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The Gold Standard: When Money Meant Something · Stuff You Should Know

• 0:01
  Speaker 1: Welcome to Stuff you should know, a production of iHeartRadio.
• 0:11
  Speaker 2: Hey, and welcome to the podcast. I'm Josh and there's
• 0:13
  Speaker 2: Chuck and it's just us here today to explain something
• 0:18
  Speaker 2: that every person in the world should know about, the
• 0:22
  Speaker 2: gold stand. I have an intro. I have an intro
• 0:26
  Speaker 2: hold on oh goud, Chuck. Yes, have you ever gone
• 0:32
  Speaker 2: to a bank and traded a dollar in for actual gold?
• 0:40
  Speaker 1: No, I've never even seen gold in person. That wasn't like,
• 0:44
  Speaker 1: you know, on whatever, a ring or something.
• 0:47
  Speaker 2: Sure, and that is a huge use for gold.
• 0:50
  Speaker 1: I've never seen nuggets or bars ingots.
• 0:54
  Speaker 2: I haven't either. I have never even seen a gold coin.
• 0:57
  Speaker 2: Now that I think.
• 0:58
  Speaker 1: About it, I don't think I have either.
• 1:00
  Speaker 2: But there was a point in time where you could
• 1:02
  Speaker 2: see gold anytime you wanted, if you went to your
• 1:05
  Speaker 2: bank and you took a certain amount of dollars or
• 1:07
  Speaker 2: pounds or francs or pesos, because countries all over the
• 1:12
  Speaker 2: world were on what's known as the gold standard. And
• 1:16
  Speaker 2: just a quick broad stroke explanation I guess is that
• 1:22
  Speaker 2: on a gold standard, every single one of your dollars
• 1:26
  Speaker 2: or pesos or francs or Deutsche marks are redeemable for gold,
• 1:31
  Speaker 2: which means that you have to have an equal amount
• 1:34
  Speaker 2: of gold in your country in safes and vaults to
• 1:39
  Speaker 2: cover every single dollar or paso or Deutsche mark or
• 1:44
  Speaker 2: frank out there. You can't just keep printing money. You
• 1:47
  Speaker 2: can only print as much money as can cover the
• 1:49
  Speaker 2: amount of gold that you have.
• 1:52
  Speaker 1: Yeah, which is you know, it's sort of a public
• 1:56
  Speaker 1: safeguard to say, hey, your dollar, your pay paper money,
• 2:00
  Speaker 1: or your coins are worth something because it's worth this
• 2:04
  Speaker 1: much of this other thing that we've also agreed is
• 2:07
  Speaker 1: worth money exactly.
• 2:10
  Speaker 2: And so for you, if you're walking around in a
• 2:13
  Speaker 2: country that's on the gold standard, you can go trade
• 2:16
  Speaker 2: your dollars in for gold, your paper currency in for gold. Right.
• 2:20
  Speaker 2: It also gives you a lot of stability and understanding
• 2:24
  Speaker 2: that when you wake up in the morning, what you
• 2:26
  Speaker 2: bought for one dollar yesterday, you're going to be able
• 2:29
  Speaker 2: to buy for one dollar today. Prices don't fluctuate very
• 2:32
  Speaker 2: much on the gold standard, and then on more of
• 2:34
  Speaker 2: a macro level, if you're a country and you're importing
• 2:39
  Speaker 2: tons of stuff, that means your currency is going out.
• 2:42
  Speaker 2: You're using your currency to buy these imports, and when
• 2:45
  Speaker 2: a bunch of your currency is out there, you need
• 2:48
  Speaker 2: it back home, so you have to use some of
• 2:50
  Speaker 2: that gold to buy your currency back. So the upshot
• 2:55
  Speaker 2: of all of this is the gold Standard is very
• 2:57
  Speaker 2: different from the type of currency that we have today,
• 3:01
  Speaker 2: and I feel like we should maybe explain a little
• 3:03
  Speaker 2: more eventually about how they're different.
• 3:06
  Speaker 1: Yeah, for sure. I mean we've been back and forth
• 3:09
  Speaker 1: between the gold Standard and the other, which we call
• 3:12
  Speaker 1: fiat currency, which is a Latin term, and that you know,
• 3:16
  Speaker 1: fiat currency basically is what we're working with now because
• 3:19
  Speaker 1: the gold Standard is basically dead. But that's where you can,
• 3:23
  Speaker 1: you know, where you have more you know, monetary policy
• 3:27
  Speaker 1: guiding the markets and stuff like that, rather than like, no,
• 3:30
  Speaker 1: it's like it's tied to gold like kind of end
• 3:33
  Speaker 1: of story. Yeah, there are people that love and you know,
• 3:36
  Speaker 1: we're going to talk about sort of the benefits and
• 3:38
  Speaker 1: the arguments for and against. But people that are into
• 3:42
  Speaker 1: the gold Standard as an idea, they're kind of out
• 3:45
  Speaker 1: of luck, but they're still around. They're called gold bugs.
• 3:48
  Speaker 1: They've been called that since Edgar alland Post's story that's
• 3:52
  Speaker 1: where it came from, about the search for buried treasure.
• 3:55
  Speaker 1: But you know, it's still a fight in some circles
• 3:58
  Speaker 1: from people who are like way into the gold standard.
• 4:00
  Speaker 2: Yeah, and there's I mean, they have a lot of
• 4:03
  Speaker 2: good points. But the problem is is that that train
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  Speaker 2: has left the station in it and it's coming back,
• 4:08
  Speaker 2: not coming back. So why gold? Right? There's alsort. You
• 4:12
  Speaker 2: could pay your currency to wheat, right, and you could
• 4:16
  Speaker 2: take your dollar bill and go into the bank and
• 4:18
  Speaker 2: they'll give you like a bushel of wheat in return. Right,
• 4:21
  Speaker 2: why gold in particular?
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  Speaker 1: Well, yeah, I said that, you know, that's something that
• 4:26
  Speaker 1: they all agreed was worth something, And that's kind of
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  Speaker 1: the deal. Like something's only worth something if everyone agrees
• 4:32
  Speaker 1: that it's worth something, right, But you can't, you know,
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  Speaker 1: you've got to pick something that makes sense. And gold
• 4:38
  Speaker 1: has always made a lot of sense for a lot
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  Speaker 1: of reasons. It is, it's scarce, but not like rare rare.
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  Speaker 1: It's rare enough to be precious, but not so rare
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  Speaker 1: that like you know, it's impossible to find. So you've
• 4:52
  Speaker 1: got to have enough of it, but not too much
• 4:53
  Speaker 1: of the thing. It's also you can divide it up
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  Speaker 1: into small things, you can melt it down, you can
• 5:00
  Speaker 1: make it into stuff, making it into coins, you know,
• 5:04
  Speaker 1: is certainly valuable. It's valuable, it's resistant to being corroded
• 5:09
  Speaker 1: and like rusted, it's durable. So all that stuff makes
• 5:13
  Speaker 1: it just sort of a valuable thing to trade.
• 5:16
  Speaker 2: Yeah, and you said it's durable. Like most of the
• 5:19
  Speaker 2: gold that's ever been mined in the history of humanity
• 5:23
  Speaker 2: is still around because you can change it from one
• 5:26
  Speaker 2: form to another, say like from a necklace into a
• 5:28
  Speaker 2: gold coin. But there's still that same amount of gold
• 5:31
  Speaker 2: on earth. And I guess as of twenty twenty five,
• 5:35
  Speaker 2: I think the World Gold Council says that two hundred
• 5:38
  Speaker 2: and nineteen thousand, eight hundred and ninety tons of gold
• 5:42
  Speaker 2: have been mined throughout history, and about two thirds of
• 5:45
  Speaker 2: those have been mined since nineteen fifty alone.
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  Speaker 1: Right, And most of that is still around, Like you said,
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  Speaker 1: it's still out there, which kind of proves that gold
• 5:56
  Speaker 1: was a pretty good pick that and silver, I mean,
• 5:58
  Speaker 1: silver was we'll talk about the fact that gold and
• 6:02
  Speaker 1: silver kind of went back and forth over the years.
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  Speaker 1: There's just a lot more silver, so silver has just
• 6:07
  Speaker 1: been worthless, right.
• 6:08
  Speaker 2: But it's still worthwhile. And in fact, if we're going
• 6:11
  Speaker 2: to start to go back a little bit in history,
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  Speaker 2: the very first, I guess currency that the United States
• 6:19
  Speaker 2: came up with, and the history for Great Britain tracks
• 6:24
  Speaker 2: very similarly. But in the US they said, we're going
• 6:28
  Speaker 2: to use gold and silver for coinage, and they had
• 6:32
  Speaker 2: to set an amount how much silver do you need
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  Speaker 2: to buy you know, one unit of gold because they
• 6:39
  Speaker 2: are related to one another, you're using both for currency.
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  Speaker 2: So they said, you know what, fifteen pieces of silver
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  Speaker 2: grains I think is equal to one grain of gold.
• 6:51
  Speaker 1: Yeah, so like a fifteen to one ratio. But they
• 6:54
  Speaker 1: realized right away that like if they're going to start
• 6:57
  Speaker 1: setting this like thesetios in these sort of units as
• 7:02
  Speaker 1: being you know, kind of blocked in, it's just going
• 7:05
  Speaker 1: to create a lot of trouble over time, like especially
• 7:09
  Speaker 1: when the amount of gold and silver increases in deep well,
• 7:11
  Speaker 1: I guess not so much decrease, but you know, like
• 7:14
  Speaker 1: when there's a gold rush or when like they find
• 7:17
  Speaker 1: a new vein of silver somewhere that changes the amount
• 7:21
  Speaker 1: of gold and silver in the world. But they still
• 7:23
  Speaker 1: had locked into that fifteen to one ratio. It's not
• 7:25
  Speaker 1: like they kept changing it over and over. So I
• 7:28
  Speaker 1: think kind of right away people were like, oh wait
• 7:30
  Speaker 1: a minute, this is all a little bit artificial in
• 7:33
  Speaker 1: a way.
• 7:34
  Speaker 2: Yeah, And that's something that goldbugs have trouble with is that,
• 7:37
  Speaker 2: you know, it doesn't really matter how you know, honest
• 7:43
  Speaker 2: a gold standard keeps the government, it's still all artificial.
• 7:47
  Speaker 2: There's still manipulation that can happen. And yeah, when a
• 7:50
  Speaker 2: bunch of gold comes on the market, gold becomes less valuable.
• 7:54
  Speaker 2: If a bunch of silver comes on the market, relative
• 7:56
  Speaker 2: to gold, silver becomes less valuable. And one of the
• 7:59
  Speaker 2: problems with using a commodity to back your currency is
• 8:03
  Speaker 2: that sometimes the value of the commodity can rise beyond
• 8:07
  Speaker 2: the face value of the currency. So if you have
• 8:10
  Speaker 2: a ten dollars gold piece and the price of gold
• 8:13
  Speaker 2: actually puts that one ounce at twenty dollars, you're not
• 8:18
  Speaker 2: going to go spend that ten bucks. You're going to
• 8:20
  Speaker 2: melt that thing down or sell it to somebody for
• 8:22
  Speaker 2: twenty dollars. Yeah, So that's a there's problems here with
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  Speaker 2: money that actually means something in the world.
• 8:31
  Speaker 1: Yeah, for sure. And that happened. And when that happened
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  Speaker 1: kind of the first time, I guess for the United States,
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  Speaker 1: people started doing that. They started melting gold coins or
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  Speaker 1: keeping them in hoarding gold coins and they started trading
• 8:44
  Speaker 1: and using silver as currency. So all of a sudden
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  Speaker 1: we were like, wait a minute. We thought we were
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  Speaker 1: on a gold sale or we're heading toward a gold standard,
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  Speaker 1: and now we're kind of on a de facto silver
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  Speaker 1: standard because that's what people are using.
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  Speaker 2: Yeah, so the government was like, well, let's just make
• 8:59
  Speaker 2: the sixteen to one, and it brought everything a little
• 9:01
  Speaker 2: bit more into parody. Then there was the Minor forty
• 9:04
  Speaker 2: nine or gold rush in California, and then there was
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  Speaker 2: also another gold rush in Australia about the same time.
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  Speaker 2: So the market price for gold went down again because
• 9:14
  Speaker 2: the supply increased, which basically made the US government throw
• 9:18
  Speaker 2: their hands up in the air and say, we give up.
• 9:20
  Speaker 2: We're going to go watch football.
• 9:23
  Speaker 1: Yeah, they're kind of football, I guess. Over across the pond.
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  Speaker 1: Isaac Newton finished out his long, storied career as the
• 9:33
  Speaker 1: Master of the Mint.
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  Speaker 2: Mm hm.
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  Speaker 1: He did a lot of other stuff obviously before that,
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  Speaker 1: but he worked as the Master of the Mint at
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  Speaker 1: the end of his life until his death, and he
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  Speaker 1: was all about gold. Was like he encouraged overvaluing it
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  Speaker 1: and said we should really just set gold as the
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  Speaker 1: gold standard for England and they adopted that in what
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  Speaker 1: like eighteen nineteen.
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  Speaker 2: Yeah, so I think they were the first country on
• 9:57
  Speaker 2: an actual gold standard, and then it kind of spread
• 10:00
  Speaker 2: around Europe from there because they're like, this is actually
• 10:02
  Speaker 2: pretty good, pretty good idea because you don't need necessarily
• 10:06
  Speaker 2: a central bank, you don't have to have somebody figuring
• 10:08
  Speaker 2: out what lever to pole or whatever. The gold actually
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  Speaker 2: kind of naturally flows from one place to another to
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  Speaker 2: basically keep this homeostasis, this balance throughout the world among
• 10:19
  Speaker 2: all the countries that are on the gold standard, right. Yeah,
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  Speaker 2: So the thing is is humans are humans. You can
• 10:27
  Speaker 2: mess up anything that is, even something that naturally flows
• 10:30
  Speaker 2: from one place to another. We can basically put our
• 10:33
  Speaker 2: foot in it and screw it up. And that was
• 10:37
  Speaker 2: the case usually, as we'll see throughout history, that's usually
• 10:41
  Speaker 2: the case when war comes along, and that happened in
• 10:44
  Speaker 2: the United States with the Civil War. And we've talked
• 10:47
  Speaker 2: many times about this about how before the Civil War
• 10:50
  Speaker 2: there was like eight thousand different types of currency in
• 10:53
  Speaker 2: use in the United States, like your general store intel
• 10:56
  Speaker 2: might have its own currency that you could use. And
• 11:00
  Speaker 2: as the Civil War came along, that all changed very quickly.
• 11:04
  Speaker 1: Yeah, that was I remember we took that feels like
• 11:07
  Speaker 1: very many years ago. We were talking about that in
• 11:11
  Speaker 1: a few episodes. It was kind of the hot topic
• 11:13
  Speaker 1: for us for a while.
• 11:14
  Speaker 2: It was so hot.
• 11:15
  Speaker 1: We were talking about all those different currencies, like one
• 11:17
  Speaker 1: town might have a currency and then two miles down
• 11:20
  Speaker 1: the road, the next town might have their own currency,
• 11:23
  Speaker 1: which you know within that town as long as everyone again,
• 11:25
  Speaker 1: if everyone agrees what something is worth, it's working out, okay.
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  Speaker 1: But that's a mess if you're trying to be a country,
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  Speaker 1: which we despite the Civil War, we were trying to
• 11:35
  Speaker 1: be a country. And so the Civil War starts and
• 11:41
  Speaker 1: the federal government was like hey, like you know, Josh
• 11:44
  Speaker 1: Clark will say one day, wars are expensive, and so
• 11:47
  Speaker 1: they issued war bonds. I think about half a five
• 11:50
  Speaker 1: hundred billion dollars in war bonds. War bonds are what
• 11:54
  Speaker 1: you buy to basically, you know, or you sell as
• 11:56
  Speaker 1: a government and people buy to kind of finance the
• 11:58
  Speaker 1: world and saying, a loan you money to go fight
• 12:01
  Speaker 1: this war. Because that bond is ensured, I know for
• 12:06
  Speaker 1: a fact that eventually I'm going to get repaid with
• 12:09
  Speaker 1: interest for lending you that money to fight this war. Right,
• 12:13
  Speaker 1: So it's like it's super safe on the investor side,
• 12:15
  Speaker 1: but it's just a long term payout.
• 12:17
  Speaker 2: Yeah. The thing is is when they issued those as
• 12:20
  Speaker 2: far as I know, they weren't backed with gold, and
• 12:22
  Speaker 2: then they weren't even further. They just started issuing straight
• 12:25
  Speaker 2: up paper currency that had it wasn't pegged to gold
• 12:28
  Speaker 2: or silver backed up by any of it. It was
• 12:30
  Speaker 2: the first fiat currency in the United States, and like
• 12:34
  Speaker 2: you said, is just basically the government saying this has value.
• 12:38
  Speaker 2: Because we say it has value. You can use this
• 12:41
  Speaker 2: to buy stuff, you can use this to pay your taxes.
• 12:44
  Speaker 2: It is currency even though it's not backed by anything.
• 12:48
  Speaker 2: And the reason they did that is because it was
• 12:50
  Speaker 2: so expensive. They literally had to print money say it
• 12:53
  Speaker 2: was it had worth and instead of using it to
• 12:56
  Speaker 2: pay their debts, to basically fight this war. And so
• 13:01
  Speaker 2: the market the United States, well the United States just
• 13:06
  Speaker 2: became flooded with all this paper currency. So the paper
• 13:10
  Speaker 2: currency plus all the goldback currency just became less and
• 13:14
  Speaker 2: less valuable. And I think the inflation that came about
• 13:19
  Speaker 2: after the Civil War, because inflation happens when the value
• 13:23
  Speaker 2: of your currency is weak because there's too much of
• 13:25
  Speaker 2: it like out there. Yeah, it was like twenty five
• 13:29
  Speaker 2: percent during the Civil War. And just for a reference,
• 13:33
  Speaker 2: in twenty twenty two, at the peak of the most
• 13:36
  Speaker 2: recent inflation in June, it was at nine percent and
• 13:41
  Speaker 2: that was pretty uncomfortable. I can't imagine twenty five percent.
• 13:45
  Speaker 1: No, we were in a pretty bad way. And this
• 13:47
  Speaker 1: was also a time when the country started dabbling in
• 13:51
  Speaker 1: national debt and saying like, hey, like, as a country,
• 13:53
  Speaker 1: we can go into deep debt. Yeah, and like, let's
• 13:56
  Speaker 1: see if anybody really cares it. Went this is these
• 13:59
  Speaker 1: are pretty staggering numbers. The national debt in eighteen sixty
• 14:03
  Speaker 1: was sixty five million. Six years later it was two
• 14:06
  Speaker 1: point seven six billion dollars. And this is when gold
• 14:10
  Speaker 1: standard or what are they called gold bugs started saying, hey,
• 14:15
  Speaker 1: I think you've just proved our point, Like you printed
• 14:17
  Speaker 1: all this money the Fiat currency, and we're in real
• 14:21
  Speaker 1: trouble now.
• 14:22
  Speaker 2: Yeah, And so Lincoln says, hold on, hold on, and
• 14:25
  Speaker 2: he rolls up his sleeves a little bit and gets
• 14:27
  Speaker 2: to work, spits in his hand, rubs them together, picks
• 14:31
  Speaker 2: up an ax for no reason, just to kind of
• 14:33
  Speaker 2: look tough.
• 14:34
  Speaker 1: Yeah.
• 14:34
  Speaker 2: Sure, there works, and he says, we're going to take
• 14:36
  Speaker 2: all of those, all of the bills out there, all
• 14:39
  Speaker 2: the dollars on the market, and just take them back
• 14:43
  Speaker 2: and start destroying them. Yeah, and by doing that, we're
• 14:47
  Speaker 2: going to actually lower the supply of dollars, which increases
• 14:52
  Speaker 2: their value. Right, And so problem solved. That's going to
• 14:55
  Speaker 2: fight inflation because the dollar is stronger again because there's
• 14:58
  Speaker 2: less dollars on there. And on just a basic economic
• 15:03
  Speaker 2: basis of supply and demand, it makes sense. But what
• 15:08
  Speaker 2: the government didn't realize all the way back in the
• 15:10
  Speaker 2: eighteen sixties is that it takes a little more finesse
• 15:13
  Speaker 2: than that to not just screw up the economy like
• 15:16
  Speaker 2: a pendulum from one problem to the opposite problem.
• 15:19
  Speaker 1: Yeah, Like, can you imagine being a citizen in the
• 15:23
  Speaker 1: United States back then, in those early days when they're
• 15:26
  Speaker 1: just trying to figure this stuff out, and you know,
• 15:29
  Speaker 1: I bet a lot of people didn't have a real
• 15:31
  Speaker 1: understanding of this, But if you did, could you imagine
• 15:33
  Speaker 1: just seeing your country be like, hey, let's print a
• 15:36
  Speaker 1: bunch of paper and say it's really valuable, right, and
• 15:39
  Speaker 1: then when they got in trouble, be like, hey, let's
• 15:41
  Speaker 1: burn all that stuff that we printed and said was valuable.
• 15:44
  Speaker 2: Yeah, Like they would just come up behind, like congressmen
• 15:48
  Speaker 2: would come up behind people counting their money and just
• 15:50
  Speaker 2: yank it out of their hands and run off and
• 15:52
  Speaker 2: you couldn't do anything about it.
• 15:55
  Speaker 1: Yeah, paper football, So that was a real hot item
• 15:57
  Speaker 1: at the time.
• 15:58
  Speaker 2: So, okay, a bunch of bills, a bunch of money
• 16:02
  Speaker 2: just gets taken back, burned, destroyed, taken off of the market.
• 16:07
  Speaker 2: It's just not there anymore, and the value of the
• 16:10
  Speaker 2: dollar strengthens. The problem is because the dollar is more
• 16:16
  Speaker 2: is worth more than it was before, and seems like
• 16:18
  Speaker 2: it's just going to keep going up in value. People
• 16:20
  Speaker 2: are like, well, I'm going to hang on to my
• 16:21
  Speaker 2: dollar because it's going to increase in value, so I'll
• 16:25
  Speaker 2: be able to buy more later. The problem is in
• 16:28
  Speaker 2: the current term that means that people aren't out buying stuff.
• 16:32
  Speaker 2: And if you're making say pre industrial televisions, which were
• 16:37
  Speaker 2: just boxes that you know, like somebody with a puppet
• 16:40
  Speaker 2: could get in and make a little show, but they
• 16:43
  Speaker 2: call them TVs back then, if you're making those and
• 16:46
  Speaker 2: people are not spending money on the pre industrial televisions,
• 16:50
  Speaker 2: your profits are going to start to go down, you
• 16:53
  Speaker 2: have less reason to produce more and more of those,
• 16:56
  Speaker 2: which means you need less workers, which means you start
• 16:59
  Speaker 2: laying people off, which means those workers have less wages
• 17:02
  Speaker 2: to spend money on. And the whole thing becomes this
• 17:05
  Speaker 2: self feeding cycle that just gets worse and worse and worse.
• 17:09
  Speaker 2: And we call them recessions, and when they're really bad,
• 17:11
  Speaker 2: we call them depressions. And that happened from the government
• 17:15
  Speaker 2: soaking up all of those bills after the Civil War,
• 17:18
  Speaker 2: and it caused what's called the Long Depression from eighteen
• 17:21
  Speaker 2: seventy three to eighteen seventy nine.
• 17:24
  Speaker 1: Yeah, and some say it almost went to like nineteen hundred,
• 17:28
  Speaker 1: like eighteen ninety seven before we were fully out of that.
• 17:31
  Speaker 1: And it was a real, like I think it was
• 17:33
  Speaker 1: a real wake up call early on to the United
• 17:35
  Speaker 1: States of like, hey, you can't There's got to be
• 17:40
  Speaker 1: a better way than just printing a bunch of money
• 17:42
  Speaker 1: when you think you need it, like kind of artificially
• 17:44
  Speaker 1: manipulating the value of the dollar like that is only
• 17:48
  Speaker 1: going to lead to trouble. So, boy, that's a great
• 17:51
  Speaker 1: first act, I think I think so too. Back in
• 17:55
  Speaker 1: form after vacation yeah.
• 17:58
  Speaker 2: Yeah, I feel pretty good.
• 18:00
  Speaker 1: Okay, you're feeling good.
• 18:01
  Speaker 2: Yeah, and you're doing great. You're looking sharp.
• 18:03
  Speaker 1: Man, I appreciate it. So let's take a break. We'll
• 18:06
  Speaker 1: come back and we'll talk about the Golden Age. We
• 18:08
  Speaker 1: love our golden ages. The golden age of the gold
• 18:10
  Speaker 1: standard right after.
• 18:11
  Speaker 2: This, so the United States just basically just stepping in
• 18:44
  Speaker 2: it and then stepping out of it and stepping in
• 18:46
  Speaker 2: another pile of it. Yeah, in the eighteen seventies, this is.
• 18:50
  Speaker 1: Not talking about gold either, right, No, no.
• 18:52
  Speaker 2: No, I couldn't come up with something that wasn't just
• 18:57
  Speaker 2: absolutely gross. So yeah, I'll keep moving on. But this
• 19:00
  Speaker 2: was the time when the world was globalizing for kind
• 19:03
  Speaker 2: of the first time, and so other countries are taking
• 19:05
  Speaker 2: note of this and they're like, yeah, this gold standard
• 19:08
  Speaker 2: might be a good thing. And like you said, it
• 19:11
  Speaker 2: kicked off a golden age from eighteen seventy one to
• 19:14
  Speaker 2: basically through war about to World War One. It was
• 19:18
  Speaker 2: a golden age for gold. There's no other way to
• 19:22
  Speaker 2: put it. I didn't want to say that, but there's
• 19:23
  Speaker 2: no other way to put it.
• 19:25
  Speaker 1: Yeah, It's like what forty something years where everyone was
• 19:29
  Speaker 1: sort of agreeing that the gold standard was the place
• 19:32
  Speaker 1: to be because there was debate like after the mess,
• 19:36
  Speaker 1: you know, post Civil War, of like what we're even
• 19:39
  Speaker 1: allowed to do as a country, and like can the
• 19:41
  Speaker 1: government even print money? Like that? The Supreme Court came
• 19:45
  Speaker 1: along in eighteen seventy one. They said, yes, they can
• 19:48
  Speaker 1: print money. Maybe they need to, you know, we need
• 19:51
  Speaker 1: to rethink our process, but the government printing money is okay.
• 19:57
  Speaker 2: Yeah, it's kind of it's legal. Yeah. Yeah, So that
• 20:00
  Speaker 2: I was settled, but that still didn't mean like that
• 20:02
  Speaker 2: the government should do that. There was still this question
• 20:05
  Speaker 2: should we keep going this way as supported by the
• 20:08
  Speaker 2: Greenback Party, who were like, yes, this actually makes a
• 20:11
  Speaker 2: lot of sense. Or there are other groups like the
• 20:13
  Speaker 2: silver movement, the gold bugs were out there who were like, no,
• 20:16
  Speaker 2: we need a commodity backed currency, right. Apparently the Wizard
• 20:22
  Speaker 2: of Oz and I'm sure we've mentioned this before, but
• 20:24
  Speaker 2: it was supposed to be an allegory for this debate
• 20:27
  Speaker 2: over whether to go with the Greenbacks and World City,
• 20:32
  Speaker 2: go with the gold standard, the yellow brick road, or
• 20:38
  Speaker 2: to go with the Ruby standard. Which were the slippers.
• 20:44
  Speaker 1: Right or the were wheat like you suggested that would
• 20:46
  Speaker 1: be the scarecrow exactly.
• 20:50
  Speaker 2: Yeah, So all of those scarecrow rubies, gold, the greenbacks,
• 20:57
  Speaker 2: all of those were part of this national bait. And
• 21:00
  Speaker 2: finally it was settled in nineteen hundred when William McKinley
• 21:03
  Speaker 2: was made president. He said, it's gold. We're just going
• 21:07
  Speaker 2: with gold. And even more than that, you cannot print
• 21:11
  Speaker 2: a dollar beyond the amount of gold. We have to
• 21:14
  Speaker 2: back it up.
• 21:16
  Speaker 1: Yeah, that was that was key to that whole declaration.
• 21:19
  Speaker 1: He was a pro gold candidate, pro gold standard, and
• 21:23
  Speaker 1: like you said, in nineteen hundred twenty one, he was like,
• 21:26
  Speaker 1: we got to have some real teeth behind this. I
• 21:29
  Speaker 1: can't just say it as president and make it so.
• 21:31
  Speaker 1: So they passed the Gold Standard Act of nineteen hundred,
• 21:35
  Speaker 1: and that had some language in there that said exactly
• 21:38
  Speaker 1: that is, hey, that circulation, it's got to be tied
• 21:42
  Speaker 1: to gold. We can't print one dollar more than we
• 21:44
  Speaker 1: have in equal amounts of gold. And that was it.
• 21:49
  Speaker 1: You know, that was the classic gold standard period. It
• 21:52
  Speaker 1: meant that nations were trading with one another on equal
• 21:56
  Speaker 1: ground and it was dependent on sending like physical gold
• 22:00
  Speaker 1: one another. If you were producing more and exporting more,
• 22:05
  Speaker 1: then you had a lot of gold, you know, stockpiled
• 22:07
  Speaker 1: in your country. If you had a trade deficit, you
• 22:10
  Speaker 1: had a lot less gold, and it was everyone kind
• 22:12
  Speaker 1: of knew what that meant, and it worked for a
• 22:15
  Speaker 1: long time.
• 22:16
  Speaker 2: It did work. I mean, there were dozens of nations
• 22:18
  Speaker 2: all on the gold standard at the same time, so
• 22:20
  Speaker 2: you knew how much you were going to get paid
• 22:23
  Speaker 2: for your shipmen of pre industrial televisions overseas, right, because
• 22:29
  Speaker 2: there were bonkers for them in Portugal. But the reason
• 22:34
  Speaker 2: why you knew is because there was such stability among
• 22:37
  Speaker 2: your currency and international currency pegged to gold, that when
• 22:44
  Speaker 2: you ship that shipment out, by the time it arrived
• 22:47
  Speaker 2: it was the same price. Yes, with fiat currency, the
• 22:51
  Speaker 2: price of stuff can fluctuate so much over a day
• 22:54
  Speaker 2: or a week that when you sent a shipment out,
• 22:57
  Speaker 2: if you hadn't already settled the contract, which you proba
• 23:00
  Speaker 2: probably did, but by the time it arrived, you might
• 23:02
  Speaker 2: be making way less than you were going to when
• 23:05
  Speaker 2: you shipped it out. That's not really what happened during
• 23:08
  Speaker 2: the classic Golden age of the gold standard. It was
• 23:11
  Speaker 2: all much more stable than that.
• 23:13
  Speaker 1: That's right. But like you said, we pegged the end
• 23:16
  Speaker 1: of that to basically World War One, because, as you
• 23:19
  Speaker 1: mentioned earlier, wars are really expensive. They're going to spike
• 23:22
  Speaker 1: your national debt if you get involved in one. And
• 23:26
  Speaker 1: in Europe and World War One, they were like, this
• 23:28
  Speaker 1: war's really really expensive, and our supply of gold is
• 23:32
  Speaker 1: being constrained, so we have to we have to leave it.
• 23:37
  Speaker 1: So the international gold standard dissolved basically mostly worldwide except
• 23:43
  Speaker 1: for the US and UK. We stayed on that gold standard.
• 23:46
  Speaker 1: And because of that, for a while, the British pound
• 23:50
  Speaker 1: and the US dollar were basically the global reserve currencies
• 23:55
  Speaker 1: because you know, they had gold to back them, so
• 23:57
  Speaker 1: they were the gold standard, the dollar in the pound.
• 24:01
  Speaker 2: Yeah, because it's not I mean, it's not figurative when
• 24:04
  Speaker 2: you're saying like you had to use your gold to
• 24:06
  Speaker 2: buy back your currency if you were in a trade deficit, right,
• 24:10
  Speaker 2: you actually had to ship gold to the country you
• 24:13
  Speaker 2: were buying your dollars or your pounds back from.
• 24:15
  Speaker 1: Yeah.
• 24:16
  Speaker 2: So with the US and the UK having currencies pegged
• 24:20
  Speaker 2: to gold and then be being the global reserve currency,
• 24:23
  Speaker 2: you could just ship currency overseas, which is so much
• 24:26
  Speaker 2: easier than shipping gold, right, So that was each lighter,
• 24:30
  Speaker 2: it is super light. So the US and England both
• 24:33
  Speaker 2: ended up with like the vast majority of the world's gold,
• 24:37
  Speaker 2: because you know, you could take a dollar, you could
• 24:40
  Speaker 2: take a pound to the US of the UK and
• 24:42
  Speaker 2: say give me some gold for this, and those those notes,
• 24:45
  Speaker 2: those the paper dollars were good as gold essentially, which
• 24:49
  Speaker 2: is I'm pretty sure where that came from.
• 24:52
  Speaker 1: Yeah, I mean that's funny. The gold standard and good
• 24:55
  Speaker 1: as gold, like a lot of these terms like literally
• 24:57
  Speaker 1: come from these weird monetary policies.
• 24:59
  Speaker 2: Yeah, yeah, William McKinley.
• 25:03
  Speaker 1: Yeah, old gold back. So things were going along okay
• 25:10
  Speaker 1: after that, and then the nineteen twenty nine stock market
• 25:14
  Speaker 1: crash came and banks started failing all over the world
• 25:19
  Speaker 1: and everyone you know those you know, when stuff like
• 25:21
  Speaker 1: this happens, there's it seems like it used to happen more,
• 25:25
  Speaker 1: but there can be a real panic, and people start
• 25:27
  Speaker 1: converting their dollars and their pounds to gold because they
• 25:30
  Speaker 1: were like, we know, gold is worth something I don't
• 25:33
  Speaker 1: want to have like this this paper currency on hand.
• 25:36
  Speaker 1: That's like clearly losing value very quickly.
• 25:39
  Speaker 2: Right, if I weigh a day, I might get less
• 25:41
  Speaker 2: gold than I will if I cash my bank account
• 25:44
  Speaker 2: into today. And remember earlier, I said, like, how this
• 25:49
  Speaker 2: is all. It all kind of self regulates, it all
• 25:51
  Speaker 2: moves naturally from one place to another. But still humans
• 25:55
  Speaker 2: can screw things up just because we're human. This is
• 25:57
  Speaker 2: how we screwed it up. There were a banking can
• 26:00
  Speaker 2: after banking panics, where people just made runs on banks
• 26:03
  Speaker 2: and said give me all my money and the bank
• 26:05
  Speaker 2: would be like, we don't have it. They would shell
• 26:07
  Speaker 2: out all their money and end up closing. And there
• 26:09
  Speaker 2: were like ten thousand bank closures in the early nineteen
• 26:13
  Speaker 2: thirties in the United States alone between nineteen thirty and
• 26:16
  Speaker 2: nineteen thirty two because people would run in and like
• 26:20
  Speaker 2: just take all their money out, and so banks were failing.
• 26:23
  Speaker 2: This was before the FDIIC. So if you had a
• 26:25
  Speaker 2: bunch of money and the bank like closed forever before
• 26:30
  Speaker 2: you could cash it in, you were broke. Like that
• 26:32
  Speaker 2: money was worthless, right, And that caused even more people
• 26:37
  Speaker 2: to make runs on banks, which created this huge, terrible
• 26:41
  Speaker 2: ripple effect. And so the UK and the US were
• 26:43
  Speaker 2: both faced with this challenge like what do you do.
• 26:46
  Speaker 2: Do you stay on the gold standard or do you
• 26:48
  Speaker 2: go off the gold standard? And the UK was.
• 26:51
  Speaker 1: Up first, Yeah, they abandoned the gold standard in nineteen
• 26:55
  Speaker 1: thirty one. Apparently there's a story that their central banker
• 27:00
  Speaker 1: named Monte Hugh Norman at the time, suffered a nervous
• 27:03
  Speaker 1: breakdown because he was you know, it's kind of up
• 27:06
  Speaker 1: to him to make that final call. And can you
• 27:09
  Speaker 1: imagine the pressure to be in charge of like a
• 27:13
  Speaker 1: kind of a worldwide economy, almost right, and how important
• 27:16
  Speaker 1: these decisions are.
• 27:18
  Speaker 2: So ask your question, no, no, I cannot imagine that
• 27:22
  Speaker 2: kind of.
• 27:23
  Speaker 1: Pressure it either. So the pounds value, of course, immediately
• 27:26
  Speaker 1: drops even further than it already was. So people that
• 27:30
  Speaker 1: were had lost faith in the paper money were saying, like,
• 27:33
  Speaker 1: see there, like good thing. We traded in our pounds
• 27:37
  Speaker 1: for gold and America and of course everywhere around the
• 27:40
  Speaker 1: world is seeing this happen, so everyone else is losing confidence.
• 27:43
  Speaker 1: And this is when you know, further runs on banks happened.
• 27:47
  Speaker 1: And we had a president, a lame duck named Herbert Hoover,
• 27:50
  Speaker 1: who was leaving office in nineteen thirty three and told
• 27:53
  Speaker 1: incoming FDR he was like, hey, you know, we're in
• 27:57
  Speaker 1: real trouble here. The reason we have gold is because
• 28:00
  Speaker 1: can't trust governments. And FDR was like you know what,
• 28:04
  Speaker 1: I think I've got this. So he went in office
• 28:07
  Speaker 1: and he said, I'm going to I'm going to fix
• 28:10
  Speaker 1: this crisis for good.
• 28:12
  Speaker 2: One of Yeah, one of the first things he did was,
• 28:14
  Speaker 2: I think the day after he was inaugurated, he declared
• 28:17
  Speaker 2: a four day banking holiday, so all the banks closed
• 28:21
  Speaker 2: right for four days so there couldn't be any runs
• 28:24
  Speaker 2: on banks. And I was watching this. There's this dude
• 28:28
  Speaker 2: who's a YouTuber named the Casual Historian, and he bills
• 28:33
  Speaker 2: himself as a Conservatorian, which I take to be in
• 28:38
  Speaker 2: a combination of a conservative and a vegetarian right probably,
• 28:43
  Speaker 2: But he was explaining that this actually didn't do much
• 28:46
  Speaker 2: in real terms, like the banks that were about to
• 28:49
  Speaker 2: fail before the banking holiday still failed afterwards. But as
• 28:52
  Speaker 2: far as the public was concerned, it was a huge
• 28:55
  Speaker 2: signal for essentially the first time that the government was
• 28:58
  Speaker 2: going to step in. Because there's one thing that you
• 29:01
  Speaker 2: cannot argue against with the gold standard is because you're constrained,
• 29:06
  Speaker 2: you cannot print more money than you have gold to
• 29:09
  Speaker 2: back it. There is nothing you can do in an
• 29:12
  Speaker 2: economic crisis except sit there and watch it happen. You
• 29:16
  Speaker 2: can't do anything there's no leverage for you to pull
• 29:18
  Speaker 2: the pull the country out of it. The only way
• 29:21
  Speaker 2: that you can pull your country out of a recession
• 29:24
  Speaker 2: or a depression is by printing more money and actually
• 29:28
  Speaker 2: devaluing the money that people are hoarding. So it's you're
• 29:33
  Speaker 2: basically saying, you got all this money that you're stashed
• 29:36
  Speaker 2: away because it's so valuable. Well, guess what, It's not
• 29:38
  Speaker 2: so valuable anymore, so you might as well get out
• 29:40
  Speaker 2: there and spend it.
• 29:42
  Speaker 1: Yeah, for sure. And you know, we were in big
• 29:45
  Speaker 1: trouble obviously in the nineteen thirties, you know, you mentioned
• 29:47
  Speaker 1: earlier sort of that cycle that happens when companies are
• 29:52
  Speaker 1: producing less and fewer customers and not hiring people or
• 29:57
  Speaker 1: firing people. And in nineteen thirty three, the unemployment of
• 30:00
  Speaker 1: the United States was twenty five percent.
• 30:02
  Speaker 2: That's so crazy.
• 30:04
  Speaker 1: I know, it's staggering. And I think worldwide, almost one
• 30:07
  Speaker 1: in three people were out of work in nineteen thirty two,
• 30:09
  Speaker 1: So it wasn't just the United States like that many
• 30:12
  Speaker 1: people being out at work at once, And that's the
• 30:15
  Speaker 1: thing that I always you know, thankfully it hasn't happened yet,
• 30:19
  Speaker 1: but with the AI conversations and people. I've had conversations
• 30:22
  Speaker 1: with people in my sphere.
• 30:25
  Speaker 2: Are you sure? They were people and not box.
• 30:28
  Speaker 1: They think it's such a great thing. And I was like,
• 30:29
  Speaker 1: you know, I'm not even arguing the merits of arts
• 30:32
  Speaker 1: or not and things like that, But I said, I
• 30:34
  Speaker 1: just worry about what would happen if like twenty percent
• 30:37
  Speaker 1: of the workforce was laid off in the span of
• 30:39
  Speaker 1: like a year or so because of AI. It's like,
• 30:41
  Speaker 1: that's what I worry about. And we haven't seen that yet, thankfully,
• 30:45
  Speaker 1: but I guess we'll see.
• 30:46
  Speaker 2: Yeah, you, me and I were talking about the same thing,
• 30:49
  Speaker 2: and she brought up a really great question, which is
• 30:51
  Speaker 2: like one of the things that a lot of the
• 30:53
  Speaker 2: AI proponents say is like, eventually you were going to
• 30:56
  Speaker 2: create this utopia where like no one has to work
• 30:58
  Speaker 2: and everybody's right. And her question is like, if that's
• 31:02
  Speaker 2: your goal, why don't we take some of that wealth
• 31:04
  Speaker 2: and just start now before I act? Right, do we
• 31:07
  Speaker 2: have to wait for AI to do that? We can
• 31:09
  Speaker 2: do it now? I thought, yes, rather clever. I stood
• 31:12
  Speaker 2: up and clapped right.
• 31:15
  Speaker 1: She's like, that's weird. Here, we're in our living room.
• 31:17
  Speaker 1: She left the room, all right, So things are bad.
• 31:22
  Speaker 1: They had that banking holiday. Congress passes what's called the
• 31:27
  Speaker 1: Emergency Banking Act at the time, which basically, like you said,
• 31:32
  Speaker 1: allowed them to, in an emergency issue, just start printing money. Basically,
• 31:36
  Speaker 1: that's not back to the gold standard, but we had
• 31:39
  Speaker 1: that gold standard because the gold Standard Act of nineteen hundred,
• 31:42
  Speaker 1: so they had to create this Banking Act, I guess
• 31:46
  Speaker 1: to work around that.
• 31:47
  Speaker 2: Right, Yeah, They basically said, Okay, this is just emergency measures,
• 31:51
  Speaker 2: and we're just printing this money to give to banks
• 31:54
  Speaker 2: to keep them from going under. So the government is
• 31:57
  Speaker 2: signaling all over the place, we're stepping in. We're going
• 32:00
  Speaker 2: to make sure that this that like, we're going to
• 32:04
  Speaker 2: do something about this for the first time. I think
• 32:07
  Speaker 2: that was my point before I got off on the
• 32:09
  Speaker 2: tangent for a little while a minute ago. But the
• 32:12
  Speaker 2: government is signaling all over the place that they're going
• 32:14
  Speaker 2: to back up banks so you don't have to run
• 32:16
  Speaker 2: and get all of your money out and just keep
• 32:18
  Speaker 2: making this whole thing worse. So that was like a
• 32:22
  Speaker 2: first step. But the problem is is there was still
• 32:25
  Speaker 2: plenty of gold out there that people were hoarding. They
• 32:27
  Speaker 2: were like, yeah, that's great, thanks a lot, but I'm
• 32:29
  Speaker 2: not taking this goal back to the bank right now
• 32:31
  Speaker 2: because I don't have any confidence in the banking system.
• 32:35
  Speaker 2: So the government figured out how to deal with this.
• 32:38
  Speaker 2: They said, well, you know what, we will put you
• 32:41
  Speaker 2: in jail for ten years and find you the modern
• 32:45
  Speaker 2: equivalent of two hundred and fifty thousand dollars. If you
• 32:48
  Speaker 2: don't give us your gold, we'll give you the equal
• 32:51
  Speaker 2: amount of paper dollars back, but you can't legally own
• 32:56
  Speaker 2: gold anymore.
• 32:58
  Speaker 1: Yeah, and that was it. That was I mean, I
• 33:00
  Speaker 1: think it was about a month after they sort of
• 33:04
  Speaker 1: restored that public confidence with the Emergency Banking Act, like
• 33:07
  Speaker 1: FDR was moving very quickly and said all right, we're
• 33:11
  Speaker 1: suspending the gold standard officially. And then the next year
• 33:15
  Speaker 1: was that Gold Reserve Act of nineteen thirty four that
• 33:17
  Speaker 1: you were talking about, where they were like, yeah, you can't.
• 33:19
  Speaker 1: I mean, you can keep your rings and if you
• 33:21
  Speaker 1: got like collectible coins and stuff, we're not coming after those. Yeah,
• 33:24
  Speaker 1: but you can't have bars of gold and a safe
• 33:27
  Speaker 1: in your house anymore.
• 33:28
  Speaker 2: Yeah. And Jimmy the Greek was like, whow right close.
• 33:33
  Speaker 2: So yeah, so now you had to have you had
• 33:37
  Speaker 2: to use paper currency, so this was the shift in
• 33:40
  Speaker 2: the United States, and this had already happened in other countries,
• 33:43
  Speaker 2: like you said, especially in Europe after World War One,
• 33:47
  Speaker 2: and the gold standard was dead. And one of the
• 33:52
  Speaker 2: things that demonstrated the death of the gold standard was
• 33:56
  Speaker 2: economists generally today say that the US being able to
• 33:59
  Speaker 2: print money and basically kickstar inflation to pull us out
• 34:05
  Speaker 2: of the deflationary spiral aka the depression. That's basically ninety
• 34:11
  Speaker 2: percent of the reason that the US got out of
• 34:13
  Speaker 2: the Great Depression. It was leaving the gold standard being
• 34:16
  Speaker 2: able to print money. Because if you can just print
• 34:19
  Speaker 2: money and take money off the market and put more
• 34:21
  Speaker 2: money on the market when you need it, you can
• 34:24
  Speaker 2: adjust the economy enough to get it out of crises
• 34:28
  Speaker 2: one way or the other. And that that's actually the
• 34:32
  Speaker 2: better way of doing it. And so the gold standard
• 34:35
  Speaker 2: never came back again.
• 34:37
  Speaker 1: That's right. And so that could be the end of
• 34:39
  Speaker 1: our show, but that would be weird because we haven't
• 34:42
  Speaker 1: had our second ad break yet. So we're gonna do that,
• 34:46
  Speaker 1: and we're going to come back and just say see
• 34:48
  Speaker 1: you later and read a listener mail, right, because the
• 34:50
  Speaker 1: gold standard's gone forever, gone forever, all right, we'll be
• 34:53
  Speaker 1: right back. Okay, we're back here for Act three, which
• 35:25
  Speaker 1: means this time for listener mail. Because a gold standard
• 35:27
  Speaker 1: is dead.
• 35:28
  Speaker 2: This is where the golden gun goes off.
• 35:30
  Speaker 1: That's right, because no, the gold standard is not dead.
• 35:34
  Speaker 1: It actually had another sort of brief not even stint,
• 35:38
  Speaker 1: like it kind of had a maybe not a Golden Age,
• 35:40
  Speaker 1: but maybe a heyday when the Bretton Woods Agreement came around,
• 35:45
  Speaker 1: which was a U in a United Nations agreement that
• 35:48
  Speaker 1: came around in nineteen forty four in Brettonwood's New Hampshire
• 35:52
  Speaker 1: that had a whole brand new system that was really
• 35:56
  Speaker 1: kind of like that original gold standard, with forty four
• 35:59
  Speaker 1: country signed on along with the US that said, all right,
• 36:03
  Speaker 1: the US dollar now is pegged to gold at thirty
• 36:06
  Speaker 1: five dollars an ounce, and everybody else that's signing on
• 36:10
  Speaker 1: is tying their currency to our dollar.
• 36:13
  Speaker 2: Right, so there's a fixed rate, like there's fifteen pesos
• 36:17
  Speaker 2: for one dollar and one dollar equals this much gold.
• 36:20
  Speaker 2: So it's essentially the world going back on a gold standard.
• 36:24
  Speaker 2: They just figured out a good way around it to
• 36:27
  Speaker 2: make it much easier, right. Yeah, and again, just like
• 36:31
  Speaker 2: the first time, if everybody's playing by the rules. Then
• 36:34
  Speaker 2: this keeps you from monkeying with interest rates to make
• 36:36
  Speaker 2: your exports more attractive. It prevents trade wars, it does
• 36:40
  Speaker 2: all sorts of calm, peaceful stuff. But the problem is
• 36:45
  Speaker 2: there's just and this is the same problem today. There
• 36:48
  Speaker 2: just wasn't enough gold in the world to cover the
• 36:51
  Speaker 2: increasing expense of modern life.
• 36:55
  Speaker 1: Yeah, for sure. And they had put things in place
• 36:57
  Speaker 1: because you know, they were a little smarter than time around.
• 37:00
  Speaker 1: They were like, all right, we'll create the International Monetary Fund,
• 37:03
  Speaker 1: We'll create the World Bank. So that means that there's
• 37:06
  Speaker 1: their official worldwide bodies kind of coordinating this monetary policy
• 37:11
  Speaker 1: between all the countries to make sure that no one's
• 37:13
  Speaker 1: doing hinky stuff. And it took a long time. This
• 37:16
  Speaker 1: wasn't like, you know, they reached this agreement in nineteen
• 37:18
  Speaker 1: forty four and by nineteen forty five it was all
• 37:21
  Speaker 1: set in stone. I think it didn't actually take effective
• 37:24
  Speaker 1: fourteen years later in nineteen fifty eight. By the nineteen sixties,
• 37:28
  Speaker 1: like shortly thereafter, the US was was spending like a
• 37:33
  Speaker 1: like a drunk ten year old military spending was in
• 37:37
  Speaker 1: foreign aid. We're all just like ramping up spending on imports,
• 37:42
  Speaker 1: foreign investment. There are a lot of dollars from the
• 37:45
  Speaker 1: United States and worldwide circulation. And even though we held
• 37:48
  Speaker 1: a lot of the world's gold reserves, like seventy five
• 37:51
  Speaker 1: percent at the time, like you said, we still didn't
• 37:53
  Speaker 1: have enough gold to cover all that kind of money.
• 37:55
  Speaker 2: No, and this is the I mean, this is what
• 37:58
  Speaker 2: keeps governments honest. There is a possibility of a worst
• 38:01
  Speaker 2: case scenario where all of the people holding those dollars
• 38:04
  Speaker 2: can all come back at once and say, hey, we
• 38:07
  Speaker 2: want this, we want our goal. We're turning in our currency,
• 38:11
  Speaker 2: give us our gold. And you know it's bad enough
• 38:13
  Speaker 2: when you're talking about citizens making runs on banks. If
• 38:17
  Speaker 2: you're talking about entire foreign governments bringing all of their
• 38:21
  Speaker 2: cash reserves to you and saying we want gold, you
• 38:24
  Speaker 2: got a really big problem. And finally, in nineteen seventy one,
• 38:28
  Speaker 2: Nixon admitted, like, we don't have enough gold to cover
• 38:31
  Speaker 2: the currency out there. Sorry, guys, you can't turn that
• 38:35
  Speaker 2: in for gold anymore. Sorry, and just kind of backed
• 38:39
  Speaker 2: out of the room.
• 38:40
  Speaker 1: Yeah, he backed out of the room. And it was
• 38:44
  Speaker 1: it was a big deal because this isn't the kind
• 38:47
  Speaker 1: of thing that we could we had pegged our dollar
• 38:50
  Speaker 1: to like worldwide value, so we couldn't just say that
• 38:53
  Speaker 1: by ourselves. In nineteen seventy three, the Monetary Fund they
• 38:59
  Speaker 1: went off the gold standard. They basically kind of came
• 39:02
  Speaker 1: along for the ride, yeah, and said, all right, everybody
• 39:05
  Speaker 1: should kind of go to this fiat currency system, and
• 39:08
  Speaker 1: like that was the true real end of the gold standard,
• 39:11
  Speaker 1: and like there's this that ship is so far out
• 39:14
  Speaker 1: of the harbor now, there's no way they could go back.
• 39:16
  Speaker 2: To it now. And it eventually kind of became a
• 39:19
  Speaker 2: fringe right wing position for some reason. They just kind
• 39:24
  Speaker 2: of adopted it. But that doesn't mean all of the
• 39:26
  Speaker 2: right wing agrees with it. In fact, Milton Friedman, who's
• 39:29
  Speaker 2: a right wing conservative economist hero, he was even like,
• 39:34
  Speaker 2: that's a terrible idea to go back on it. He
• 39:37
  Speaker 2: wrote a paper, and I think nineteen ninety or co
• 39:39
  Speaker 2: wrote one that basically demonstrated just how bad of an
• 39:42
  Speaker 2: idea it would be. But there's still plenty of people
• 39:45
  Speaker 2: who are like, no, gold is where I want to
• 39:48
  Speaker 2: put my faith in. One of the reasons why it's
• 39:52
  Speaker 2: still around is because people believe that if there's a
• 39:57
  Speaker 2: social collapse right afterward, people will still accept gold. They
• 40:02
  Speaker 2: won't accept dollars or pounds or euros, but they'll take
• 40:06
  Speaker 2: gold in return. So that's one reason a lot of
• 40:09
  Speaker 2: people still have faith in goals and investment. There's other
• 40:12
  Speaker 2: people who are like, gold's always going to become more
• 40:14
  Speaker 2: and more valuable because there's a finite amount of it, right,
• 40:18
  Speaker 2: And that actually is the same thing for bitcoin. There's
• 40:24
  Speaker 2: a finite amount of bitcoins, which means that over time
• 40:27
  Speaker 2: it's going to become more and more valuable. It's going
• 40:30
  Speaker 2: to buy more and more stuff, which makes it a
• 40:32
  Speaker 2: deflationary currency, which actually makes it dangerous because that means
• 40:36
  Speaker 2: people are more likely to buy in HORD bitcoins or
• 40:39
  Speaker 2: buy in HORD gold because eventually it's going to become
• 40:43
  Speaker 2: more valuable, and that's how you go into a recession.
• 40:46
  Speaker 1: Yeah. I've never I'm just you know, me and economics
• 40:50
  Speaker 1: and money. I'm just a big dummy with all that.
• 40:53
  Speaker 1: So cryptocurrency is something that even though we've podcasted on it,
• 40:57
  Speaker 1: I just it's not like I'm saying like I don't
• 40:59
  Speaker 1: try cryptocurrency. I just I don't understand it and I
• 41:02
  Speaker 1: have no interest in understanding it.
• 41:04
  Speaker 2: Yeah. Yeah, although it does seem to have gained a
• 41:07
  Speaker 2: lot of legitimacy, especially Yeah coin sure, but I mean
• 41:11
  Speaker 2: it's a wild ride, like it was at like sixteen
• 41:15
  Speaker 2: thousand earlier this year, early like last year, and now
• 41:18
  Speaker 2: it's at like sixty one, and sixty one is down
• 41:21
  Speaker 2: from ninety something a month or two ago. Like maybe
• 41:25
  Speaker 2: it's a long term thing, but that's not something you
• 41:27
  Speaker 2: want to I mean, you would have to be so
• 41:29
  Speaker 2: insane to trade that stuff on a daily basis.
• 41:33
  Speaker 1: I don't have the stomach for I'm just that's not
• 41:35
  Speaker 1: who I am either. You know, I want to I
• 41:37
  Speaker 1: want to sit around and you and I want to
• 41:39
  Speaker 1: sit around listen to elevator music, not track the currency cryptocurrency.
• 41:44
  Speaker 2: No, but for some people that is quite thrilling.
• 41:47
  Speaker 1: Oh I bet it is. Have fun with that if
• 41:49
  Speaker 1: that's your thing for Larry David. Right, So, like we said,
• 41:55
  Speaker 1: I think an act one that you know, there are
• 41:57
  Speaker 1: still people that argue for the gold standard and people
• 41:59
  Speaker 1: that aregue against it, even though that ship is sailed,
• 42:02
  Speaker 1: and there are you know, some pretty good arguments each way.
• 42:05
  Speaker 1: If you're for the gold Standard, you know you can say,
• 42:10
  Speaker 1: like hey, that's going to definitely put a lid on
• 42:14
  Speaker 1: this crazy government spending that we have had going on,
• 42:17
  Speaker 1: and it'll stabilize the money supply. We've seen it do
• 42:20
  Speaker 1: that literally, so you know, that's a pretty decent like
• 42:25
  Speaker 1: they got a lot of data to back those claims
• 42:27
  Speaker 1: up for sure.
• 42:28
  Speaker 2: Yeah, one of them is it's just basically throwing shade
• 42:32
  Speaker 2: at how out of control government spending gets when the
• 42:35
  Speaker 2: government is allowed to literally just print money when it
• 42:38
  Speaker 2: wants to. One of those things that you'll see a
• 42:42
  Speaker 2: lot is that the purchasing power of the dollar has
• 42:46
  Speaker 2: declined by more than eighty five percent since the US
• 42:50
  Speaker 2: left the gold standard in nineteen seventy one. And the
• 42:53
  Speaker 2: reason why is because the government just keeps printing money
• 42:56
  Speaker 2: anytime it likes, which causes inflation. Well, that's purposeful, like
• 43:01
  Speaker 2: a fiat currency is an inflationary currency as opposed to
• 43:05
  Speaker 2: a deflationary currency like gold. They want inflation to happen
• 43:09
  Speaker 2: because inflation you can keep on top of. It's deflation
• 43:12
  Speaker 2: that's really hard to come out of. So yeah, it's
• 43:15
  Speaker 2: not really a problem if you can buy less with
• 43:19
  Speaker 2: a dollar than you did before because you're adjusting for inflation.
• 43:23
  Speaker 2: It's not a problem as long as your wages are
• 43:25
  Speaker 2: keeping up with it. The problem is is wages haven't
• 43:28
  Speaker 2: kept up with it, and so people are being paid
• 43:30
  Speaker 2: the same amount as before and are able to buy
• 43:32
  Speaker 2: less because they have less money. Even though the cost
• 43:35
  Speaker 2: of living has increased their wages are wages haven't gone
• 43:39
  Speaker 2: up commensurate to it.
• 43:41
  Speaker 1: Yeah, for sure. And if you want to talk about
• 43:42
  Speaker 1: like you know, we're talking about printing money and a
• 43:44
  Speaker 1: spike in the cash supply, here's a pretty staggering statistic.
• 43:49
  Speaker 1: The supply of money in nineteen seventy, this is what
• 43:53
  Speaker 1: they call the M two money supply, which is all
• 43:55
  Speaker 1: the cash, all the money and checking accounts, all the
• 43:58
  Speaker 1: travelers checks, was about six hundred billion dollars in nineteen seventy,
• 44:02
  Speaker 1: the year before I was born. In August of last year,
• 44:07
  Speaker 1: it was twenty two trillion dollars, which is an increase
• 44:12
  Speaker 1: of three thousand, five hundred and sixty six percent over
• 44:16
  Speaker 1: whatever fifty four years, and twenty percent of that was
• 44:21
  Speaker 1: created in twenty twenty.
• 44:23
  Speaker 2: Yeah, just that year.
• 44:25
  Speaker 1: Yeah.
• 44:26
  Speaker 2: Yeah, So there's this, I mean, there's clear evidence that
• 44:30
  Speaker 2: like the government will just print money as much as
• 44:32
  Speaker 2: it can whenever it wants to. Part of the problem
• 44:35
  Speaker 2: is is that also increases the national debt because for
• 44:39
  Speaker 2: money out there, if you can print money, make new money,
• 44:41
  Speaker 2: you can spend that new money if you're the organization
• 44:45
  Speaker 2: that is creating the money. So the national debt increased
• 44:48
  Speaker 2: tremendously too over that same time period from nineteen seventy
• 44:52
  Speaker 2: to twenty twenty five.
• 44:55
  Speaker 1: Yeah, it could increase nine thousand percent. It was three
• 44:59
  Speaker 1: hund undred ninety eight billion back then and now it
• 45:02
  Speaker 1: is over thirty six trillion dollars, and it's a number
• 45:06
  Speaker 1: that is just hard to even comprehend. That seemingly nobody,
• 45:11
  Speaker 1: well not nobody, but the right people aren't concerned enough.
• 45:14
  Speaker 2: About So gold bugs are like, see, if you let
• 45:17
  Speaker 2: the government print money, they're going to print money and
• 45:19
  Speaker 2: they're going to spend more money. The gold standard keeps
• 45:22
  Speaker 2: them from being able to do that.
• 45:24
  Speaker 1: And of story, that's right. But there are anti goldbugs.
• 45:29
  Speaker 1: There are people who prefer fiat currency and the ability
• 45:31
  Speaker 1: for the government to step in and throw levers and
• 45:34
  Speaker 1: control monetary policy through debate and decision making. And that's
• 45:41
  Speaker 1: one of the big arguments. It's like, hey, we need
• 45:43
  Speaker 1: to be able to make these decisions sort of on
• 45:47
  Speaker 1: the fly and move quickly to save ourselves in times
• 45:51
  Speaker 1: of doubt and in times of economic stress, and they
• 45:54
  Speaker 1: can also combat a lot of those a lot of
• 45:56
  Speaker 1: that data too. They can also say, well, yeah, but
• 45:59
  Speaker 1: you really should look at these numbers instead.
• 46:02
  Speaker 2: Yeah. So goldbugs always say that that there's stability in
• 46:08
  Speaker 2: gold currency, right, But the problem is is that if
• 46:11
  Speaker 2: you look at the gold markets, they fluctuate tremendously, so
• 46:15
  Speaker 2: that's actually kind of out the window. Another one, this
• 46:18
  Speaker 2: one I couldn't find an answer to that. I can't
• 46:20
  Speaker 2: wrap my head around those. And the total value of
• 46:24
  Speaker 2: all the gold in the world is thirty six trillion dollars,
• 46:28
  Speaker 2: which is eye popping, but.
• 46:29
  Speaker 1: That's the debt. But yeah, exactly ironically.
• 46:33
  Speaker 2: But if you took the entire global economy and valued that,
• 46:37
  Speaker 2: that's more like one hundred and twenty six trillion dollars.
• 46:41
  Speaker 2: So if the world went on a gold standard again,
• 46:44
  Speaker 2: how would you shrink one hundred and twenty six trillion
• 46:47
  Speaker 2: dollars into thirty six trillion? That right there, that's what
• 46:50
  Speaker 2: we've been saying. The ship has left the harbor, that
• 46:52
  Speaker 2: train has left the station. It's just there's again, there's
• 46:56
  Speaker 2: not enough gold to cover the value of everything in
• 46:58
  Speaker 2: the world.
• 47:00
  Speaker 1: Yeah, for sure. Another big sort of argument that people
• 47:04
  Speaker 1: against the gold standard point too, is like, hey, look
• 47:06
  Speaker 1: at our stock market. People aren't putting their money in
• 47:09
  Speaker 1: their mattress anymore and making runs on banks. They're shifting
• 47:12
  Speaker 1: that money. They're cash dollars into the stock market, and
• 47:16
  Speaker 1: those dollars have grown and grown and grown. I mean,
• 47:19
  Speaker 1: there are always dips in the stock markets, and even
• 47:23
  Speaker 1: you know, there have been some very bad days in
• 47:26
  Speaker 1: a row with the stock market, and you know, the
• 47:30
  Speaker 1: crash of two thousand and eight and the dot com
• 47:31
  Speaker 1: bubble and all that stuff always affects the stock market,
• 47:34
  Speaker 1: but it's proven to be a pretty stable thing over time.
• 47:39
  Speaker 2: It has. And in fact, if you there's this comparison
• 47:43
  Speaker 2: I found I can't remember where I found it, but
• 47:45
  Speaker 2: if you took five thousand dollars in nineteen seventy one
• 47:49
  Speaker 2: to celebrate the birth of Chuck, Yeah, and you said,
• 47:54
  Speaker 2: I'm going to go buy five thousand dollars worth of gold,
• 47:56
  Speaker 2: It's going to be a great present for Chuck. I'm
• 47:58
  Speaker 2: also going to bring a little I'm a little frank incense.
• 48:01
  Speaker 2: It is going to get biblical in the year. The
• 48:05
  Speaker 2: gold actually would have increased about seventy five hundred percent.
• 48:09
  Speaker 2: And this is gold prices are so all over the place.
• 48:12
  Speaker 2: This is probably already out of date. But I think
• 48:15
  Speaker 2: in the end of twenty twenty five, you would have
• 48:19
  Speaker 2: had three hundred and seventy nine thousand, five hundred dollars
• 48:22
  Speaker 2: worth of gold from that five thousand dollars worth of
• 48:25
  Speaker 2: gold you bought in nineteen seventy one. So that makes
• 48:28
  Speaker 2: it seem like, okay, great, gold's a good investment. What
• 48:31
  Speaker 2: happens if you invested it in the stock.
• 48:32
  Speaker 1: Market, Well, if you had had that same five grand
• 48:36
  Speaker 1: after my birth and put it in the S and
• 48:38
  Speaker 1: P five hundred, you would have made two hundred and
• 48:41
  Speaker 1: seventy one thousand, five hundred dollars. So the gold standard
• 48:45
  Speaker 1: wins in that case. But that is if you were
• 48:48
  Speaker 1: just taking those dividends, if you're taking the money that
• 48:50
  Speaker 1: you're making from the stocks and saying like, all right,
• 48:52
  Speaker 1: that's that's my income or whatever. If you had kept
• 48:55
  Speaker 1: reinvesting all that from the five grand, it would be
• 48:59
  Speaker 1: one point one eight five million plus what five hundred bucks. Yeah,
• 49:06
  Speaker 1: So that's a return of almost twenty four thousand percent
• 49:09
  Speaker 1: rather than seventy five hundred percent.
• 49:11
  Speaker 2: Right, And even if you're like, okay, we'll wait a minute,
• 49:13
  Speaker 2: adjusting for inflation, how much is that? So I looked
• 49:16
  Speaker 2: it up. I went on our beloved west Egg, and
• 49:19
  Speaker 2: something that costs five thousand dollars in nineteen seventy one
• 49:22
  Speaker 2: would cost you forty thousand dollars today. So even after
• 49:27
  Speaker 2: you bought that five thousand dollars thing, you'd still have
• 49:29
  Speaker 2: one point one million and change left over. So it
• 49:33
  Speaker 2: would be much better to invest it in the market.
• 49:36
  Speaker 2: As volatile as it is, as unpredictable as it is,
• 49:39
  Speaker 2: as as easy as it is to lose your shirt
• 49:41
  Speaker 2: over the course of time, the ability to unleash the
• 49:45
  Speaker 2: stock market that having a fiat currency and being able
• 49:48
  Speaker 2: to print money creates is a it's a better return
• 49:52
  Speaker 2: on investment.
• 49:53
  Speaker 1: Yeah, I'm surprised I got through this one.
• 49:56
  Speaker 2: You did great.
• 49:58
  Speaker 1: Well, you did great.
• 49:58
  Speaker 2: You did great.
• 50:00
  Speaker 1: Who wrote the original article here? Who is this?
• 50:02
  Speaker 2: That was Olivia Joint She did great.
• 50:03
  Speaker 1: Yeah, she did great too. And you did a lot
• 50:06
  Speaker 1: of great supplemental research. Everyone's doing great, everybody.
• 50:08
  Speaker 2: It was just great up in here. We should also
• 50:11
  Speaker 2: say we probably got a lot of stuff frong. We
• 50:13
  Speaker 2: probably walked past a lot of stuff. This is such
• 50:15
  Speaker 2: a detailed nuance discussion that people who are like monetary
• 50:20
  Speaker 2: policy walks this is one of their favorite things to do,
• 50:23
  Speaker 2: is to point out all of these nitpicky little things
• 50:26
  Speaker 2: based on mind boggling economics that are really hard to describe.
• 50:30
  Speaker 2: We just glanced over the surface of this, but I think, yeah,
• 50:34
  Speaker 2: probably we got more right than you'd think.
• 50:37
  Speaker 1: Yeah, it's tough to tackle something like this because there
• 50:39
  Speaker 1: are people that know a gazillion times and more about
• 50:42
  Speaker 1: this kind of thing than we do.
• 50:43
  Speaker 2: Yep, and Chuck just said tackle, so he unlocked listener mail.
• 50:49
  Speaker 1: I'm going to call this this was from our crowd's episode,
• 50:53
  Speaker 1: and this is a classroom hack, a question hack from
• 50:56
  Speaker 1: a I think a teacher. Hey, guys, love the episode
• 50:59
  Speaker 1: about Yeah, I'm a middle school teacher and crowds are
• 51:02
  Speaker 1: my standard environment. Your comments about being afraid to ask
• 51:05
  Speaker 1: a question in class really spoke to me because a
• 51:07
  Speaker 1: big part of my job is navigating the power of
• 51:10
  Speaker 1: language with crowds in my students. There's a simple teacher
• 51:13
  Speaker 1: hack that is most effective and easiest, the easiest change
• 51:16
  Speaker 1: I've ever made to my communication with students and Aaron
• 51:20
  Speaker 1: from New Brunswick, Canada. I will go ahead and say that,
• 51:22
  Speaker 1: like anyone speaking in front of a crowd where you
• 51:25
  Speaker 1: like source questions, I think this is a pretty good
• 51:28
  Speaker 1: way to go. And here it is. Instead of saying
• 51:31
  Speaker 1: does anyone have any questions? What I say instead is
• 51:35
  Speaker 1: what questions do you have? There must be questions. It
• 51:38
  Speaker 1: really works a completely different response from the students. Guys.
• 51:43
  Speaker 1: The assumption that questions are expected always prompts at least
• 51:47
  Speaker 1: one kid to get the courage, which opens up the
• 51:49
  Speaker 1: gates for everyone else who is too apprehensive. Thanks for
• 51:52
  Speaker 1: being my first podcast in twenty twelve and for continuing
• 51:55
  Speaker 1: to bring joy and relaxation to a tire but satisfied teacher.
• 51:58
  Speaker 1: Peace and love and again that is from Aaron with
• 52:01
  Speaker 1: an E from New Brunswick, Canada.
• 52:03
  Speaker 2: Thanks Aaron, Peace and love back to you too, and
• 52:05
  Speaker 2: thanks for teaching.
• 52:07
  Speaker 1: It's a good hack.
• 52:08
  Speaker 2: It's a great hack. Questions who's got them? I know
• 52:11
  Speaker 2: there's some? Don't lie right, and then just get more
• 52:15
  Speaker 2: aggressive right huh huh, give me a question?
• 52:19
  Speaker 1: Yeah that works.
• 52:20
  Speaker 2: If you want to be like Aaron and send us
• 52:22
  Speaker 2: a great email and say peace and love that's awesome.
• 52:24
  Speaker 2: You can send it off again via email to the
• 52:27
  Speaker 2: email address stuff podcast at iHeartRadio dot com.
• 52:35
  Speaker 1: Stuff you Should Know is a production of iHeartRadio. For
• 52:38
  Speaker 1: more podcasts my heart Radio, visit the iHeartRadio app, Apple Podcasts,
• 52:42
  Speaker 1: or wherever you listen to your favorite shows.