Costco sold out of gold quickly after offering it for sale at $1,900, surprising many with the demand for this traditionally valuable asset.
In this week’s episode of Retire in Texas, Darryl Lyons delves into the unexpected surge of interest in gold sparked by Costco’s foray into selling the precious metal, while also exploring the contentious debate surrounding the potential introduction of a government-backed digital dollar.
Show highlights include:
*A breakdown of gold’s recent surge in value and why it is attributed to inflation hedging and fear in the market, with concerns about potential shifts in the US economic and political systems.
* Why advocates for the digital dollar argue it would reduce fees, facilitate faster disaster relief, eliminate the need for physical cash, provide access to currency for the unbanked, and align with global trends.
*The doubts that many have about the government passing fee savings to consumers, concerns over quick fund access leading to quick withdrawals, and skepticism towards the necessity of eliminating cash entirely,
*Concerns about the potential negative impact of a digital dollar on the monetary system.
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Transcript:
Hey, thanks for tuning in. This is Darryl Lyons, CEO and co-founder of PAX Financial Group. And you’re listening to Retire in Taxes. And this information is general in nature only. It’s not intended to provide specific investment tax or legal advice. Visit PAXFinancialGroup.com for more information.
So, Costco is selling gold now. Costco is selling gold. Now apparently, they sold out very quickly, but it was like $1,900. People bought gold from Costco. never saw that coming. I went online to see if they still had any available. They didn’t. Maybe you know how to get some from Costco. A trusted brand selling gold. It feels a little bit better than some of what we’re seeing on TV and, on the radio, where just these nebulous gold companies, we have no idea who they are and where they’re from.
So, yeah, that was an interesting play by Costco. Gold is hot. It’s had an incredible return lately, and it’s gotten a lot of people’s attention, hitting record highs. Why does gold go up? There are typically three reasons. One: inflation. So, I don’t think I have to make that connection too hard. If you want me to unpack it a different time, I will, but there’s a connection between gold and inflation. It’s an inflation hedge. It’s supposed to be an inflation hedge, a declining dollar. And this is interesting because the dollar has not been declining. It’s been accelerating relative to other currencies.
So, that’s not really a reason why gold is accelerating. I think the, one of the main reasons gold is accelerating is fear. It’s always really been a fear trade, is what we call it in our industry. People buy it when there’s a lot of fear. And so I think there’s this prevailing fear, and that the US capitalist system may implode. And the US government will shift over to a communist or socialist type of society. And is there evidence to support that claim? That there’s this shift from democracy or a shift from capitalism?
And I think, of course, you pick up clues that there is that threat that’s out there. I wouldn’t, I wouldn’t, I wouldn’t discount it altogether. But what happens that we have to just think about in, in the context of probabilities and possibilities, is that what we’re hearing a lot is the worst-case scenarios, we’re hearing a lot from gold salesmen.
So, you know, every single AM radio talk show host sells gold. So, there’s a lot of commercials that will feed into this fear and use half-truths. And these headlines often have some legitimacy. So, I want to actually tease one of the headlines out a little bit and ask ourselves if there’s legitimacy, because this is the one that the gold salesmen have been using a lot lately.
And the headline is this, this is the headline that gold salesmen are using to sell more gold. And again, it has some legitimacy. So, we’re going to go through it a little bit more. This is the headline: Biden takes big step toward government backed digital currency. Or a similar headline would be: How a new digital dollar could shake the U.S financial system.
So those headlines are pulling people’s attention and encouraging them to, you know, buy gold. And so we got to figure out, is this a legitimate headline? Is this in the way I like to look at the way I like to look at these things, the lens that I’ve trained myself over the years to be able to think intelligently about the esoteric and nebulous world of the markets and capitalism that has human behavior.
And it’s very different than my accounting degree or even engineering, where you get to the end and there’s a right or wrong answer, very black and white. You’ve got to take these nebulous arguments and true intelligence looks at both sides of the arguments and draws a conclusion after effectively looking at both sides. And so, we’re going to look at both sides of this argument.
We’re going to look at this, this, this idea of a digital dollar, a United States digital dollar. What would that be? A digital dollar would be a form of legal tender in the United States that could be used to purchase goods and services. They would settle all and any outstanding debts. It would exist in virtual form only. And it’s stored and exchanged online via computer networks. Never taking the physical form of paper.
But said another way, a digital dollar, this is just, I think, just the easiest way to digest it. And I haven’t really heard many people talk about this. The digital dollar is just a way to skip the banks. You just skip the banks.
You no longer deal with this bank. You just go directly to the government. Because, I mean, think about it. We’re already digital in a lot of ways, right? I mean, nobody really carries cash that much anymore. So, we’re already digital. The difference is, is you just go directly to the United States government. No Frost bank, no Bank of America, no Encore, no Heritage, no local community bank.
And so, the idea, the again, we’re looking through the lens of why they want to do this is that if you remove these banking institutions, they’ll never tell you that they’re going to do it, wholeheartedly. What the message is, is that they’re going to have another offering, another way for people to do their money, so to speak.
They’ll still keep the banking industry in place, but that really isn’t, I think that’s a false argument. What we really want to look at is why would they consider doing this? What is the purpose behind it? So, let’s look through a practical lens. I’ve got five points that I want to make. These are the arguments that digital dollar proponents use to encourage their agenda or to move it forward.
So, here’s the first one. So, instead of, it would reduce fees. The first one is it would reduce fees. So, they go through and they analyze all the fees that the consumers are paying. And they say, well, we could reduce fees. And sometimes fees are with the banking industry. Sometimes fees are simply just, you know, transactional fees. Other times it’s a spread between the interest you’re getting in, the interest that you could be getting.
And there’s the bank that may take a little bit. So, whatever it is, the idea is that it reduces fees. But, where I look at is I go, we got a government in debt. So, what you’re telling me is that I can believe that the government is going to pass on that savings to me.
To me, it seems like the government is just going to take those fees for their own pockets. So, I don’t really think I wouldn’t think that the government’s just going to reduce fees and process this without any. They might do it initially, but eventually they’re going to charge us. I’m not really buying that one.
Number two, advocates for this currency is digital dollars say it would be much faster to provide disaster relief funds to individuals. You know, in a hurricane or another virus, you can just quickly put money in people’s accounts, and they can be able to do what they need to do. But I think you’ve already caught this. If they can deposit quickly, they can withdraw quickly. So that’s not good for me.
Number three. They say cash is dead. I mean, really, no one uses cash anymore. In fact, here’s how stupid it is. Now, it takes 10.4 cents to make a nickel. So, this whole cash system is archaic in a lot of ways. But I think you need to solve that problem in isolation of itself. That’s a, you just need to figure out how to resolve that. That’s just dumb.
We don’t disrupt an entire system when we have a problem with a component of it. But cash is dead. I don’t think it means that we create this whole digital dollar system because of that. I think there’s other ways around that.
Number four, this one is, you know, trying to pull at your heartstrings. So, this drives me nuts because I don’t like to think like a teenager. I, you know, I love my teenage kids, and I was one once, but we think with emotions and there’s impoverished people that are what they call the category of impoverished people. They call the unbanked population, which is a small percentage of the world, a small percentage of the country.
And they believe that through this mechanism they will have access to currency. But the reality is, is that there’s no reason for these people to be unbanked. I would suggest that they’re unbanked, not because of resources or access or information. They’re unbanked because they want to be off the grid. They don’t trust the man, and they’re certainly not going to trust a digital dollar. So that doesn’t make sense to me. But of course, digital dollar proponents will tug at heartstrings.
And the fifth one is interesting. This one is China’s doing it. And very much this is the case. and this one actually is the reason I say it’s interesting was because I can see this point of view. Now, my argument is we do not want to be China.
And of course, China is looking at it. They’re communist when we don’t want to be China. But the threat that I think probably needs to be analyzed and for this reason I think research is, is healthy, is that we as a country hold this position of being the global currency, and we’ve got to do everything we can to maintain that position.
And if we find out that China has moved to a digital dollar or yuan or whatever, then what we have to ask ourselves is, is that a threat to our dollar dominance in any way? And so that, I think we have to really be intelligent about understanding. And that’s why a lot of studies are being done at MIT right now on this idea of digital dollar.
So, when you see studies about it, I want you to know, don’t freak out because even myself, I would want to know how this would work. And I would want to be able to compete with China on a global basis. But, so for me, I wouldn’t have any issues with studies, but of course, it’s taking the next step that’s problematic.
So right now, we know that I just mentioned that there are studies taking place on the digital dollar. So, is this a possibility that this could happen? You know, I’ve often mentioned that it’s a, and you’ve heard me say this a thousand times, it’s a possibility, certainly, but it still isn’t a probability. And I’ll tell you why in just a few minutes.
But if you do have these concerns, then, and you want to own gold like gold bars or coins or whatever. I don’t have any issues with that. That’s absolutely okay, even silver. And, you know, just making it about 5% of your overall investable assets is probably the right number. I don’t know in an apocalyptic scenario, I kind of think that guns and whiskey would probably be more valuable, but, yeah, I mean, I don’t have any issues owning gold in, in a, in a certain context of your entire investment portfolio.
Sometimes they have just periods of really poor performance. And so that has to be considered in a long-term investment. But again, let’s go let’s go into this. Why Darryl isn’t it, why do you say it’s possible but not probable? So let me tell you why. The Swiss National Bank has been really digging into this a lot.
They’ve actually drawn the conclusion that they’re not going to do it. So that’s good to see one, they’re not in the EU, but it’s nice to see one global leader, take a look at this deeply and say, no, we’re out. They said this is their quote. They will fundamentally alter the current monetary system.
And I think if you pull on this thread, you would recognize that it would be real, real problematic for the world if we go down this route. I think the role that community banks play in our system is taken for granted. In fact, I think the regulatory push that’s taking place for the last ten years that’s made it more difficult for community banks to play a role is problematic.
So I think what you find if you go down this route, you remove these, this banking industry that that the really are our neighbors in a lot of ways that are advocates for us in removing that, is problematic in a lot of ways, to create loans, for small businesses to be able to build construction or to do construction, I think of a general contractor that if they no longer had this intermediary of a local relationship, how problematic would that be for them to get the bridge financing to do the commercial construction?
It becomes real problematic because if you think about the removal of a community bank. And so, I think that’s where, you know, the Swiss National Bank, you know, ended up kind of going down this path of research and saying, okay, I think this might be a problem for our whole system. So, that’s I like that the Swiss national banks, you, came to that conclusion. So, I was good.
And then Senator Cruz, I don’t know if you know this, but Senator Cruz just, is pushing through legislation, that say we will say absolutely zero chance they’re putting in writing in legislation. It’s not it hasn’t been passed yet that there will never be a United States digital dollar. This has been, of course, endorsed by, the American Bankers Association, as you would imagine, the Independent Community Bankers Association and of course, the Blockchain Association, have all supported this legislation that said by Ted Cruz that said, we will not have United States digital dollar.
And part of the reason is, is I mentioned all those, concerns that I addressed, but also one of the big ones is we do not want financial surveillance, a financial surveillance tool by the United States government. And so that’s part of, if you read some of the legislation, you’ll see that language in there.
But there’s a bipartisan push back against this. not only does you would, as you would imagine, Ron DeSantis, say, no way. But, RFK Jr said, no way. So, we’ve got, bipartisan push back against this United States digital dollar.
So, with all that being said, is it possible? Yes. Is it probable? No. Could it happen 30 years from now? I guess so. Will it happen in the next few years? I really, really, really doubt it, despite what the goal people tell you. Honestly. but if you want to buy gold, go for it. again, 5% allocations, an appropriate amount. I wouldn’t get so hung up on this as much as the fear, mongers will, well, you know, get you uncomfortable, I wouldn’t buy into it that much. That’s their job is to scare you.
But you know, I do think that we have got to keep our eye on this. And if we see legislation start to come through that supports it, we’ve got to push back. Because this idea of a digital dollar is not a wolf in sheep’s clothing. It is the wolf.
So, thanks for tuning in today. Appreciate it. And as always, I want to remind you, you think different when you think long-term. Have a great day.
Resources:
Costco is selling gold bars and they are selling out within hours (cnbc.com)
Guide To The U.S. Digital Dollar – Forbes Advisor
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