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Keith Weiner

Keith Weiner

Keith Weiner is CEO of Monetary Metals, a precious metals fund company in Scottsdale, Arizona. He is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. He is founder of DiamondWare, a software company sold to Nortel in 2008, and he currently serves as president of the Gold Standard Institute USA. Weiner attended university at Rensselaer Polytechnic Institute, and earned his PhD at the New Austrian School of Economics.

Articles by Keith Weiner

Central Planning Is More than Just Friction, Report 17 February

1 day ago

It is easy to think of government interference into the economy like a kind of friction. If producers and traders were fully free, then they could improve our quality of life—with new technologies, better products, and lower prices—at a rate of X. But the more that the government does, the more it burdens them. So instead of X rate of progress, we get the same end result but 10% slower or 20% slower.
Some would go so far as to say, “The free market finds ways to work even through government restrictions, taxes, and regulations.” We won’t address cardboard straws emerging where plastic straws are banned. Or gangs selling illegal drugs on the black market, when they are prohibited by law.
As usual, we want to talk about the most important kind of government intervention. And it happens to be

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What They Don’t Want You to Know about Prices, Report 10 Feb

9 days ago

Last week, in part I of this essay, we discussed why a central planner cannot know the right interest rate. Central planner’s macroeconomic aggregate measures like GDP are blind to the problem of capital consumption, including especially capital consumption caused by the central plan itself. GDP has an intrinsic bias towards consumption, and makes no distinction between consumption of the yield on capital, and consumption of the capital per se. Between selling the golden egg, and cooking the goose that lays golden eggs.
One could quibble with this and say that, well, really, the central planners should use a different metric. This is not satisfying. It demands the retort, “if there is a better metric than GDP, then why aren’t they using it now?” GDP is, itself, supposed to be that better

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Quantum Metal Lease #1 (gold)

9 days ago

Monetary Metals leased gold to Quantum Metal, to support the growth of its gold distribution business through retail bank branches. The metal is held in the form of retail Perth Mint bars.
For more information see Monetary Metals’ press release.
Metal: GoldCommencement Date: January 31, 2019Term: 1 yearLease Rate: 4.5% net to investors

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Monetary Metals Leases Gold to Quantum Metal

12 days ago

Malaysia’s leading gold distributor saves money with a Monetary Metals lease
Scottsdale, Ariz, February 8, 2019—Monetary Metals® announces that it has leased gold to Quantum Metal, to support the growth of its business of selling gold through retail banks. Investors earn 4.5% on their gold, which is held as Perth Mint minted gold bars in inventory.
Monetary Metals has a disruptive model, leasing gold from investors who own it and subleasing it to businesses who need it, typically for inventory or work-in-progress. Gold owners benefit, because they earn a return rather than pay storage costs. Gold-using businesses benefit, as the lease is the lowest-cost money in their capital structure. And the lease is more user-friendly, being off balance sheet with no need to be hedged.
Monetary Metals

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Who Knows the Right Interest Rate, Report 3 Feb 2019

16 days ago

On January 6, we wrote the Surest Way to Overthrow Capitalism. We said:
“In a future article, we will expand on why these two statements are true principles: (1) there is no way a central planner could set the right rate, even if he knew and (2) only a free market can know the right rate.”
Today’s article is part one of that promised article.
Let’s consider how to know the right rate, first. It should not be controversial to say that if the government sets a price cap, say on a loaf of bread, that this harms bakers. So the bakers will seek every possible way out of it. First, they may try shrinking the loaf. But, gotcha! The government regulator anticipated that, and there is a heap of rules dictating the minimum size of a loaf, weight, length, width, depth, density, etc. Next, the bakery

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Modern Monetary Theory: A Cargo Cult, Report 20 Jan 2019

23 days ago

Newly elected Representative Alexandria Ocasio-Cortez recently said that Modern Monetary Theory (MMT) absolutely needed to be “a larger part of our conversation.” Her comment shines a spotlight on MMT. So what is it? According to Wikipedia, it is:
“a macroeconomic theory that describes the currency as a public monopoly and unemployment as the evidence that a currency monopolist is restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.”
It is uncontroversial to say that the Federal Reserve has a monopoly on the dollar. So let’s look at the second proposition. Unemployment, MMT holds, is evidence that the supply of dollars is restricted.
In other words, more money causes more employment!
This does not sound very different from what the New Keynesians

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The Dollar Works Just Fine, Report 20 Jan 2019

29 days ago

Last week, we joked that we don’t challenge beliefs. Here’s one that we want to challenge today: the dollar doesn’t work as a currency, because it’s losing value. Even the dollar’s proponents, admit it loses value. The Fed itself states that its mandate is price stability—which it admits means relentless two percent annual debasement (Orwell would be proud). So there is no question that the dollar loses value. The only mainstream debate is whether this is good or bad.
Our focus today is whether this is why the dollar doesn’t work, why it’s failing.
Prices have been rising for 100 years. There is no reason why they couldn’t go on rising for another 100. Or 1000. The inflation argument, as we call it, does not reach anyone other than those who already think the dollar is failing. The rest

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Rising Interest and Prices, Report 13 Jan 2019

January 14, 2019

For years, people blamed the global financial crisis on greed. Doesn’t this make you want to scream out, “what, were people not greedy in 2007 or 1997??” Greed utterly fails to explain the phenomenon. It merely serves to reinforce a previously-held belief. Far be it from us to challenge previously-held beliefs (OK, OK, we may engage in some sacred-ox-goring from time to time), but this is not a scientific approach to explaining observed events. To properly understand a crisis, you have to look for the root cause. And if the crisis did not occur previously, your theory needs to explain why not then, and why only now.
Suppose an old company, XYZ, goes out of business. “Times change,” people say, to explain an economic phenomenon. Or, perhaps slightly less imprecisely, “the market changed.”

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Surest Way to Overthrow Capitalism, Report 6 Jan 2019

January 7, 2019

One of the most important problems in economics is: How do we know if an enterprise is creating or destroying wealth? The line between the two is objective, black and white. It should be clear that if business managers can’t tell the difference between a wealth-creating or wealth-destroying activity, then our whole society will be miserably poor.
Any manager will tell you that it’s easy. Just look at the profit and loss statement. Profit is so powerful an incentive for managers, that one could never persuade them to operate based on any other indicator. And it would work—if economists had done their jobs properly.
But have they?
As we have argued many times, economists have given their apologia for the regime of irredeemable currency. Millions of trees have sacrificed their lives, so that

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Rising Rates Falling Assets, Report 30 Dec 2018

December 31, 2018

Last week, we wrote about the concept of discounting. This is how to assess the value of any asset that generates cash flow. You calculate a present value by discounting earnings for each future year. And the discount rate is the market interest rate. We said:
“If the Fed can manipulate the rate of interest, then it can manipulate the value of everything…

There is no other rate to use, other than the market rate. You don’t know the right rate any better than the people who centrally plan our economy. The problem is not that the wrong people are in the job. The problem is not even that they use the wrong magic formulas to determine what rate to set.”
The Fed cannot make a company more profitable, but it can reduce the discount rate so that market participants are willing to pay more for

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Are Stocks Overvalued, Report 24 Dec 2018

December 24, 2018

We could also have entitled this essay How to Measure Your Own Capital Destruction. But this headline would not have set expectations correctly. As always, when looking at the phenomenon of a credit-fueled boom, the destruction does not occur when prices crash. It occurs while they’re rising. But people don’t realize it, then, because rising prices are a lot of fun. They don’t realize their losses until the crash. So we want to look at stocks when they’re high, before people realize what’s happened to them.
How do you value a stock? The classic methodology, proposed by Benjamin Graham and Warren Buffet, is to discount future free cash flows. Let’s leave aside the problem of how to predict future revenues much less cash flows in our crazy resonant system with positive feedback. For purposes

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Why Do Investors Tolerate It, Report 17 Dec 2018

December 18, 2018

For the first time since we began publishing this Report, it is a day late. We apologize. Keith has just returned Saturday from two months on the road.
Unlike the rest of the world, we define inflation as monetary counterfeiting. We do not put the emphasis on quantity (and the dollar is not money, it’s a currency). We focus on the quality. An awful lot of our monetary counterfeiting occurs to fuel consumption spending. And much of this, certainly a very visible part of it, is government borrowing to pay for the welfare state that is not supported by taxation.
There are four components to our definition of legitimate credit:
The lender knows that he is lending
The lender agrees to lend
The borrower has the means to repay
The borrower has the intent to repay
It is counterfeit credit, if one

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The Prodigal Parent, Report 9 Dec 2018

December 10, 2018

The Baby Boom generation may be the first generation to leave less to their children than they inherited. Or to leave nothing at all. We hear lots—often from Baby Boomers—about the propensities of their children’s generation. The millennials don’t have good jobs, don’t save, don’t buy houses in the same proportions as their parents, etc.
We have no doubt that attitudes have changed. That the millennials’ financial decision-making process is different. And that millennials don’t see things like their parents (if you’ve ever seen pictures of Woodstock, you may think that’s not a bad thing). However, we believe that the monetary system plays a role in savings and employment. And the elephant that is trumpeting in the monetary room is: the falling interest rate. Interest has been falling since

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Inflation, Report 2 Dec 2018

December 3, 2018

What is inflation?
Any layman can tell you—and nearly everyone uses it this way in informal speech—that inflation is rising prices. Some will say “due to devaluation of the money.”
Economists will say, no it’s not rising prices per se. That is everywhere and always the effect. The cause, the inflation as such, is an increase in the quantity of money. Which is the same thing as saying devaluation. It is assumed that each unit of money commands a pro rata share of all the goods produced, so if there are more units then that means each unit is worth less. Value = 1 / N (where N is the number of units outstanding).
There are different ways that the quantity of money can expand. It depends on what kind of monetary system you have. For example, the miners increase the quantity of gold. In free

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A Golden Renaissance, Report 25 Nov 2018

November 26, 2018

A major theme of Keith’s work—and raison d’etre of Monetary Metals—is fighting to prevent collapse. Civilization is under assault on all fronts.
The Battles for Civilization
There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travellers to provide the password to their phones so the government can go through all your data, presumably including your gmail, Onedrive, Evernote, and WhatsApp. China is now developing a “social credit” system, to centrally plan the economy and control citizen behavior. Canada has made it a crime to call someone by the wrong gender pronoun. Even in the US, whose First Amendment has

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The Ultimate Stablecoin, Report 18 Nov 2018

November 19, 2018

A long time ago in a galaxy far, far away we wrote a series of articles arguing that bitcoin is not money and is not sound. Bitcoin was skyrocketing at the time, as we wrote most of them between July 30 and Oct 1 last year.
Back in those halcyon days, volatility was deemed to be a feature. That is, volatility in the upward direction was loved by everyone who said that bitcoin is money, in their desire to make money. In the first instance of the word, the term money refers to bitcoin. In the second, it refers to the dollar. The same problem we see with gold:
bitcoin is money
bitcoin is going up
buy bitcoin now
sell bitcoin later at a higher price
to make money
From what we remember from a logic class in the philosophy department back in university (in the halcyon days long before the

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The Failure of a Gold Refinery, Report 12 Nov 2018

November 13, 2018

So this happened: Republic Metals, a gold refiner, filed bankruptcy on November 2. The company had found a discrepancy in its inventory of around $90 million, while preparing its financial statements.
We are not going to point the Finger of Blame at Republic or its management, as we do not know if this was honest error or theft. If it was theft, then we would not expect it to be a simple matter of employees or management walking out the door with the gold. $90 million is about 2.6 tons. Unless it happened very slowly, over many years, that seems like a lot of gold to disappear. And if it occurred over years, why didn’t regular audits and other internal controls catch the discrepancy until now?
We want to make a different point altogether. We define inflation as the counterfeiting of

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Wizard’s First Rule, Report 4 Nov 2018

November 5, 2018

Terry Goodkind wrote an epic fantasy series. The first book in the series is entitled Wizard’s First Rule. We recommend the book highly, if you’re into that sort of thing. However, for purposes of this essay, the important part is the rule itself:
“Wizard’s First Rule: people are stupid.”
“People are stupid; given proper motivation, almost anyone will believe almost anything. Because people are stupid, they will believe a lie because they want to believe it’s true, or because they are afraid it might be true. People’s heads are full of knowledge, facts, and beliefs, and most of it is false, yet they think it all true. People are stupid; they can only rarely tell the difference between a lie and the truth, and yet they are confident they can, and so are all the easier to fool.”
Does this

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What Can Kill a Useless Currency, Report 28 Oct 2018

October 31, 2018

We believe that our site was rolled back during maintenance. So this is a repost.
There is a popular notion, at least among American libertarians and gold bugs. The idea is that people will one day “get woke”, and suddenly realize that the dollar is bad / unbacked / fiat / unsound / Ponzi / other countries don’t like it / . When they do, they will repudiate it. That is, sell all their dollars to buy consumer goods (i.e. hyperinflation), gold, and/or whatever other currency.
Redemptions Balanced With Deposits
No national currency is gold-backed today. In a gold backed currency, each currency unit begins life with someone who chooses to deposit his gold coin in exchange for the paper currency. And it ends life with someone redeeming the paper to get back the gold coin. A good analogy is bone

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Useless But Not Worthless, Report 21 Oct 2018

October 22, 2018

Let’s continue to look at the fiasco in the franc. We say “fiasco”, because anyone in Switzerland who is trying to save for retirement has been put on a treadmill, which is now running backwards at –¾ mph (yes, miles per hour in keeping with our treadmill analogy). Instead of being propelled forward towards their retirement goals by earning interest that compounds, they are losing principal. They will never reach their retirement goals. If you disagree, we encourage you to model it.
We say “fiasco” because living in retirement in Switzerland is like trying to live on a farm which does not grow crops. The farmer has to sell off pieces of the farm to buy groceries. As the Swiss retiree has to sell off pieces of his accumulated savings. Except the bank is also consuming his savings at -0.75%.

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Interview, Ted Talk, Gold Bug Hope

October 18, 2018

I was on the Jay Taylor Show again, to talk about the the Swiss franc. No, the headline was not of my choosing.
Adam Caroll gave a Ted Talk about how people behave differently when money isn’t real. And gets into a discussion of how kids will click to spend on their parents’ phones without any real appreciation for what it costs. It’s called “When money isn’t real“. Real being the paper dollar, and unreal being a credit card, or worse yet, waving your phone over a payment sensor.
I just wanted him to see that his “real” money has, itself, been divorced from anything real. Similarly, economist Paul Romer, who just won the Nobel Prize, criticized economic models which are “pseudoscience”. He meant when central banks rely on flawed models, though he doesn’t see the applicability to the very

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You Can’t Eat Gold, Report 14 Oct 2018

October 15, 2018

“You can’t eat gold.” The enemies of gold often unleash this little zinger, as if it dismisses the idea of owning gold and indeed the whole gold standard. It is a fact, you cannot eat gold. However, it dismisses nothing.
This gives us an idea. Let’s tie three facts together. One, you can’t eat gold. Two, gold is in backwardation in Switzerland. And three, speculation is a bet on the price action.
The fact that gold is inedible is supposed (by the enemies of liberty) to be proof positive that a gold standard wouldn’t work. Of course, there’s always the retort: You can’t eat dollars!
That may be emotionally satisfying, but there is a deeper issuer that the anti-gold crowd is missing. Yes, money makes terrible food but, also, food makes terrible money. A car makes a lousy airplane. And a shoe

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The Toxic Stew, Report 7 Oct 2018

October 8, 2018

Last week, we shined a spotlight on a crack in the monetary system that few people outside of Switzerland (and not many inside either) were aware of. There is permanent gold backwardation measured in Swiss francs. Everyone knows that the Swiss franc has a negative interest rate, but so far as we know, Keith is the only one who predicted this would lead to its collapse (and he was quite early, having written that in January 2015).
Of course, in hindsight, it makes sense that durable negative interest rates would lead to permanent backwardation. What use to decarry gold—i.e. sell the metal, buy a future, and use the cash for some productive purpose—if there is no productive purpose? If no one bids a positive interest rate for said cash, then traders will not part with their gold to get the

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Textbook Falling Interest Behavior

October 2, 2018

This is a textbook case. Well, it would be if there was a textbook that presented the dynamics of the rising and falling interest rate cycles.
Costco is spending over a quarter billion dollars, to make a capital investment in chicken processing. This is not the typical entrepreneurial investment, which seeks to increase margins by serving an unserved or underserved demand.
This is an investment made with conscious intention to drive prices down.
Costco is making a huge investment (I assume with borrowing dollars) to drive the price of rotisserie chicken down. Nearly every critic of the Fed cries about inflation, yet this article casually mentions that Costco has not raised the price on its hot dog and soda combo since the mid 1980’s. And now Costco is driving down the price of another

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Permanent Gold Backwardation, Report 30 Sep 2018

October 1, 2018

Sometimes, one just needs to look in the right place. And often in those cases, it just takes a conversation to alert one where to look. We had a call with a Swiss company this week, to discuss gold financing for their business. They reminded us that there is a negative interest rate on Swiss francs. And then they said that a swap of francs for gold has a cost. That is, the CHF GOFO rate is negative (the dollar based 12-month MM GOFO™ is +2.4%).
Let’s review what GOFO means. The London Bullion Market Association described it:
“[the] rate at which contributors were prepared to lend gold to each other on a swap basis against US dollars.”
In other words, the bank gives you gold and gets dollars in exchange. This is not a sale, but a swap, which means that the gold and dollars return to their

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We Need a Free Market in Interest Rates

September 25, 2018

We do not have a free market in interest rates today. We have not had one since the creation of the Fed in 1913. The Fed began buying bonds almost immediately, which pushes up the price and hence pushes down the interest rate.
However, as I discuss in my theory of interest and prices, the Fed creates a resonant system with positive feedback loops. It wants lower rates (so the government can borrow more, more cheaply) but it gets a destabilized rate which moves higher. At first. Then lower, much lower. Then higher. Then lower.
The Monetary Metals project is developing the first free market to set a rate in 105 years. I discuss it on video.
[embedded content]

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Why Are Wages So Low, Report 23 Sep 2018

September 24, 2018

Last week, we talked about the capital consumed by Netflix—$8 billion to produce 700 shows. They’re spending more than two thirds of their gross revenue generating content. And this content has so little value, that a quarter of their audience would stop watching if Netflix adds ads (sorry, we couldn’t resist a little fun with the English language).
So it is with wry amusement that, this week, Keith heard an ad for an exclusive-to-Pandora series. The symptoms of falling-interest-disease are ubiquitous.
Consumers love it. And why shouldn’t they? If a farmer throws a lavish feast to eat his seed corn, of course the revelers will praise him. As free-marketers praise the plethora of consumer products such as the iPhone and the all-you-can-eat Netflix video buffet. They believe these products

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Never Mind the Bollocks, Here’s the Avocado Toast, Report 16 Sep 2018

September 17, 2018

For about ten bucks a month, Netflix will give you all the movies you can watch, plus tons of TV show series and other programs, such as one-off science documentaries. They don’t offer all movies, merely more than you can watch. Oh, and there are no commercials.
They don’t just give you old BBC reruns, which you know they can get for a pittance. Netflix is spending money (well Federal Reserve Notes) producing its own original content.
Did we mention that there are no commercials? How is this even possible? According to CNBC, Netflix is spending $8 billion to produce 700 shows. Assuming all of its reported 118 million subscribers pay $10, their production budget eats up more than half a year of their total subscription fee revenue.
CNBC reports that Netflix is exploring the idea of putting

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News from Switzerland and Turkey

September 13, 2018

Trouble in Swiss Employment
This story from Switzerland will be ignored, lest it generate cognitive dissonance. The mainstream looks at a few carefully curated statistics. I encourage you to do a Google search on “marginal productivity of debt”. My articles are all over the first page of results. This is not because I am such a prominent economist. Nor is it because this is a term I coined (e.g. “yield purchasing power”).
It is because marginal productivity of debt does not sell the Narrative. The economy is booming. Stocks are up, which is the main thing. Also GDP and employment.
The headline says it all: Older People Marginalised on Swiss Labor Market. That is not what you’d expect from the mainstream macro statistics. For that, you need to be armed with a theory of interest rates that

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Why the Fed Denied the Narrow Bank, Report 9 Sep 2018

September 10, 2018

It’s not every day that a clear example showing the horrors of central planning comes along—the doublethink, the distortions, and the perverse incentives. It’s not every year that such an example occurs for monetary central planning. One came to the national attention this week.
A company called TNB applied for a Master Account with the Federal Reserve Bank of New York. Their application was denied. They have sued.
First, let’s consider TNB. It’s an acronym for The Narrow Bank. A so called narrow bank is a bank that does not engage in most of the activities of a regular bank. It simply takes in deposits and puts them in an account at the Fed. The Fed pays 1.95%, and a narrow bank would have low costs, so it could pass most of this to its depositors. This is pretty attractive, and without

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