybe.

I doubt she understands the situation thoroughly. So she's just thinking, okay, we got $1,600,000. Why not just spend it instead of having to issue more bonds at the auction?

Makes sense, right?

Right.

Why borrow more when we've got $1.6 trillion in our checking account? The problem here is that when she spends, let's say, a trillion dollars, that means two things. Number one, there's going to be a trillion dollars of additional bank reserves in the commercial banking system. And number two is that's going to increase M2 money supply by a trillion dollars in, let's say, four months. So let's focus on the bank reserves first and foremost. If we think about quantitative easing, all that is is the Fed printing up bank reserves to buy Treasuries or mortgage backed securities from the commercial banks themselves. That's what a lot of people call printing money. That's base money. So if we think that, okay, quantitative easing has made the stock market go up in the past and it kind of distorts the financial economy as far as price signals. During QE3, which was just an unfathomable amount of quantitative easing, that was about 85 billion per month. Currently, because of what I call the Cerveza sickness, which we all love that. Yeah, yeah. So currently the Fed is doing quantitative easing to the tune of 120 billion per month, which a lot of people would argue. That's why the stock market has just gone up to nosebleed levels. And that's why we see a lot of the insanity that we see today in the S and P, the Nasdaq, et cetera. Well, if Janet spends, let's say, 250 billion a month, that's going to be an additional 250 billion of QE on top of the 120 that they're already doing. So that's going to be $370 billion worth of QE every month within four months. So why is that a big deal? Well, and let's just set aside the M2 money supply so there's more currency units, a trillion dollars more currency units in the real economy chasing goods and services, while, as you know, the supply of stuff is decreasing. Therefore, it's going to put a lot of pressure on consumer prices. But what happens is the banks that now have these additional bank reserves, they don't really like to just keep them at the Fed because they don't get much of an Interest a couple basis points at that. So they like to buy T bills, those short term treasuries we were talking about, because through a process called rehypothecation, which is bananas in itself, the bottom line, I won't go into that, but they can make more money by holding T bills than they can by holding bank reserves.

Right. And that George, is that the reason? I heard a lot of complaints about that the banks are basically playing the arbitrage. Right. Is that the reason that not enough of this money trickled down during the Great Recession and maybe that's happening now too. It's a cantillion thing, right, where the people close to the money are hoarding the money?

Kind of, yeah.

I would argue that it's just a simple risk reward equation for the commercial banking system. So would you increase the size of your balance sheet to create a loan to XYZ entrepreneur in the real economy, when you just got done with the GFC, interest rates are at 0, everything around you is telling you that the economy is shaking. Or do you take that balance sheet capacity, go into the repo market, rehypothecate, just create derivatives. This is something in the financial economy, the risk reward is better for them to keep that balance sheet capacity. In the financial economy, of course, I.

Mean, I understand why they're doing it. I'm just saying, you know, kind of coming from the perspective of. Isn't the whole point of all these programs is that the whole point? Ostensibly it's supposed to help the people, right? And it's helping the banks.

Yeah, it's supposed to help people by bringing down interest rates in real economy, increase spending and do all these things that Keynesian economists think are fantastic. Right. But going back to those bankrupts. So what this does is this creates a massive amount of demand for these T bills, which is why if you look at the yield curve or if your listeners have been watching CNBC or Bloomberg, they always talk about the yield curve really steepening. So the 10 year and the 30 year rates are going up dramatically while the short end of the curve, the rates aren't going up at all. They're still almost pegged right at zero. And the market is doing that even more so than the Fed because there's so much demand for those. So just let me for clarification, if there is demand for those T bills, the price, price goes up. If the price of a bond goes up, the interest rate goes down. The problem we're coming into now is we could have a situation where there are so much demand for these T bills because of what Janet Yellen is inadvertently doing, that the interest rates on the short end of the curve go negative.

So you'd have this bizarre situation where a three month T bill would be trading at a negative interest rate while a 10 year treasury, the interest rate would be going up at the same time.

Yeah.

So this causes a lot of problems for hedge funds for a lot of issues. I'll just put it at that. It's one thing for a German boon to go negative or a jgb, which is the Japanese debt. It's a whole other ball game for American U.S. treasuries to go negative even at the short end of the curve, although they.

And is that just because the US has the biggest economy and the most influential central bank, or is there another reason for that? And the reserve currency too?

And the treasury can't issue new debt at negative yields. So it gets really weird. And a lot of these sovereign wealth funds have these on their balance sheet. A lot of the hedge funds are what we call risk parity. So they're levering up to buy these bonds. So if the interest rate goes negative, I don't even know how that plays out. But it's a precarious situation at the very least.

Right.

So I don't think the Fed is going to want interest rates to go negative for a sustained period of time with these T bills. So number one, they're probably going to call up Janet Yellen and say, what the hell are you doing? What are you thinking? I'm sure that J.P. morgan and Goldman Sachs are going to have her on speed dial saying, you don't understand what.

You'Re doing right now, Stop.

But then the other thing, this takes us back to our original topic the Fed can do is Operation Twist 2.0.

Right?

Because the Fed has some of these T bills on their balance sheet. So what they can do is they can sell the short term T bills. If they sell them, that creates more supply. If we have more supply, theoretically the price goes down, therefore the interest rate goes up. So they have this mechanism that they could try to employ to bring those short term interest rates up above negative if they dip down. The problem here is the Fed only has about 300 billion of these T bills on their balance sheet. So after they sell those, they're done. And if the problem still exists, then it could hit the fan and then they'll buy the long end of the curve because at some point interest rates will get high enough to where they, number one, affect the stock market. Dramatically, which is what we saw in 2018. And number two, they start affecting the real economy. I mean, you can imagine what would happen if interest rates, quote unquote normalized and mortgage rates went from 3% to say 10%, very detrimental. So they'll probably come out and do what we call yield curve control, like they did in the 1940s. After World War II, they basically capped long term interest rates and bought as many bonds as they needed to to make sure the interest rates did not go above a certain level on the 10 year, therefore the real economy.

George, that begs the question.

The interest rates are artificially low. They've been that way for a long, long. In the last year, what do you think is the real or the natural interest rate for say a 30 year home mortgage? Maybe nobody knows because the market's so manipulated. Right.

I can tell you where historically it's been. I mean, historically mortgage rates are right around what, 6, 7%, something like that. That would be going back to. I'm just trying to think of a chart I've used in one of my videos. Probably going back to the late 1800s, right around that number, maybe seven, eight, something like that.

So what does this all mean as you're talking?

I'm thinking this is all sounding inflationary. Do you concur with that?

Yeah, because if we take a step back and think through the process of Janet YELLEN Spending the 1.1 trillion, it's not only going to increase the amount of bank reserves in the system, which is what we just talked about, but it's also going to increase the amount of deposits in the commercial banking system because she's spending an extra trillion dollars and people are going to cash those checks, they're going to deposit those checks. So that means that we've got an extra $1 trillion worth of currency units that are in the economy chasing goods and services. If we look at the unemployment rate, which I think is understated, but then we think about how many businesses have gone bust during the lockdowns, 20, 20 and what we're seeing now and how many of those businesses are not coming back. When we look at supply chain disruptions, and then we think through the average income of an American going up significantly during the same time at which there's very high unemployment and we have a reduction in goods and services, I mean there are no certainties. But you would have to argue that the probabilities of consumer price inflation, I'm not talking about asset price inflation, but consumer price of the stuff you buy every Day going up significantly in 2021. And I think it would come as a surprise for most of your listeners and viewers to understand how much incomes have actually gone up, up. They haven't just stayed the same due to these stimmy checks and increased unemployment benefits. But as an example, In January of 2021 alone, average income, if you just took an aggregate total of the United States went up by 10%. 10% in one month. That is a staggering number. I mean, if you go back to the Industrial revolution and we didn't see anything even remotely close to that type of economic boom, if you will. If you're a Keynesian, you just look at the aggregate demand and then going back to 2020, the numbers get even more staggering. And this is from the government's own website. I did some research on this the other day. So from the, it was the Bureau of Economic Analysis and they did a study showing they actually had state by state, which is really fascinating. But then they took an average of all the states and incomes from Q1 of 2020 to Q2 of 2020 went up by over 30%. Over 30% in the state of Massachusetts, Jason, they went up by over 70%.

70.

Unbelievable.

I mean, just think about that.

Okay, but what part of the income.

Distribution spectrum is that? I mean, that's certainly not true of low level workers.

Yeah. Because they're getting this stimulus money and the people who are unemployed going back to 2020 are making more money being unemployed than they were working.

Right. Talk about bad incentives, you know.

Yeah, yeah.

So you incentivize people to not go to work, which some people could argue that's, that's good because of health reasons. I'm not going to get into that debate. But the bottom line is if people aren't working, there's less stuff, period. And if incomes go up by 30% and the amount of stuff goes down by 30%, you pretty much got one way for consumer prices to go.

Just expand on that a little bit. That's a super important point. So obviously limited supply of goods and services, increased supply of currency units equals inflation.

And consumer price inflation. Yeah, not necessarily.

Yeah, consumer price inflation, but certainly we've seen tons of asset price inflation too. But that's of course a slightly different topic.

Yeah, because a lot of people are taking this money and going into GameStop or just speculating, becoming Wall street gamblers really.

Or they're buying a new house or.

I was going to say they could be using it as a deposit, buy a new house as well. But we talked about the income side of the equation, but we also need to think through the expense side of the equation. When you have a rent moratorium and you have a mortgage forbearance, so people's incomes go up by 30%, but their expenses go down by, let's say, 50%. If they're spending 50% of their income.

On that and the savings rate has just skyrocketed, we've seen that.

And that's why you see the savings rate go up. But that's also why you see the trade deficit go to the moon, which no one's really talking about except for Schiff. And so what's happening is because we're not creating. We weren't really making anything before, but now we're really not making anything. And so where do we have to get the stuff we actually buy? We have to import more and more and more and more. And that's why you see the trade deficit just skyrocketing.

So tell us more about what this means to us. And that earlier statement you made about the Fed and the inner workings of the Fed and Yellen's, all the action.

She'S taking, you know, you said, well.

It could hit the fan. What does that look like? What does that mean?

Well, I mean, if this affects these huge hedge funds that have focused on a risk parity strategy, and if, and I'm not an expert enough to know what their balance sheet looks like or what their portfolio looks like and how much this would or would not affect them, but if it did significantly affect them, then you're talking about pension funds. Because let's use Bridgewater as an example. Bridgewater is the largest hedge fund on the planet Earth. So you're going to have a lot of pension funds, they're going to have a substantial portion of their capital invested with a strategy that could be heavily reliant upon Treasuries having a positive yield or at least a zero yield once they go negative, it really throws a wrench in tingen or into the gears. Potentially. Potentially. And I want to be very clear, I'm not an expert on hedge funds or risk parity strategy. So I don't know if this would just be maybe a little speed bump or it could be something catastrophic.

So what is catastrophic or even a speed bump look like, though? What does that mean? What do we see as us common folk out in the world?

A speed bump would be something like the repo spike that we saw in 2019, in September, where it was a huge deal, but it only lasted a Couple days. And most Americans didn't know.

And you were one of the few people really reporting on that, by the way. You did an awesome job. And if you typed in repo market, you'd see George Gammon right there.

As far as for the geeks who.

Are really into the financial plumbing in.

The monetary system is a pretty, pretty big deal. But for everyone else, they didn't even notice. As far as something catastrophic, I mean, you're looking at gfc, something like that.

The global financial recession, the global financial crisis, the Great Recession 13 years ago.

Although if you had kind of a domino effect like that now, the outcome would be far worse without the intervention of the Fed and the government because the debt is so much higher on the consumer balance sheet, on the corporate balance sheet, on the sovereign balance sheet, at the state level. I mean, pretty much everywhere you look, people and entities have much more debt now than they had back in 2008. So that would add a lot of.

Gunpowder.

To the explosion.

When you're talking about those debt numbers, you see all this stuff out there. I look at all these charts all the time. You do too. You know, are those debt numbers adjusted for inflation or. So those are, that's real debt then.

A lot of times they're a percentage of gdp.

Yeah. Okay, so interesting.

A better apples to apples comparison there. Now, why is the consumer balance sheet so leverage? Most likely because housing prices go up pretty much. If you look at the consumer balance sheet, and I haven't done this, but I would imagine it's pretty consistent with housing prices. So in other words, when housing prices go up, the consumer debt to GDP goes up as well.

So that means people are buying a new house, the new house has a bigger mortgage. But the important thing to know about that, and I don't think it's quite as dire as one might think hearing that on the surface, because that debt service payment is actually cheaper because of the low interest, the artificially low interest rates, which can't last forever.

Yeah, they can't. But they can last a very long time and a lot longer than most people would assume. Using that concept of things that seem insane and things that are obviously manipulated, they're not a market action. What's the saying, you know, the market can remain irrational longer than you can remain solvent type. That is very, very true. I think if you would have asked anybody, you know, you said, okay, in 2020, the government is going to have $5 trillion in deficit spending, so they're going to increase their debt by $5 trillion, which just to put into context, from 1776, seriously, 220 years, the United States government accumulated 5 trillion in debt in 220 years. And we accumulated that much debt just in 2020.

And those 220 years had multiple wars, crises, the Spanish flu. I mean, yeah.

So just staggering stuff. So if you would have said, if you would have given some metrics like that, people would say, oh, there's no way that it can last, it can't survive. You can't keep ticking the can that far down the road. But sure enough, here we are.

You know, I believe they can kick that can down the road for quite a bit longer, actually.

So do I.

One of the things that brought me.

To that conclusion is I was just going through that tweet storm from Michael Burry.

Yeah, the recent one.

Yeah.

Where he was talking about hyperinflation. He actually referenced my good friend Lynn Alden, one of her charts and her appearance on Macro Voices and what she was talking about, very similar to what we're saying, where if the Fed just buys assets, it's really not inflationary, it's not creating currency units in the real economy, but when the Fed monetizes the debt directly, that's creating more currency units, similar to the process we talked about before. And Burry reiterated that on Twitter. But he also mentioned a book that he was reading called Dying of Money and it's an in depth analysis on the Weimar Germany hyperinflation in addition to the inflation we had in the United states in the 1970s, which was nothing.

Compared to Weimar, Zimbabwe, Hungary or anything else. Or Argentina. Right.

Yeah, it wasn't, but the seeds were sown many years in advance. So we think about the Weimar Germany situation. They're real inflation where they're going around with wheelbarrows full of cash and stuff that was really within About a year, 1923, and then 1922 is when you really started to see some inflation that created what we call Gresham's Law. So you can imagine if all these foreigners that own dollars right now, if the dollar was depreciating by 50% per year, those dollars would most likely come back to the United States to buy anything that was a hard asset.

And the reason is because if the dollar was depreciating, people would want, want to exchange the dollar for something real, correct?

Yeah. So it's Gresham's Law where the bad money chases out the good. That would create more currency units circulating, that would create higher velocity, and that would just take the inflation to the next Level, which it did in Weimar Germany. But the whole point there is going back to 1914. That's when they went off the gold center. That's when they really started to print money for World War I. It started in 1914. December seeds were being sown. But you saw the result or the effect of that in 1923. So call it nine years, ten years later, the lag time. Give some context there so people understand how dramatic it was from 1914 to 1918, where they didn't really see too much of a move, relatively speaking, in consumer price inflation. So from 1914 to 1918, they saw combined prices doubled. You say, well, that's a lot, George. Yeah, but if you look at it on an annual basis, it's only about 15% per year. Very consistent with what we had in the 1970s here in the United States. But M2, money supply increased nine times.

Wow, nine times. So they increased their money supply by 60% percent per year.

Per year.

Just incredible.

Consumer prices only went up by 15%. What happened is this lulled them into this idea that, well, what's the problem here? You know, if we're creating all these additional currency units and all this additional demand and the only price we have to pay is an additional 15% of goods and services on net balance, that's a huge win.

Right?

We might as well keep doing it.

Might as well keep doing it, right?

Yeah, yeah.

So they kept doing it. And to the point where what really lulled them to sleep, which was kind of the straw that broke the camel's back, was between 1920 and 1921, the end of 1921, the mark, the German Reichsmark, which was their currency unit, appreciated against the dollar. It went up in value.

Why would that happen?

Because their economy was booming. They were an export powerhouse.

They were doing.

The economy was on fire. And so their currency, a lot of demand for the currency. So from that almost two year period, if you look at a chart from 20 to 21, the end of 21, the dollar went down in value against the Reichsmark. The Reichsmark went up in value just a mere year, not even a mere six months before they started using the Reichsmark as toilet paper.

Yeah, not as I was going to say kindling, but it was actually used in the fireplace to produce heat because the heat you could extract from the money was more valuable than the money, or I should say currency.

Let me give you another shocking statistic. Okay. At the end of, I believe it was 2021, or excuse me, 1921. And it's all in this book. And you can download it free on the Internet.

It's fantastic.

And by the way, I want to tell you about the book, so you can also buy it on Amazon. Speaking of inflation, it's $494 for the hardcover, but you can get the paperback for 49 bucks. It does not have very good reviews either.

Oh, it's fantastic.

That's it right there, folks. In the.

I've been reading it.

It's awesome. So I believe it was 1922. So at the beginning of 1922, there were 190 billion worth of reichmarks in existence. So there are 190 billion reichmarks. That was all the Reichmarks in the entire planet Earth. One year later, it would have taken that many Reichsmarks to buy a newspaper.

That's just unbelievable. I mean, unbelievable. It's absolutely incredible. The stories you hear out of the Weimar history. Do you know the one, George, about the man that was trying to go into a market and he had his wheelbarrow full of currency.

Right.

Of marks. And he couldn't get the wheelbarrow through the door and someone came along and dumped the money out, but ran away with the wheelbarrow because that was more valuable. Oh, yeah, yeah.

And so let's take that back to today. You know, why does that matter, George? Well, number one, to your point, things can last a lot longer. While these seeds are being sown, let's remember that the money supply was increased at the beginning. When this hyperinflation was brewing, the money supply was being increased by, call it 50, 60% per year. Now, I want to remind everyone, in 2020 alone, the United States money supply was increased by 25%. So I understand 25% isn't 50, but it's damn close.

That would indicate inflation is coming and a lot more people are starting to talk about that. I've noticed people that I respect.

But it could be five years down the road. It could be. You know, these things take a long time to play out.

Sure. And we've also got to remember that, of course. Famous last words. This time it's different. I mean, you know, the US has the reserve currency. Germany did not Things.

Aggression of law still kicks in.

Good money chasing out bad. Very interesting. Anything else you want to wrap this up with, George?

No, that's it, man. Thanks for having me on. It's always great to talk to you.

Yeah.

Well, any action steps? How about a quick action step on this? What are you going to say there?

Make sure you got a 30 year fixed rate mortgage.

Yeah.

Own a little bit of gold, own bitcoin if that's your thing. And make sure you got a 30 year fixed rate mortgage.

And you know, I agree with that all too well.

George Give out your website.

It's just georgegammon.com and people if they just google me they can find my YouTube channels. George Gammon Find me on Twitter. It's G A M M O N. Good stuff.

George Gammon thanks for joining us.

Thanks buddy.

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