Judging Freedom - Kevin DeMeritt: Digital Currency - What you should know.

Episode Date: November 16, 2023

#digitalcurrency #coinbase #learcapital #kevindemeritt #nationaldebt #buygold #buysilverThe COVID-19 pandemic has left in its wake an economic turbulence of unprecedented proportions. The aftershocks are felt across the global economic landscape, shaping the future of money, labor markets, and government strategies. The focus is shifting towards digital economies and their inherent complexities. This shift presents new challenges, particularly regarding privacy in a potentially cashless society. Amidst these uncertainties, could gold prove to be the ultimate safety net for your financial assets?Kevin DeMeritt, the brains behind Lear Capital, lends his expertise to this episode "Navigating the Economic Aftershocks: Pandemic, Digital Currency, and the Value of Gold." DeMeritt dissects the labor market issues triggered by the pandemic's aftershocks, highlighting the ripple effects of rising interest rates and the implications of the government's six-month debt rollover on the economy's equilibrium. As we delve into the digital economy, the conversation takes an intriguing turn toward the mechanics of digital wallets and the potential loss of privacy in a cashless society. The discussion further delves into the consequences of a government-run digital currency, with former Fox colleague Monica Crowley contributing her perspective. The digital currency debate is a complex one, with government-run digital currencies promising convenience and efficiency but potentially undermining privacy. If every transaction becomes trackable and the government gains the power to control digital currency, what happens to individual privacy?As Crowley rightly points out, your money essentially becomes a software, a number in a program that the government, and possibly your political opponents, can access. In this digital era, where does gold fit in? As a finite resource, gold's value remains steady despite economic upheavals. DeMeritt sheds light on the correlation between the US debt and the price of gold, providing an insightful perspective on why precious metals could be a secure, safe, and private way to protect your assets against government overreach.The episode wraps up with a bold prediction about the future price of gold, based on the debt-to-gold price correlation. The compelling case for investing in precious metals as a hedge against economic instability underscores the importance of diversifying one's investment portfolio in these turbulent times. As we navigate these tumultuous economic seas, the need for a sound monetary strategy has never been more crucial. Whether you're intrigued by the digital economy or prefer the security of gold, the key lies in understanding the shifting economic landscapes and making informed decisions to protect and grow your assets.Learn More: https://LearJudgeNap.comSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Thank you. Hi, everyone. Judge Andrew Napolitano here for Judging Freedom. Today is Tuesday, November 14, 2023. Kevin DeMeritt from Lear Capital is here to talk with us and answer my questions about digital capital, digital currencies, and other related issues. Full disclosure, I am a paid spokesperson for Lear Capital, but Kevin is one of the smartest people I know in understanding and explaining how economic forces shape your lives and how you can best prepare for the forces that are coming in the future that you can't always control. Kevin, always a pleasure, my dear

friend. It's 30 degrees here in New Jersey. I'm sure it's a lot warmer in Los Angeles, but welcome here, my friend. Yeah, about 75, but I'll try to send you some warmth. All right. God bless you. Great to be here, pal. You guys know how to live. Before we get to all the digital currency, a couple of questions have been bumping around in my mind, and I thought I'd ask you about them first. We all, of course, experienced the economic downturn that occurred during COVID when various governments decided to shut businesses down and that they would pay people not to work. And then when they opened the businesses up, not everybody went back to work. Is that phenomenon now over or are small businesses still looking for people who left during COVID and never came back? Yeah, I think a lot of businesses are still looking for people who left during COVID and never came back?

Yeah, I think a lot of businesses are still looking for people. You know, we have a problem hiring people. You look at the restaurant industry having problems. Vegas is having some problems. You know, they're leaving signs up saying, hey, look, if you don't want your towels washed and so on and so forth because of help, you know, just hang them back up and we won't wash them this time or redo your bed. So I think from what I'm seeing, from what I'm seeing out there, I think it's still a problem. People just aren't motivated to go back to work yet.

I think there's still, you know, a little bit of the COVID money left over and they're going to take it as far as they can go. Has inflation made this worse? Well, yes, I think it has made it worse. I think higher interest rates have made it worse because that's what you get from inflation, right? You get these higher interest rates, higher car payments, higher credit card payments, so on and so forth. I think it's harder for people, but I'm not sure that's bringing people back to the workforce yet. I think it will when they completely run out of money, but it seems like the holidays are here early with people. And why do we still have inflation? Is it because the Federal Reserve is determined to tame the economy by making everything more expensive by raising interest rates? We still have inflation because we had $9 trillion worth of debt in 2008, and we have $33 trillion worth of debt now.

So if you think of the basic definition of inflation, it's too much money chasing too few goods. That's the basic definition and that's how it works. We've created trillions of dollars worth of money and it's chasing fewer, well, it's chasing the same amount of goods, if not fewer goods than where we were in 2008 because we had a pretty good economy then and it's a little bit slower than it was back then. So the opposite of that is the value of the dollars that are out there, every time you print up additional dollars becomes worth less and less and less. So you can look at it either way.

Your money's not going as far. And the government's debt that is estimated to be a trillion dollars a year just for interest payments is not going to make that equation any better. You know, at the risk of segwaying out of your comfort zone, which is the economy and into politics, I must say first, I agree with you fully, and I think everybody watching us now does. But I don't see any way out of this. The government, when it comes to this issue of borrowing in order to pay its debts, is really, there are very few free marketers there. There's maybe a handful of libertarians in the House of Representatives and one or two in the Senate, but the rest are really the big government party that thinks they can just borrow and spend, borrow and spend, borrow and spend.

The Republicans supposedly are conservative. They supposedly control the House of Representatives. They have a new speaker of the House who's supposedly a conservative. Guess what? He just proposed a new continuing resolution to keep the government open until January. Half a trillion dollars worth of borrowing. So this is only going to get worse and worse. I don't know how we get out of it. Is there any way out of it, short of a radical change in government thinking and government, almost unimaginable, living within its means, Kevin? No, absolutely not. And they should have gotten a big wake-up call here a few weeks ago because

they issued billions of dollars worth of 30-year treasuries and 25% of that offering was not taken by the public. So the primary dealers, the people who actually go out for the government and issue those notes had to purchase them because that's their obligation. That should be the biggest wake up call for the government right there. 25% of your offering for 30-year notes goes nowhere. It goes back to the primary dealer. You cannot continue that. So what happens? Moody immediately says, hey, look, we're going to cut the outlook to negative, citing deficits because they see what's going on there. And in the next six months, we have a trillion and a half dollars worth of debt that's going to roll over. In the next six months, if this continues to happen, it will be a big wake-up

call because you can't get interest rates down. The government could lower interest rates, but the investors that are going to purchase those notes are saying, hey, look, we're not going to accept a lower interest rate with all of the risk that is involved purchasing your debt. What was the interest rate on the 30-year notes or bonds that the government was offering that it couldn't sell 25% of? Well, it was a 30-year note, so it was around four and a half, four and a quarter. Wow. So the dealers were forced to buy them at four and a quarter, and then what will they do? Try and sell them for more than that in order to get rid of them? Well, they'll try to sell them any way they can because 25% of a government offering is a heck

of a lot of money. So you just can't do that for very long. And the only way to get rid of them is you're hoping interest rates go up a little bit. And what happened today was that inflation came off its highs a little bit more, but to me, it's just the way that they calculated by January, February of next year, you'll probably see it go back up just a tiny little bit again, make up for it. But so the dealers are probably stuck with the notes that they have right now. So what do you do going into December or possibly January? Well, this is very telling. Where is the woman going to get the trillion and a half that it owes that it has to be rolled over?

Where's it going to get it from if it can't get it at four and a half percent? Well, it's going to get it because they raise interest rates. So if they raise interest rates, that's going to cause more people to say, okay, I'll take the risk at this new higher interest rate. So that's one way of doing it. The other way of doing it is this whole quantitative easing that the government took us through with 2008. And again, with COVID, where they print up the money and buy their own notes. But again, that would put them right back on track with higher and higher inflation, which would drive up the interest rates. So to me, they're trapped. They can either not print up the money and interest rates are

going to go up naturally because investors want more money for the risk, or they print up a bunch of money causing more inflation and interest rates go up anyway. So I think when people hear interest rates are here higher and longer, that's the reason why. That's the best explanation of the reason why we're probably going to be living with higher interest rates for longer. What happens if these brokers refuse to take and sell and buy the government's bonds? What does the government do? Well, the government would print up their own money and buy the bonds themselves. And that's what I'm saying. They're just stuck. They can print up the money and cause inflation, or they don't print up the money and cause higher interest rates, either of which cause

higher interest rates, one very quickly and one a little bit further down the road because of inflation. And nobody seems to care, again, with the exception of a half dozen, maybe a dozen or so, conservative-slash-libertarians that still have the old-fashioned belief, the old-fashioned belief that, like you and I and everybody watching us now, the government should live within its means. When is the last time the government lived within its means? I think the last balanced budget was Bill Clinton's first or second year in office, and that raised taxes

retroactively. I remember I wanted to wring his neck for raising taxes retroactively, but it's the last time we had a balanced budget. And before that was 50 or 60 years. Yeah. I don't think we're going to get back to that. You can't get back to that judge with interest on the debt at a trillion dollars a year. Impossible to get back to a balanced budget with the deficit creating a trillion dollar interest payment per year. Right, right. We're running on the screen how to reach Kevin. It's 800-511-4620 or learjudgenap.com. If you want to talk to the Lear Capital people about this or about investing or about how to preserve your assets. One of the things that I also want to talk to

you about, Kevin, is digital currency. So how about we'll call this Digital Currency 101 for people that really, because that's me, people that really don't even know the basics about it. What is it? How does it work? So cryptocurrency is really a digital payment system that really does not rely on banks to verify transactions. The transactions are recorded in a public ledger. So cryptocurrency is stored in a wallet. So it's digital and you can purchase things with it. Not a lot because not as many people take a digital currency as they would take the normal currency that we all think of. And once you pay for something, the cryptocurrency

is then transacted on what's called the blockchain, which verifies with a bunch of public ledgers that you have purchased whatever it is that you've purchased and that money's been transferred. For instance, if I was purchasing something from you, it would take it from me and give it to you. And on the blockchain, it would see that transaction that has taken place. All right. Suppose I am going to buy widgets for $10,000 and I have $10,000 in cash in my checking account, but I want to use cryptocurrency. What would I do? Well, the first thing you would have to do is transfer your physical cash into digital currency so that you would go to some exchange like Coinbase, maybe transfer $10,000 into Coinbase and then purchase that cryptocurrency.

At that particular point, you would have an account with Coinbase in a digital wallet with Coinbase and the company that you were going to transact with, if they took cryptocurrency, then you would find out what their digital wallet address was and transfer your digital currency into their wallet. When that happens, that's when the blockchain would then kick into gear and make sure that the ledger has that verified that you moved your money from one wallet to your wallet to their wallet. Now, you're crawling at a wallet. Would it actually be on my mobile device? Your wallet could be on your mobile device. Your wallet could be on a thumb drive. Your wallet could be on your mobile device your wallet could be on a thumb drive your wallet could be at coinbase so you have to pick the type of wallet and each wallet has pros and cons so it's best for people to research the kind of wallet that they want to use do do these um

i'll call it a wallet what what would you call Coinbase? What do they call themselves? They're a digital crypto exchange. So they are digital crypto exchanges offer interest on the money that's sitting there between the time you deposit it and the time you use it to make a purchase. Or is this not an efficient way to store money at all? They do have interest on lending your cryptocurrency out, but not so much in the same way that, let's say, a money market would work. So you need to lend your money to someone and use it as collateral to get that interest. Okay. Here's a clip from my friend and former Fox colleague, Monica Crowley, explaining digital currency. It's a critique of digital currency. It's one I share. I suspect you do as well, but I don't want to put words in your mouth. This is from Fox Business not too long ago. When President Biden came into office, he ordered the Treasury Department under Secretary Yellen to actually begin a pilot program to study how this would affect the U.S. economy and the average American.

We're not alone. Most Western governments also have these pilot programs. So there is a massive move toward a central bank digital currency in all of these countries. The bottom line here is not ease or convenience. That's how they're going to sell it, right? The ultimate objective is to move us to a cashless society. So you will no longer have that hard asset of that $20 bill or $10 bill. Your money will essentially be software. It will be a number in a program that the Fed, Treasury, the government, your political opponents will all have access to. They eventually want to get rid of most banks. Now, the big ones are too big to fail. But in the end, the ultimate objective is to essentially wipe all of the banks out so that your bank will be the

Federal Reserve. Now, she's talking about, as I understand her, a mandatory cryptocurrency run and operated by the government, as opposed to the type of exchange that you told us, where you would do research and shop around and pick the exchange that you want. I think she's probably a step ahead of that. If what she has predicted comes to pass, what does that mean? The greenback wouldn't exist anymore? Yeah. So that digital currency that the government is testing right now is much different than Bitcoin. Bitcoin's decentralized, meaning that the ledger is a bunch of people on computers that are mining, right? And that means they're just checking and making sure that that transaction that we just discussed is actually all valid. And so they do that through an encrypted exchange.

The government is centralized. The Federal Reserve is going to be the centralized place to say, hey, look, you made that transaction, but a little bit different. So if I want to purchase something from Amazon, I go on Amazon right now and I purchase it. I get it through the mail and the money goes through a bank. The bank doesn't really understand what I'm purchasing. This digital currency is much different. The digital currency, which I believe will come to pass sooner rather than later, would mean that I would purchase my product from Amazon, but instead of my money going straight to Amazon, it goes to the Federal Reserve, then to Amazon. Now the Federal Reserve is in every single transaction that I make. So we can track every

step along the way with the money. So your privacy out the door, right? They don't like, she brought it up in the little clip there. If they don't like your political person that you're giving money to, what could happen at that point? If they believe you're not paying your taxes, they could just grab your money. It's digital. It's in a wallet that they control. It's not in an outside wallet or cold storage where that digital currency is on my thumb drive and they can't get at it. So they want to move toward this because your privacy is completely out the window. You can forget about privacy with money completely when the governments do this. And China has gone to

this and other countries as well. You sense that coming here sooner rather than later. Well, they're testing it now. They've been testing it. They've tested it with, I don't know, 7,500 banks so far. So they would love to go to a digital currency. They don't have to print up the money. They can print digital currency much quicker. They don't have to worry about counterfeit currency and so on and so forth. They don't have to worry about you know counterfeit currency and so on and so forth they don't have to worry about money laundering they see every single transaction that people will make with this new digital currency here's uh the digital king himself the master banker who controls everything who lived across the hall from me when i was a

senior and he was a freshman at Princeton, but we barely knew each other at the time, Jerome Powell. What we're doing is experimenting in kind of early stage experimentation. How would this work? Does it work? What's the best technology? What's the most efficient? Just like paper dollars, a central bank digital currency, or CBDC, would be issued by the Federal Reserve. Those pushing for it say it would have several advantages over physical money. They say it could be used to fight inflation because the Fed would have more direct control over the money supply. It could speed up transaction payments and help fight money laundering.

The ability to track transactions has a couple of elements that are very attractive to economic policymakers. One is to know where people are spending their money. Another is to track taxes and prevent evasion and that sort of thing. Where does gold come in, Kevin? If I have gold stored securely in my home or in some secure place, how is that affected, if at all, by cryptocurrency? General cryptocurrency, I don't think it's affected the gold market too much at all. Maybe

Bitcoin, because it's a new store of value for younger people more than older people, is what we're seeing. This government digital currency, completely different story. I think if you have cash and you don't want the government to know every single transaction that you make, and you want some privacy legally, you might want to own some precious metals. Okay. you might want to own some some precious metals okay um where where do you see the price of gold going in the near future uh in light of what we're just talking about the massive borrowing the massive printing and now scaring the daylights out of us with this digital currency i i think the price of gold is going to go to $3,200. We put a special report

together and the predictability of the U.S. debt to the price of gold, the correlation there is 92%. You can look at it over a long period of time, a fairly short period of time, let's call it five to seven years, short to me, 92% correlation. So when you look what happened when QE started in 2007, again, we had about $9 trillion worth of debt. The debt today is 33 trillion. Let's call it a triple. That means that the debt has grown about 12% per year. What was the price of gold? The price of gold was $650 an ounce in the same time. It's 1950 now, about a three times increase again. So it's just following the debt. So if you believe that the

government's going to wake up and not spend money and the trillion dollars in interest that we need to pay is not going to matter, then you probably don't want to own gold. But based on where the debt is right now, compared to the price of gold at around 1950, we're estimating that the price of gold should be $3,200 an ounce with a 92% probability if you just calculated out what the debt is and where the price of gold should be. It's that simple. Right. Wow.

You can't print gold. I can't print up any more gold. They print more dollars. And if you put an increase in demand on a fixed supply, what happens to price? It's that simple with a piece of gold. It's not all that complicated. is a secure, safe, and private way to protect yourself from the avaricious overreaches of a government that is institutionally incapable, no matter who runs it, of staying within its means. Kevin DeMeritt, always a pleasure, my dear friend.

I hope I find my way to the warm climate of Los Angeles soon, but it's great to see your smiling face. Thanks for joining us. Yeah, thanks for having me on. Of course, of course. Wow, one of the smartest guys I know on matters of economics. It doesn't matter that I work for him. He's smart. He knows how to explain these things, and he makes a compelling case for you to take care of your own assets. Three o'clock today, Lieutenant Colonel Karen Kwiatkowski, we have a government of cowards. 4.30 today, Eastern, the inimitable Scott Ritter. How close are the Israelis to saber-rattling a nuclear weapon over Gaza? Judge Napolitano for Judging Freedom. for judging freedom. I'm