AMA 43 – The New Game on Wall Street with “Ranting Andy” Hoffman

Wall Street

Join Jason Hartman and Andrew “Ranting Andy” Hoffman, Miles Franklin’s Marketing Director, as they discuss the new game on Wall Street with its evil derivatives and destructive investment advice. Andy says Wall Street is no longer in the business of destroying retailers. Ever since the repeal of the Glass-Steagall Act, they’ve been in the business of destroying countries and taking power. Andy talks about Goldman-Sachs infiltration into political positions in other countries, and the infiltration into municipalities by other big Wall Street thugs, such as JP Morgan. For more details, please visit: MilesFranklin.com. There is no more retail stock market and the consequence is record unemployment numbers. The government has been in bed with Wall Street and pushing out propaganda for years, but people are fed up with the game and the government is on the defensive.

Andy also shares his expertise about the Gold Cartel and explains how the COMEX is a charade, controlled by the likes of Goldman-Sachs, causing people to lose confidence in the trades due to the wide spread between paper and physical gold. Andy warns that we need to protect ourselves as people become more disgruntled and distrusting, while the potential exists for the government to respond by tightening down the shackles with economic and perhaps even military martial law. Andy calls this the “end game” and people need to be prepared as citizens and nations lose their sovereignty. The paradigms that everyone has been taught about stock markets and home ownership don’t apply anymore. Things are falling apart right now as the dollar continues to lose value through the non-stop printing presses. The only real money is in the form of gold and silver, and only if you own it physically. It’s time to simplify.

Andrew (“Andy”) Hoffman, CFA, joined Miles Franklin as Marketing Director in October 2011. For a decade, he was a U.S.-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney. Since 2002, his focus has been entirely on Precious Metals, and since 2007 has written under the moniker “Ranting Andy.” Prior to joining the company, he spent five years working as an Investor Relations officer or consultant to numerous junior mining companies. An archive of Andy”s “RANTS” can be found on the Miles Franklin Blog.

Narrator: Welcome to the American Monetary Association’s podcast where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for the American Monetary Association. This is your host, Jason Hartman, and this is a service of my private Foundation, the Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blogpost. We have a lot of resources there for you. And you can find that at AmericanMonetaryAssociation.org or the website for the foundation which is JasonHartmanFoundation.org. Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.

Start of Interview with Andy Hoffman

Jason Hartman: My pleasure to welcome Andy Hoffman to the show. He’s the marketing director at Miles Franklin. He has a vast amount of Wall Street experience and I think you’ll find his story to be very interesting as we talk about the gold cartel endgame and lots of other Wall Street shenanigans and Shenanigans as they relate to Comex as well. Andy, welcome. How are you?

Andrew Hoffman: Great. Thanks for having me, Jason. And you’re welcome to call me Ranting Andy if you’d like.

Jason Hartman: Ranting Andy, okay, good. Well, I hope to hear some rants. Those will be exciting. You’re coming to us from Denver today. And, first of all, before we dig into some very, very interesting stuff today, tell us about your background on Wall Street and why you left Wall Street.

Andrew Hoffman: Well, I’m from New York. I had a 20 year career on Wall Street. I’m a CFA. I was a cell site analyst for 7 or 8 years, institutional investor ranked and the oil field service sect. I also was a buy side trader and analyst at a hedge fund for 3 or 4 years. I worked at Cantor Fitzgerald as a bond broker for 3 or 4 years and I’d been around the street on every side of it basically. But around 2005 I was getting a bit disillusioned with all the scandal I saw around me. Particularly, [00:02:10] had a lot of scandals. And on top of that, I realize that as a research analyst, the investment bankers pretty much were telling you what to do and I didn’t like that one bit. So I found that about precious metals in 2002, immediately invested my whole portfolio in it and it stayed that way ever since.

And when I left Wall Street in 2005, I vowed to never come back. I’ve been working in industry for 4 or 5 years with junior mining companies and writing a blog under the moniker “Ranting Andy” which has taken quite a bit of a following. And a few months ago, I joined Miles Franklin, one of the largest bullion dealers in the country to be the head of marketing. So I now write every day. I make presentations about gold and silver and hope to educate people about how to protect themselves from what’s coming.

Jason Hartman: So, on Wall Street, first of all, I want to just touch on that topic before we dig in here. You said that one of the reasons you left is you were just fed up with the scandals and the scams. And every company you had worked for was either bankrupted, socialized, and I guess by that you mean government bailouts. Tell us if you’ll elaborate on that a little bit more if you would because I just saw the movie Margin Call a few weeks ago.

Andrew Hoffman: Good movie.

Jason Hartman: Wasn’t that great? Really good. Listeners, go see margin call, just a fantastic movie showing you the complete greed and corruption that Wall Street is. It’s just disgusting, it really is.

Andrew Hoffman: Well, the firms I work for, again, I work for Citigroup which was bankrupted and nationalized. I worked for firms that were taken over by Wachovia. I worked for Shearson Lehman Brothers. I worked for Merrill Lynch. Pretty much any company that I dealt with either had scandals that it was required to be taken over by someone else or it was bankrupted or nationalized as you say. And I work so hard to find that it was really a handful of people at the top that controlled everything and their causes were not good. I mean, I’m in business to make money but I’m also in business to be beneficial to society. And Wall Street is the absolute opposite. I’ve made a career for myself now in crusading against Wall Street.

Jason Hartman: I say to people that they should be a direct investor and they should have direct control over their money. And it is just unbelievable frankly what a good job Wall Street has done at screwing the public and getting people to believe that you should just walk into some advisor at Ameriprise or Merrill Lynch or whatever company – it doesn’t need to be those names – it could be any company – and just relinquish the control of your money, your financial future to these people that know nothing more about it than probably you do.

I have friends that have worked at those firms or currently work at those firms and you ask them questions, they just know nothing. It’s just simply about bringing money in and handing it over to the department and they have a morning call where they hear what’s the pitch of the day, what should we tell people now, what’s the gab. It’s unbelievable. Their knowledge is so elementary, it amazes me.

Andrew Hoffman: Yes, and the more morning call is a big part of my day as an analyst. But what you’re talking about is actually the old Wall Street game, the game where they try to take the retail public’s money which ended basically at the time of the internet bubble and the stock market crash. That was when the whole public was in the stock market so that they can sell them deals at the time, fees, and then high prices and they all went down and they sold high and everyone else bought high. But that was the old game.

The new game started in 1999 when the Glass-Steagall Act was repealed. It was repealed because of lobbying by Wall Street to the government. And as a result of that, they’ve now been given free rein to do whatever they want. After Glass-Steagall, what you saw was the big game of derivatives, of basically the gamesetters screwing the countries, not just retail investors but you’re talking about the populous as a whole being screwed, the government being screwed because Wall Street has taken over. They were the biggest campaign contributors to George Bush, to Obama, to pretty much anyone in a position of high authority and they now control the governments.

If you look at Italy, they just go the new prime minister installed. He’s from Goldman Sachs, as is the new guy in Greece – and they got in without elections. So what you’re talking about is Wall Street is not in the business of ripping off the retail public anymore. It’s in the business of destroying nations and taking power.

Jason Hartman: Well, they certainly destroyed Iceland, didn’t they?

Andrew Hoffman: Yeah, Iceland was the tip of the iceberg because that was the first nation that was dumb enough to listen to what the Goldman Sachs and JP Morgans told them about how to run their finances. But you go right down the line to Greece and the pigs and municipalities in America. Look at the municipality in Alabama, the biggest bankruptcy ever last month. That was all JP Morgan that told them to do dumb things.

Jason Hartman: Unbelievable. So what you’re saying is that the old Wall Street, and you’re right that is a good point, the old Wall Street I guess they decided to become the new Wall Street because the general public, the retail customer if you will, just doesn’t have enough money for them. They’ve gotta get into the sovereign world and go just destroy nations because there’s a lot more money there, right?

Andrew Hoffman: Yeah. It’s bigger game and that’s what you progressed to in life. And, again, there is no more retail stock market. I can’t emphasize this enough. The retail investor was wiped down the stock market crash 10 years ago. They were given a brief respite of spending by the real estate bubble, care of the Federal Reserve, and now that that’s bust there’s nothing left. That’s why we have record unemployment. And it is record unemployment and it is record unemployment if you look at what the real numbers are, not what the government posts.

Jason Hartman: By the way, I say that the real numbers are about 24 to 26 percent. When you count underemployment, you count independent contractors who many of them earn no money even though they’re considered employed. And then the discouraged workers that have fallen off the roles, it’s amazing how highly educated the person working at Starbucks is. It’s scary. This is a person sitting there with all kinds of student debt that isn’t dischargeable by bankruptcy that you’ve just trapped the population in this cycle of dependence on government, haven’t they?

Andrew Hoffman: Yeah. The only relationship Wall Street has with the public these days is in plotting with the government to put out enough propaganda to keep them at bay. Things like Occupy Wall Street worry them because it’s a wholesale uprising of the public like we saw in the Arab Spring. It’s not quite to that violent level yet, but that’s what they worry about. People are upset because all the promises that were made to them are not happening. They’re continually told every day “Don’t worry – things are better. We’re bailing out Europe, we’re mowing interest rates. . .” The fact is that the people are starting to get upset and Wall Street and Washington need a way to keep them in line which is why you see things like the National Defense Authorization Act pass without any opposition. Who knows what they’ll do in an election year?

Jason Hartman: Well, what do you mean by that? Tell us about that. I don’t understand.

Andrew Hoffman: The National Defense Authorization Act passed last week. I’m not sure if the president signed it yet. He will because I think both Congress passed it. And it was basically part of the annual Omnibus defense spending bill where they’ve now said that the government has the right to arrest and detain any American citizen whether they are in the country or out of the country if they deem them to be an enemy of the state which is very, very loosely defined, basically anyone that they don’t like. And that goes against the 4th amendment, against unreasonable search and seizures and almost no one seems to care about it. It’s a 2 to 1 vote. It passed by in Congress and it’s gonna be law soon. And you have to worry about the social aspects of what the government is doing right now.

Jason Hartman: When you look at this as a political issue, it seems like the whole debate between left and right, Democrat and Republican, is just kind of a big distraction. It seems to be that there is something going on at a much higher level, maybe the new world order, maybe the Bilderberg group, I don’t know how sort of conspiratorial we want to get here but it just doesn’t really matter. They’re both out to just destroy the middle class. You can call it socialism, fascism, feudalism, mercantilism, I don’t even know anymore. It’s just such a strange breed of what we’ve got going on, but certainly we know that the left and the right are in bed with the corporatocracy. I’m happy that the Occupy Wall Street movement is going on, frankly. And I’m not a hippie. I’m not a left-winger. I’m more on the right side of things usually, but I don’t know.

Andrew Hoffman: What you’re seeing now is a rapid evolution because when people say this is how it is, the fact is this may be how it is yesterday, but then today it’s different. When it comes to congress, the president, all they want to do is get reelected. They really could not care less about anything else. And the biggest problem is because of the inflation that’s been created by the Federal Reserve’s nonstop money printing, not to mention the unlimited money printing in Europe and China and Japan, you name it, the cost of getting reelected soars. I just read that I think they spent $3 billion on the campaigns 8 years ago and then $5 billion 3 years ago and now it’s gonna be over $6 billion.

Jason Hartman: This is on all campaigns you mean.

Andrew Hoffman: Yeah, of which a huge percentage is for the president. It’s kind of this vicious loop. The only way that these people can get reelected is by having this campaign contribution money. And that’s why they continually say that they will get rid of it like Obama promised he would and they don’t and he gets more than ever. And the number one contributors, like I said, to Bush, to Obama, to everyone are the Wall Street banks and of course the military defense contractors.

So, it’s only going to feed on itself. And every day, what these guys are doing, republican, democrat, doesn’t matter, they’re just on the defensive. They’re just like the ECB – today they had their LTRO bailout and two weeks ago it was the Federal Reserve swap bailout and they’re just every day just trying to kick the can down the road and there’s no road left to kick it down. There’s going to be a day of reckoning in 2012 when they can’t do this anymore and there will have to be bankruptcies or nationalizations and plunging stock markets and all that. You can’t avoid it forever.

Jason Hartman: Well, I couldn’t agree more. You can’t kick the can down the road forever. Tell us what the day of reckoning looks like. What happens on that day? Does every global fiat currency just suddenly collapse? What happens? What does it look like?

Andrew Hoffman: I wish I knew, Jason. There’s only a few things that I do know. I know that physical, not paper, but physical gold and silver won’t go higher. That’s number one. I know that the standard of living of all these supposedly first world nations that have been overprinting money and over-indebted are going to go down dramatically. And no one’s is going to fall more than United States because no one’s printing more money, no one has more debt, and no one has a higher undeserved standard of living. So, when you have bankruptcies and foreclosures and poverty and a decline in currency, you’re going to have social unrest. The only reason you haven’t seen you haven’t seen it here yet like you’ve seen let’s say in these Arab nations or in Europe, in Greece, is because we still have this reserve currency and we’ve been able to [00:14:30] print more of it without destroying its value. These other countries haven’t had that.

And that goes for most of these European nations now, because only the ECB can print money. Italy can’t, Greece can’t, and as a result you’re having problems. But the problem is that the inflation in this country has gotten out of hand in recent years. And it’s only gonna get worse because now they’re really turning on the afterburners with money printing. And eventually it’s going to come back to ruse for America. Will it be in 2012? Well, it may be. I would be hard pressed to believe that we’ll get through 2012 without a day of reckoning there.

But how fast will things come apart? How will they come apart? It’s just hard to tell because the last answer I gave about how everything’s evolving on the defensive, I mean anything could happen. But it’s not gonna be good and that’s why what I write in every single piece that I’ve written for years now I end with protect yourself because it’s all about thinking if these worst scenarios happen, where am I going to be?

Jason Hartman: So, a couple of things. We’ve talked mainly about irresponsible government spending. We’ve talked about government debt, money creation, and fiat currencies. But what we haven’t touched on yet are two other major points I think. Number one, I want to ask you about derivatives. And number two, I want to ask you about COMEX and the possibility of it being a Ponzi scheme and not being backed by the physical gold and silver that it says it has.

Andrew Hoffman: Right, all of those things are Ponzi schemes that are not backed. That’s how we’ll start. But then I’ll go back to 1999 when the Glass-Steagall Act is repealed. That’s when this game of derivatives started. And, frankly, even I hadn’t heard of “derivatives” other than knowing that theoretically an option is for a warranty. It is a derivative but what we’re talking about, where people make these off exchange bets about how things are gonna happen, almost like you go in this online gambling and what’s going to happen in the football game tonight, it’s no different what they’re doing here, except they do it without any regulation. And they’re all doing it with each other. So no one even has any idea who’s really beholden to who.

And now we’re at a level where the notional value of these derivatives. I read it yesterday. It’s $750 trillion dollars.

Jason Hartman: Let me just give people a perspective on that because I thought it was only $300-$600 trillion. You’re saying $750 trillion with a T. Just understand, The US national debt is about $15 trillion. The US GDP is somewhere around $12 trillion. Correct me if I’m wrong on any of these numbers but I’m close enough for government work probably. And the GDP of the entire planet is about $60 trillion dollars. The entitlement time bomb of The US is $60+ trillion. So you’re saying that the amount of derivatives floating around on planet earth, $750 trillion dollars with a T?

Andrew Hoffman: Yeah, that was actually in my piece I wrote yesterday. That comes from The US office of the control of the currency or OCC, that’s a real number. And actually of June 30th that number is up $120 trillion just in the first 6 months of the year. So it’s probably closer to $800 now. That was 6 months ago. Now, these bets are completely unregulated, so no one knows what they’re doing. But more importantly, they don’t work, because look at what happened in 2008.

I mean, AIG was the longest writer of derivatives on earth. And they went bankrupt because they wrote all those derivatives. And the reason that Goldman Sachs and all these other guys did not go bankrupt is because they were bailed out. AIG was nationalized and Goldman Sachs and those guys who bought all the derivatives that they weren’t getting paid on were bailed out by the government. And it’s hard to believe that with all the regulations so-called that’s happened since then that this hasn’t caused derivatives to go down but you can look at the piece – it’s in my piece yesterday. They’ve gone up. In fact, they rocketed up in the first half of this year and it’s only going to get worse.

And now we’re talking about comments and you asked me before to call MF Global. Now, MF Global is the largest clearing firm on the comments. Now, again, I’ve been a Wall Street professional for 20 years. I’ve heard just about anything. I’ve never heard of MF Global. So, they’re one of these I call dark pool firms that are in the shadows, you don’t even realize they’re there. But they have a huge market share of all these trades that are going on on this COMEX which, as it is, I spend half of my day writing about the fraud that is the COMEX. So these guys are run by Goldman Sachs’s ex-CEO and ex-senator and governor, basically stole billions of dollars from their clients and no one’s gonna do anything about it.

So the COMEX which I have written exhaustibly for, god, 5-7-9 years, I work with GATA, I write pieces, hundreds and hundreds of pages about it. COMEX is the biggest scam in the history of American financial markets. It’s there for the most part just to manipulate paper prices. It’s dominated by bullied banks, naked shorting. And these derivatives behind the scene are somehow connected but you never know how. The CFDC is in bed with the government. They will never enforce anything. That’s why John Corzine is not even arrested right now or in prison.

The lynchpin of the whole system, to me, has always been physical gold and silver because when we went off the gold standard in 1971, it wasn’t just us, it was the whole world that went off the gold standard for the first time, there was not a single country on earth for the first time in history not backed by gold. And since that time, every one of these currencies has printed money and created these derivatives to push the game to the level we’re at right now and there’s no endgame except for them to collapse. And so you’re seeing the final death throws here where I believe MF Global there was much bigger reasons behind simply sealing money. I’ll never know what they are probably.

But the fact is the COMEX is a paper market that tries to pretend what the real prices are and each day the difference between the real prices and the paper prices there gets wider. And at some point, either by force majeure or simply irrelevance, the COMEX will be no longer used. And, in fact, I believe that at some point in the next few years, the whole futures game which really was spawned in its fashion the way it is now after the Glass-Steagall act may be dead for some time because people just won’t trust credit anymore.

Jason Hartman: Wow. Give us a concept, a size. How big is the COMEX? If we want to compare it to good old Bernie Madoff for example, his fraud was about $60 billion I believe. The COMEX has gotta be huge. I mean, what’s the scale of it?

Andrew Hoffman: That’s a hard question. It’s more the importance of the COMEX than the size because, again, I only really follow the precious metals markets. I’m not watching what the corn pits are doing, what soybeans are. . .

Jason Hartman: Fair enough. What’s the metal size of the COMEX? Maybe just the gold and the silver size.

Andrew Hoffman: We were talking before the call, there’s only about 2 million ounces of gold in inventory there. And there’s only about 100 million ounces of silver in inventory, and of that not even half of it is actually deliverable, meaning probably at least half of all that is simply being stored there by customers. It’s not being held by a bank available to be bought. So let’s say there’s only 30-40 million ounces of silver. At $30 an ounce, that’s like a billion dollars. I mean, it’s nothing, it’s absolutely nothing. And the same goes for a million ounces of silver. I don’t even know if that’s one ton of gold, it’s so little.

So I believe they trade in the paper markets something like a billion ounce of silver in a year – actually I take it back. They traded a billion ounces in a day back in April when it hit $50 an ounce. You have a fractional banking system there where it’s at least 100 times more paper strain than actually exists over there. So it’s hard to say how big the size is.

But the fact is what matters is that people have to believe, they have to have confidence that the COMEX is a real price discovery methods. And each time that you see these kind of scandals and each time you see a giant gold smash where just two weeks ago, I won’t even go into the whole thing, gold suddenly falls almost $200 for no reason. People start to realize that it’s not real. The premiums between the physical price and what’s shown on your screen get wider and wider. And the open interest on the COMEX has been dropping dramatically over the last few years, particularly after the MF Global because traders are scared to trade there. They don’t believe it’s real. They also are scared that they’re going to have their account stolen from them by the end of Global and the other clearing groups.

So, it’s an enormous size of problem. But it’s not the dollar signs that matter so much, it’s the confidence. Because if people don’t believe the COMEX is a real market and they just look to the physical market for gold, the cartel that holds it down will blow up immediately and then you’ll see people rushing into real items like gold and silver and rushing out of paper items and treasury bonds and the whole daisy chain starts. So it’s a critical part that’s right at the nerve center of the cartel, the banking cabal, the Washington-Wall Street access of their ability to control markets and people.

Jason Hartman: Yeah, very interesting, very scary actually. So when you look at MF Global, how much money are investors going to lose in that fiasco?

Andrew Hoffman: Yeah, the numbers every day are different. It’s just like any of these other scandals. I said it was 600 million and they said it was 1.2 billion and they said it was 3 billion. And it’s at the point where no one even knows what the number is and JP Morgan is right in the middle of it, they have a hold of the money and they were a custodian. They’re not in trouble as usual.

But, again, it’s not even the amount. It’s the effect as if people don’t trust that the COMEX is real or that their accounts or safe. The government will bail out Goldman Sachs or Merrill Lynch for tens of billions, but they’re not gonna bail out a bunch of innocent people with their accounts for 1 billion. Even though the CME, that’s the Chicago Mercantile Exchange which owns the COMEX, even though they tell everyone we will guarantee every one of our trades. And they’re not, the little guy here is not being protected. They’re being destroyed while John Corzine is safe, JP Morgan is safe, and at some point people just won’t use the COMEX at all. I believe now that most of the trading and the gold and silver there isn’t real anyway. And it’s just government computers and bank computers from JP Morgan.

And so at some point you’re just going to see a full separation. You’ve already seen a pretty big separation between paper and everybody else. And at some point you’re going to see a full separation.

Jason Hartman: It’s just another central bank. It’s just another big scam, it’s just another big fiat money scam. And instead of with dollars, it’s with certificates or numbers on a computer screen about commodities. It’s just unbelievable. So as far as I know, still now what are we? 3 or 4 years out, not one person has gone to jail out of this financial crisis. Anthony Mozilo with Countrywide got a little tiny fine, which to him is no big deal. This is just incredible. I mean, it’s amazing if you’re a little guy and you’re a small-time crook, you’re probably gonna go to jail. You’re probably gonna get busted. If you’re a big-time crook, you just get rewarded.

Andrew Hoffman: Yeah, well they’re part of the system. And if you’re not part of the system like Bernie Madoff was not and Lehman Brothers was not, they had people who are at odds with the big rigs, then you’re out and it is a cartel no matter what anyone wants to call it. It is collusion in Washington, Wall Street, London to keep power. And, again, as the world gets more difficult and there’s more poor people in more distinction, they tighten their grip like the National Defense Authorization Act, like the European Stablilization Fund that they’re working on now, unbelievable Draconian roles that would take away sovereignty or some of the big European countries.

I fear for economic martial law. I fear for military martial law. Because when people are poor and they’re broke, they are controlled. Governments act to control them. And we need to protect ourselves. And it doesn’t mean it will happen but we need to assume that it will happen because we want to not be caught when these things do happen.

Jason Hartman: When you say economic martial law, Andy, what do you mean? What does that mean?

Andrew Hoffman: Well, I mean bank holidays for one. What if they decided that it is really is going to hit the fan? And they can’t kick it down the road anymore and this weekend they decided we’re closing the banks and we’re making new rules. We’re devaluing the currencies. We’re not gonna let you take your money out of your bank or if you do it’ll be with controls. We’re going to take your IRA and force you to put it into treasury bonds and we’ll give you a new one where you’re 59 ½ based on those treasury bonds. The point is telling you, increasing taxes, changing rules, tax savings, anything to serve their purposes at your expense. That’s economic martial law. And then of course, if there’s social unrest, who knows what they’ll do?

Jason Hartman: Really amazing. There’s just so much to talk about. Can I just maybe get a little bit conceptual and esoteric with you for a moment? This is kind of just really basic in a way but it’s really sort of conceptual, too. And this is a thought I had recently and it applies to the fiat money issue, the derivatives issue. And when I say this, I certainly know that the chips on the table will be moved around pretty dramatically. And that’s why listeners, they want to position themselves so they won’t get hurt or they’ll be hurt as little as possible from what is going on. And what is going on is giant. It is happening at the foundational levels and at the highest levels of global finance. These are huge mega-trends, mega-games that are being played and we’ve just got to protect ourselves. But if you really look at it, pre-financial crisis, let’s just go back to 2006-2007 and then today, if you look around the world, the amount of goods in the world are pretty much the same as they were before the crisis.

Now, the chips on the tables get moved but wealth is denominated nowadays on a computer screen and to some smaller extent in fake paper fiat assets like stock certificates and currencies. But the amount of resources hasn’t really changed. In fact, it might have grown by better exploration techniques and technologies. When a crisis hits, when the can can’t be kicked down the road any further, does it really change things that much?

Andrew Hoffman: It changes them a lot because the resources may be the same like oil or cotton, but the money to pay for it is not. The incredible amount of financial wealth that’s been destroyed by the reversely separable type of real estate bubbles, and now the sovereign debt level, you’ll be talking about unbelievable amounts of losses and bankruptcies and foreclosures to the point where people can’t afford things anymore. And what’s replacing that money is freshly printed government money. And of course that freshly printed government money doesn’t go to you, doesn’t go to Main Street. It goes to the very people who caused the problem, the banks. Goldman Sachs gets that money.

And Goldman Sachs, what they do is they speculate with it. Speculation generally makes things go higher in price, so it makes it more difficult for people to buy those scarce resources. Plus, certain businesses are not resources are not grown. Gold production, despite being in a 12 year bull market, it peaked in 2002 I believe. And it still hasn’t gotten there yet. And who knows if and when it will. Silver production, silver used to come out of the ground 15 times [00:31:06] all-time low. So there are some things that are peaking. I’m not saying that there’s no more gold and silver in the world but certainly at these prices there are.

And even oil – I was an oil analyst for 10 years. OPEC ruled the market. Whatever they did mattered. OPEC is irrelevant now because they have so little excess capacity. I think it’s all in Saudi Arabia now and a lot of people question that they even have what they say. So, there’s a lot of moving parts as you say and chips are moving around. But the fact is that the only new “wealth” coming into the world is printed money which isn’t wealth at all.

Jason Hartman: Yeah, it’s just a fake symbol of wealth and it’s very temporary and fleeting. So it seems like the plan is just a couple of things here. Number one, control resources and commodities. Have lots of long term fixed rate debt attached to them if you can. And let inflation enrich you while it unfortunately impoverishes everybody else.

Andrew Hoffman: Right. I’ll agree on most parts. People ask me on all the time, well, if there’s going to be inflation, shouldn’t I have debt because it’ll get wiped out? Now, during the labor inflation, yes, debt will be wiped out. They’ll just devalue the currency and write off all the debt this weekend. In Europe, they really could do it in Europe at any given weekend right now, things are so bad. But unless there’s hyperinflation events like that and, believe me, that’s not a scenario that anyone should be looking forward to. I’d rather have a lot of debt than have that situation where you have food shortages and social unrest. But again, unless that happens, you’re gonna have debt and you’re gonna have to pay that debt off.

And in this kind of economic environment, if you lose your job, which 26% of the people have already, you’re not gonna go and pay off that debt. You’ll lose your house and that kind of thing. So, one needs to be extremely careful.

Jason Hartman: Let me qualify that. I agree with you on what you’re saying. I was talking about debt against say rental properties or income properties for example, where someone else is paying the debt for you. Now, granted, their ability to repay that debt for you, in other words in the form of rent, that will be affected, no question about it, and I think the renter will change. In other words, the standard of living will decline rather radically where the standard of living at that renter will change.

So, for example, if it’s a house, just take a little single family home as an example because it’s simple. But say you have a renter in there who’s paying $1500 a month today. That renter, due to inflation, they will be impoverished. So they will have to move out of the $1500 and let’s say it’s a 1500 square foot house down to a $3000, 800 square foot house. So their standard of living will be declined but it will be replaced with another renter who used to live in a 3000 square foot house who maybe got foreclosed on or rented it who sees their standard of living decline as well. So, it’s like a ladder. That ladder moves. People get knocked down a few rungs on the ladder no question. But there’s still someone there to rent it and to outsource the debt, too.

Andrew Hoffman: Right. And without being a real estate expert, which obviously you are and I’m not, I’ve been saying forever about how people can rent. You don’t need to own house. And that’s been the whole problem with the real estate bubble is everyone’s told that you must own.

Jason Hartman: Let me just comment on that if I can and then I want to hear your thought. I moved from Southern California to the Phoenix area recently. I have pretty much all my life been a homeowner with only a couple of very short exceptions. Now I’m a renter and I love it. I own lots of rental properties that I rent to other people. But I rent this gorgeous penthouse and it’s a steal frankly. I mean, I think I’m kind of ripping off the landlord I got such a good deal. So I would rather, oddly enough, rent my own high end penthouse and rent basic more necessity housing to other people. It seems to be a very good equation as far as I can tell.

Andrew Hoffman: I’ve heard anecdotally and I’m pretty sure that the rental market is dramatically better than the ownership market because people are losing their houses so they need to rent. I’m not gonna talk about the financing or real estate because that’s not an area that I’m focused on. But people, again, they need to realize that the paradigms that they’ve been taught about stock ownership and home ownership and all kinds of things, the standard of living that they’re expected to have with their iPhones and their flat screen TVs. You have to simple it down and make life simple because things are not going to get any easier going forward.

I was in New York working for Wall Street. I rented the entire time I was there. I moved out here when I was 37. I was renting a New York apartment because I knew that that’s a market I don’t want to be in. Once Wall Street finally goes down, it’s gonna be a catastrophe. When I came out to Denver, housing is a lot cheaper, I bought without finance, and I don’t plan on moving anywhere. But if I did plan on moving, I’d probably be renting here.

Jason Hartman: See, the problem with owning free and clear and buying without finance is that none of us ever really own anything in this country because we all have property taxes which are a perpetual lean on our ownership. And it’s just the government, they always win – they always figure out a way to win. But let’s talk about metals because that is your specialty and let’s maybe wrap up with this thought. How should people enter the metals market as a hedge against the rather dramatic inflation that we both think is coming?

Andrew Hoffman: It’s really a hedge against everything. It’s a barometer of bad tidings which is why the government does not want it to go up. But as you say, it’s most identified with inflation. Again, people need to realize the definition of inflation doesn’t mean higher prices in the store. It means the printing of money. How fast are they printing money? They’ve been printing money exponentially. They were really printing it exponentially now, just this thing this morning in Europe and the feds thing two weeks ago. QE3 has been ongoing even though they don’t talk about it. I assure you they will be talking about QE3 pretty soon, especially with an election year.

Jason Hartman: They’ll give it another name, though. It won’t be called QE3. They’ll give some name like The Twist or something.

Andrew Hoffman: Yeah. But whatever it is, it will have to be overt because things are really falling apart right now. And I mean they’re really falling apart. So, you’re going to see that kind of fear of inflation and the way to protect yourself is simple. Coins, it’s that easy. I mean, there are lots of options of how to do it. There are even ways where it is “paper crown silver” but it’s safer in other ways. But when I advocate to anyone, it’s simply to buy coins, one ounce coins, the standard issues that people are aware of, the evils with the Canadian Maples.

Jason Hartman: Not numismatic, though, right?

Andrew Hoffman: No. Numismatic is like stamp collectors. You have to be an expert in numismatics and frankly the people that we deal with who are numismatics are coin buffs more than they are new inflation buffs. They just love the game. It’s like baseball cards. So you want to avoid them because you’re gonna probably pay way more than they’re worth or more importantly not know why you paid way more than their worth.

So you want to buy standard coins, protect them. There are ways of storing them that we can help you with or just store it yourself in a very safe place, not a bank, and you should be just fine.

Jason Hartman: So you mentioned not a bank, not a safe deposit box, huh? Because you think if we have a bank holiday, maybe suddenly there will be a guard at your safe deposit box. And that guard will be a government person that says let me see what you’re getting out of there. Maybe they’ll deny you access, right? Is that why you’re saying that?

Andrew Hoffman: Yeah, banks are public domain. There was a decree back in 1930s. The 1930s, a completely different world, we were under a gold standard now, it was a very isolated world, UF centric. So the government put out a decree that they were going to confiscate gold. And it’s something I don’t think is even remotely possible today. It makes absolutely no sense because it is a global world. There isn’t even that much gold in this country. It’s all in China and India. But when they did that, no one returned to gold. They said you had to, no one did it.

Jason Hartman: Some people did it. You say no one using that figuratively, right?

Andrew Hoffman: The only gold that they really confiscated was the gold that was in the basic safety deposit boxes, gold that was left in the public domain. So I’m saying do not leave it in a safety deposit box. In fact, I’d take just about all my wealth out of the system. There’s nothing in banks. There’s a tiny bit in Charles Schwab because I trust them more than the rest. And everything else with banks I don’t trust because I do believe there’s gonna be bank holidays, and as we spoke before, some kind of economic martial law in which my assets, I’ve cashed out my IRA, paid the penalties, because I believe that those assets are going to be expropriated.

Jason Hartman: Those are going to be nationalized. The IRAs and the pension funds, they’re going to be nationalized. And, folks, if you’ve got a 401-K, you better watch out. If you’re putting money in an IRA, expect big brother to come and nationalize that. They’re going to engineer a fake crisis, false flag, and I think they’re going to say we have to, for the public good, take care of people’s retirement now and we have to manage it because we’ve done such a great job with social security, haven’t we?

Andrew Hoffman: Yeah. I ended up doing a piece yesterday, and I write about this all the time, it was actually called “Out, Out Damn IRA!” It’s funny because one of the things that’s been brainwashed into people’s heads is that IRA money is after tax. So everyone’s like my IRA is $100,000. No, it’s $65,000 because you’re going to pay that tax no matter what.

Jason Hartman: Unless it’s a Roth you mean.

Andrew Hoffman: Right, well if it’s a Roth, you already paid it.

Jason Hartman: But the law can change. Andy, this is the amazing thing. Who in their right mind thinks that the law will be the same by the time they retire. The government is broke. And living under a government that does not have money becomes an ugly scenario because then the government tries to attack any source it can to get that money. The monster is coming after all of us.

Andrew Hoffman: And tax rates will be higher.

Jason Hartman: Of course they’ll be higher. They’ll just change the law.

Andrew Hoffman: I won’t take my IRA out because I have to pay 10% penalty. We’re a socialist nation. You don’t think that 10-15 years from now when you’re 59 ½ it’s not gonna be a 10% IRA tax rate? It’s unbelievable.

Jason Hartman: It’s ridiculous. So I would say if you have an IRA and you insist on having one, have a self-directed IRA as do I, and own physical assets with that IRA. So there it’s much harder to nationalize that than it is a stock account or it’s simply a paper transaction. So that’s one thing you can do. But, as you say, you’re just out of the system. I had Howard Ruff on the show a while back and he’s a big old gold bug – he’s been around forever talking about this stuff. And he says bury it in your backyard. Where do you put it? I like physical. But, again, it presents another problem of where to go.

Andrew Hoffman: I would guess that 90% of the people that own physical own it in their house. It just makes sense that that’s what people are doing, and if they do, well, if you get serious and you bolt them down and you get alarm systems and a dog and all that stuff, it’s unlikely to be sold, especially if you’re armed in a state where you’re allowed to be. That’s what I think most people are doing but some people don’t want it in their house. And some people who are very wealthy just can’t afford the space and the weight. . .

Jason Hartman: A nice problem to have, yes.

Andrew Hoffman: It’s a nice problem to have but, believe me, silver at this price is very heavy. If you own a million dollars of silver, that’s a lot of silver. If you own $10 million in silver, most houses can’t handle that. So there are storage facilities. And we at Miles Franklin have storage facilities that we work with, both in North Dakota, we work with Dakota Depository, and we work with Brinks, the security company. It’s not even a bank or depository in Montreal, Canada.

Jason Hartman: It just scares me again because I had Peter Schiff on and he was peddling his Perth Mint deal. And I’m like, okay, let me see. I give you my fake fiat money and then you give me a certificate saying I’ve got gold in the Perth Mint, that’s just another fiat. But, granted, it’s not the government fiat and it’s not the Wall Street fiat, so it’s probably better than both of those. Spread it around, diversify.

Andrew Hoffman: There are degrees. You can go on continuum from having a coin in your hand to owning a COMEX Futures gold certificate. And, yeah, the Perth Mint is somewhere in there, but to me it’s still a certificate. In a million years I wouldn’t buy a certificate. I wouldn’t care where it’s from. I wouldn’t buy it from the Royal Canadian Mint, from the Perth Mint. It’s a certificate. And I don’t believe for a second, especially with what’s going on with the COMEX and MF Global, I wouldn’t think for a second that a piece of paper had something behind it.

Jason Hartman: You’re absolutely right. Andy, fascinating discussion. Andy Hoffman, folks. Andy, give you’re your website. Tell people where they can learn more.

Andrew Hoffman: Sure. It’s MilesFranklin.com. Actually, if you go to the front page you can sign up for my newsletter, I write for free 5 days a week. My firm writes 2 newsletters a day just to help educate. There’s nothing more than that. We try to tell people what’s really going on in the world so that we have educated customers.

Jason Hartman: Good stuff. Thank you so much for joining us today. And keep in touch as things developed. And the can can’t be kicked down the road any longer. We’d love to have you back on the show for an update and your thoughts on things.

Andrew Hoffman: Great. Thanks so much, Jason.

Narrator: The American Monetary Association is a nonprofit venture funded by The Jason Hartman Foundation which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by The Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit www.HartmanMedia.com or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

The American Monetary Association Team

Transcribed by Ralph

Share and Enjoy:
  • Print
  • Digg
  • StumbleUpon
  • del.icio.us
  • Facebook
  • Yahoo! Buzz
  • Twitter
  • Google Bookmarks
AMA