Economics - RR103B4

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Lesson[edit]

Professor: Rushdoony, Dr. R. J.
Title: Economics
Course: Course - Economics
Subject: Subject:Economics
Lesson#: 1
Length: 1:26:39
TapeCode: RR103B4
Audio: Chalcedon Archive
Transcript: .docx Format
Economics.jpg

This transcript is unedited. It was:
Archived by the Mt. Olive Tape Library
Digitized, transcribed, and published by Christ Rules
Posted by with permission.


So spiritually minded that they are of no longer earthly good, and I believe that is too often true of people. Now where it comes to considering the significance of money, I believe it is especially important for us, as clergymen, to be wise stewards of what we get. We’re not going to get much. It’s rare that a minister is ever a rich man, which makes it all the more important for us, as clergymen, to know what money is and how to use it.

Now one of the first things we have to realize [?] is that there is no area of the modern world that has not been affected by the modern worldview. Those of you who have been in the epistemology class have seen that one of the basic attitudes of modern man is that because their epistemology so requires it, they will not admit that there is a real world out there, because to admit that a real world exists out there objectively, means to admit ultimately that God is there.

Now, man is consistent, he is a system-making animal. He wants to create a systematics out of his position. So, having denied the reality of the world in his epistemology, he is going to deny the reality of any kind of law order in the world of economics. So, the essence of modern economics is it’s a do-it-yourself economics, that man makes his own rules as he goes along. And this is true of money. Now, what is money? [00:02:27]

There are two definitions that, by and large, have...[edit]

There are two definitions that, by and large, have been given in modern times by economists as to what money is. One is that money is a medium of exchange. Now that definition is partially true, it is a medium of exchange. But it doesn’t say too much about it. You can define something, and your definition can be superficially true but worthless. For example, if I define man as a two-legged animal, I have not said anything that is false about man. But I have still not defined man properly. Man is a creature created in the image of God. If I say the definition of man is man is a two-legged animal, then you can come back at me, “Then a chicken is a man,” because a chicken is a two-legged animal. The definition is worthless. Money is a medium of exchange. But if that’s all it is, we have still not gotten to the meaning of money. [00:03:55]

The other definition that you will get concerning money...[edit]

The other definition that you will get concerning money in the economics department is that money is a representation of wealth. Now that is no good at all. Would you want to marry a representation of a woman, a picture of a woman? That would be poor living, wouldn’t it? Or, if you bought a house, would you be satisfied with a mere representation of a house, a picture? Or a building plan? Money is either wealth, or it is nothing. Therefore, money properly must be a form of wealth in order to be a medium of exchange. This is why, historically, money has been gold or silver.

First, it is a form of wealth. Second, it is easily divisible. Third, it is easily transportable. Fourth, it has a value everywhere in the world, and with gold, it does not corrode, rust, or rot. There is only one acid that can eat into gold. Thus, gold has a permanency of value, which is historically established.

Now, when we go to scripture, we find that scripture very clearly speaks of money as gold or silver. In fact, one of the indictments of God against Israel in the first chapter of Isaiah where a bill of indictment is drawn up, in verse 22, the indictment of God is “Thy wine is mixed with water and thy silver is become dross.” In other words, you are now passing slugs instead of silver coins, which is our predicament today. Then again, when the law of God in Moses speaks of just weights and just measures shall you have, we have forgotten that recent commentators, because they have gotten so far away from knowing economics, have forgotten that just weights means they’re just weights of money. Just weights, or just shekels; gold, or silver. And this you will find still in the older writers like (Fairbearn?) who will tell you very clearly that weights had reference to gold and silver, to money. And those days, the gold and silver was not coined, but it was bars, a weight or a shekel. A shekel was a weight originally, rather than a coin. The principal of the scripture, that money is a weight of gold and silver, was applied in this country very systematically. [00:07:32]

The Constitution does not say that Congress has the...[edit]

The Constitution does not say that Congress has the power to print money, they were against paper money. The Constitution was an anti-paper document. What is had specified that only gold and silver are legal tender, and all Congress could do was to establish the weights and measures. It’s very interesting that they did this under the influence of a reformed pastor, John Witherspoon. John Witherspoon, during the Continental Congress, lectured the Continental Congress on money, emphasized the importance of a sound monetary structure. His pupils were the ones who wrote those clauses into the Constitution, under his guidance. So, we owe our hard money Constitution to John Witherspoon, reformed thinker. As a matter of fact, we followed the policy of weight so strictly, that our money was made in terms of weight. The twenty dollar gold piece is an ounce. Nine-hundred fineness, gold. [00:09:05]

Originally, our gold pieces did not even specify that...[edit]

Originally, our gold pieces did not even specify that it was twenty dollars, or ten dollars, or five dollars in gold. All is said was United State of America, and then very often it would give the number of grains of gold. But it didn’t do that necessarily, it was known that this is an ounce, or a half of an ounce, or a quarter of an ounce. So, they followed the biblical principle of weight. Even though, they coined it as a round thing, but it was in terms of weight. So, we began our history with the principle that money is a weight of gold or silver, because this was what God told Moses. Just weights shall ye have.

Paper money, thus, is not real money. Paper money is checkbook money. For example, when you write a check it says, “Pay to” and you fill in a name. Now, until recently, our paper money said, “Payable to the bearer on demand,” but they have left this off. I looked in my wallet to see if I could see any that still had it, but I see that I don’t. But if you have an older bill in your pocket, it may say, “Payable to the bearer on demand.” Has anyone got one? They are pulling them in very rapidly.

[Audience] {?}

[Rushdoony} What?

[Audience] {?} [00:11:07]

[Rushdoony] Yes, but a few still circulate and every...[edit]

[Rushdoony] Yes, but a few still circulate and every now and then I see one, that says “Payable to the bearer on demand.” Now, originally it would say “Payable to the bearer on demand one dollar in silver,” or “five dollars in gold,” or silver, so it was redeemable in hard money. It was a check. A check that was payable at any bank in gold or silver. We stopped paying off in gold in 1934, and about four years ago, we stopped paying a little longer four or five years ago, we stopped paying off in silver. Those of you, do you remember when the last of the silver certificates were redeemable? Yes, here is a silver certificate. This certificate, “This certifies that there is, on deposit in the Treasury of the United States of America, one dollar in silver payable to the bearer on demand.” Now this is an honest check, or was. They’ve reneged on it. The money you have in your pocket now is a check without anything behind it. It’s a counterfeit check. But because the government is writing it, it can get by with it, you cannot. Now, while these were still being redeemed, I was busy collecting as many as I could, and I was cashing them for up to $1.96 a piece, and I was taking, buying silver coins with that, and gold coins. I had a good thing going for a while.

[Audience laughs]

And I came out very nicely, thank you, because I knew that the price of silver was rising, and the price of our bad checks were going down. [00:13:18]

Well, what has happened? Since we have gone off gold...[edit]

Well, what has happened? Since we have gone off gold and silver, we could not expect foreigners to take bad checks, you see. A citizen has to do it. The government says, “You’re going to take these paper dollars, whether you like it or not.” But a foreigner says, “Now look, I don’t want to, I don’t have to take your paper. I want gold. I want silver.” We were paying off all foreigners until just about the end of Johnson’s administration, when there was a very serious run on the dollar, and we reached the point where we could not pay off. As a matter of fact, there were 60 billion dollars in paper in Europe, with claims on ten billion in gold and we didn’t have it to pay off. It would be like writing $60,000 in checks with $10,000 in the bank. Our attitude, as a result, was “we will then simply refuse to pay off,” so we told them, “You nasty foreigners, trying to steal our gold, we’re not going to pay you off. First, we refuse to pay off all individuals abroad. Then, in August and December of 1971, we told foreign countries we would not pay them off. So, the world has been floundering since then in an economic crisis.

Now, what happened recently was that what we had told them at the Smithsonian agreement, in, on December 15, in 1971, was “Now look fellas, be good boys, we’ll pay you off. We’ll pay you off, we’re going to balance our budget and, uh try to, uh, balance our, uh, our, avoid, uh, balance of payment deficit, and we’ll start paying you off.”

1972 ended, and the picture was that we were more in debt than ever. Instead, of having 60 billion outstanding, we had 80-90 billion that foreigners were holding, they wanted paid off. This created a crisis. Gold was going up, paper was going down. As long as foreign trade was in dollars, the values were the same from country to country, in that all international trade was settled in terms of gold. It meant that at the end of the year, you said to a company, or to a country, “Now, let’s see. Our trade has been so-and-so, and we wind up owing you $100 million. Alright, we’re paying off $100 million in gold.” All your transaction, you see, would be on paper, but your settlement of the difference, would be in gold. So you would be, in effect, bartering goods and making the difference up in gold, or silver. Primarily, in gold. [00:17:09]

Now, when we went on to a paper, this became artificial...[edit]

Now, when we went on to a paper, this became artificial, because we were now settling all payments, one country with another, in terms on an artificially-established rate by international agreement as to how much the dollar was worth, and how much the ruble was worth, and so on. And these rates were sometimes highly unrealistic. If you go onto the Soviet Union, the ruble is artificially pegged very high. It’s practically worthless in any kind of foreign trade. But the Russians want prestige, want to say, “Ah, Ruble is worth a lot in relationship to the dollar.” So, if you buy an ice cream cone, well, you don’t buy ice cream cones there, but if you go into a restaurant and buy, uh, a meal in the Soviet Union, you pay an astronomical sum, because the exchange rate is so artificial, and they have so overvalued the ruble that to buy rubles to pay for the meal, you’re buying the rubles at an inflated price. So, the prices are artificial. [00:18:26]

Now, this has a very serious impact, because if you...[edit]

Now, this has a very serious impact, because if you are, say, a German businessman and you are selling something to the United States, if the dollar is overvalued, and the Mark is undervalued, your goods are going to be cheap in the United States, and American goods are going to be expensive in Germany, because the dollar is overpriced. If the dollar starts to fall in value, and the Mark goes up, the American goods become cheaper in Germany, and the German goods become more expensive in the United States. So, this means you could be wiped out, if your market in the United States disappears because it’s costing too much to buy a VW.

For example, if the Canadian dollar becomes one penny stronger than the American dollar, 1,000 Canadians are out of work. The way this happens is this: Supposing you have something you’re selling to American that costs $1,000. On $1,000, it means one thousand times one cent. Your goods are more expensive than they were before. Now, that difference can make your manufactured product too expensive for an American to buy against an American product. So, they won’t buy it, they’ll say, “Oh, there was some value in buying the Canadian, because we could make a little more money selling it. But now, we can’t. We might as well buy the American.”

For example, the record industry in the United States almost died in the last year or two. The English record industry has skyrocketed, and so many of the records, those of you who are record fans, are now English records. Isn’t that true?

[Audience] [?]

[Rushdoony] What? [00:21:02]

[Audience] They’re all a lot more than industry...[edit]

[Audience] They’re all a lot more than industry.

[Rushdoony] Yes. For the simple reason that, as the pound has sunk lower in the last year or so, the English record companies can now outsell, in many cases, the American companies, right here in the United States. Is this point clear? Alright. You see, it’s artificial, for prestige you like to keep your currency high, but for business reasons it’s good to have it low.

Now, when foreigners in Japan and Europe found recently they had about $90 billion on hand, and the Central Bank said $90 billion on hand, and they needed some of their own currencies to pay off their workers. What did they do? They immediately began to dump them. “Let’s get rid of them. I need some marks, “ or “I need some francs,” or “I need some yens to pay off my men, I’m getting overloaded with dollars. And I’ve bought all I want to buy in America, I don’t need anything more, so I’m going to get rid of them.” Immediately, the Central Bank, like our Federal Reserve, the government-owned bank, steps in to support the price. Why? Well, Germany put billions into supporting the dollar recently. Now, the German taxpayer is going to have to pay that. Why in the world would they do that? It’s not because they love us. The economics of this is simply this. It’s better to assess the taxpayers all these billions than to have the taxpayers out of work and angry at the government, and if they had not supported the dollar, if the dollar continued to fall below a certain floor where they said, “We’ll keep it above that level,” then the VW’s would have proportionately risen in price. The English records would have risen in price. The Toyotas would have risen in price, and they wouldn’t have sold as many here. At the same time, the American goods would become cheaper over there. [00:23:25]

A young fellow I know has a few gold shares in a, uh...[edit]

A young fellow I know has a few gold shares in a, uh, in a South African mine, and he was mailed a dividend check just at the time of the devaluation recently, a few weeks ago, at just 11 1/10th percent. So, when he cashed the check, even after they took off a sizeable amount in taxes and so on, he wound up with more money than the check was made out for, because he did it with the devaluation. And the South African rand was now worth more in relationship to the dollar, so when they converted the rand, he had more dollars. So, he wound up with more dollars than he was supposed to have at the beginning. He came out ahead.

So you see, what happens when the dollar fluctuates. Well, it reached the point where they could no longer support it. The central banks were in serious trouble. Now the alternative they’re trying is to let the dollar float, and the report today was the dollar, for a while, rose a little in strength and then fell back. But the situation is artificial, because increasingly, the currencies of the world are un-backed by gold or silver, there’s no real value behind that. And these rates, these exchange rates are artificial, and so it becomes a matter of grave concern how you’re going to have trades these artificial rates. With a floating exchange rate, it means that the trade again is uncertain, because supposing you’re doing some buying from Europe. Thus, I know two persons in California who are doing a great deal of buying from Europe. [00:25:29]

This one man is a sales executive from a small company...[edit]

This one man is a sales executive from a small company, a wholesaler. And he said he went to one of the big department stores recently and showed them some items, and they were ready to order {?} ..”but, what was the price on these goods?” and he said “Well, I don’t know. We think it will be so much, plus, whatever the variation and the exchange rate is for the going rate.” And the buyer of the department store, one of the biggest in Southern California, said, “Now look pal, I’m gonna give that to the purchasing department. The purchasing department knows, wants to know exactly how much we are going to spend, what we’re going to pay for these items, and I can’t tell him that it’ll be ‘so much, plus’ five or ten percent, two percent, depending on what the exchange rate is, on the given day.” So the buyer says, “I don’t see how we can place the order.”

I see the problem it creates. The artificial exchange, which keeps it constant, is an artificial thing, but the floating thing, because this is just counterfeit paper that all countries have, is only good insofar as you say, “I need it to get some of their goods,” but in itself it’s nothing good to hold, it fluctuates in value, so you want to get rid of that paper. After all, you’re a businessman, and you get, say $100,000 in English pounds, you’re not going to want to hold those English pounds, even though perhaps two months from now, or six weeks from now, you’re going to have to buy some goods from England, $100,000 worth. Why? If the pound begins to drop in value, all your profit in the business field can going to be wiped out. Because the percentage of your profit is very, very small. Always. Business normally operates on a 4-6% profit, that’s all. And if you have a floating exchange, your profits are, more or less, eaten up by the rise and fall in the pound. [00:28:15]

I have at home some cruzeiros from Brazil...[edit]

I have at home some cruzeiros from Brazil. A very fine, young man, a Christian who works in one of the biggest banks in San Francisco in the exchange department, bought them and mailed them down to me, and he said, “See what happens,” the businessman up here. Brazil has had, for a long time, very, very rampant inflation. And so these businessmen, who are being paid off on some debts, and in the process of sending the money from Brazil to here to pay them off, as it was going to the bank, they had devaluation. And what did the bank do, the central bank in Brazil? Now, these are the bills I got. Some were for 10,000 cruzeiros, some were for 5,000, some were for 100,000. They devalued. They said, “Our money is highly inflated, and inflation comes about not because of what capital or labor does, but because a government that’s gone on paper money increases the money supply. It runs into a deficit and what does it do? It prints more dollars. Now, there are several ways of doing it. You can issue bonds against them and print dollars, and creates debt that way and loss of money. But, the net result is it prints more money. Now the more money you print, the more money you put into supply, the cheaper the money gets, you see. So, what the Brazil government did, was to take and say, “We’re going to wipe out, we’ll cancel, the last three zeroes on every bill.” Well, if you were a businessman in San Francisco, and you got 10,000 cruzeiros, 10, and 5 and 100, you’d be a pretty sick character. [00:30:35]

Now, this is what is happening in the business world...[edit]

Now, this is what is happening in the business world. This is one reason why business, in the last 10 years as inflation has gotten underway, it’s become multinational. So you have a General Motors, and a Ford, and Chrysler, in all these different countries because getting money from one country to the other, across the border, you run into so many problems like this. There are several hundred devaluations a year now. The United States has had two in 14 months. Two in 14 months. And after we devaluated the second time in February, we thought that would settle the gold rush, but instead, the gold rush increased before the week was over. Why? Well, when I’m home I talk daily to some businessmen who are in very close communication with Zurich, almost daily, and London with the gold markets and the main banks there. And what happened was, we devalued, the second time in 14 months. We are more or less bankrupt as a country, and our money is not worth much. After they dumped all these dollars, we still had 80 billion outstanding against about 11 billion in gold.

So, what was congress talking about the day after devaluation? The big debate in congress was should we give $6 billion, $6 ½ billion to North and South Vietnam to rebuild those countries from the ground up? And congress seems to be favorable, and on top of that, the mayors of America were having a convention in Washington, D.C., and Mayor Alioto of San Francisco, a good democrat, came up with the idea to approach congress on, with the enthusiastic support of many, many mayors. “Let’s have a similar project, another $6 ½ billion project, at least, to rebuild the cities of America, from the ground up. Eliminate all the slums, all the old buildings, build ‘em up from the ground up.” Well, when that news hit Europe, they just panicked, they said, “They’ve gone stark raving mad. They’re bankrupt and they’re going to spend $6 ½ billion helping their enemies who are killing them yet. We will know there’s a truce. And they’re talking about rebuilding the cities.” So panic set in. Now, I don’t know what kind of an agreement they’ve come to, because it hasn’t been announced and they’re still meeting, and will be meeting through the 26th of this month, but whatever it is, it will be temporary. Meanwhile, gold has gone up as paper has gone down. [00:33:49]

Now, one week recently, to give you an idea of what...[edit]

Now, one week recently, to give you an idea of what’s happened, we promised that we’d practice economy domestically, so we said that we would raise the prime rate of interest to 6 ½%. Now when you raise the interest rate, it means that business is going to have much more trouble borrowing money, it will cost more, so it will slow down on expansion, and business will begin to slow down, and you will begin to have a recession. This is what happens with a socialistic economy that’s dependent not upon the free market but upon government policies. So, with a 6 ½% interest rate, imagine if you’re buying a house, you may be paying 9 to 9 ½% interest rate, for some people who are buying houses right now. Perhaps it’s lower here, but in the big cities it’s that high. Well that’s terrible, and it may get a lot worse. So we told Europe, “Look, we’re being responsible, we raised it to 6 ½% prime rate so we’re going to have a recession. We’re going to keep, we’re going to cool off the economy. But, at the same time, that week we raised the, we increased the money supply by almost 1%, and on an annual rate it would have been 48%. Now, of course we won’t keep it up all year long like that, but you can see what that means. We were undercutting this, by doing that. This is why prices are going up. It isn’t that the businessman is getting rich or the farmer is getting rich. Ask your farm relative about that. It’s that money is getting cheaper, there’s more money and everything is going up proportionately, so that while you’re making more money, you’re actually keeping less of it too, because the government is increasing its take at the same time.

So, you have inflation, and it means your savings are eaten up. Let’s assume, since we’re going to assume something that isn’t real, let’s be generous. Let’s assume we each have $100,000 in the bank, if we’re going to think, let’s think big. Now, if you have $100,000 in the bank, you may be getting, let’s say, 5% interest on that. Now 5% interest would be $5,000. On the other hand, you’re going to pay income taxes on that $5,000, so you don’t have really $5,000. But then there’s another factor, inflation cuts the purchasing power of that, does it not? So that the $100,000, by the end of this year, may only buy, have a purchasing power of $95,000, because of inflation. You see what that means? So, while you still have $100,000 in the bank, if you were to go out and spend it, you might be spending only $95,000 worth. Your purchasing power’s been cut. So, you’re losing. You lost, you will lose, by the end of this year, at least $5,000 in purchasing power, the $5,000 interest you get you’ll pay taxes against. So that you may come out $6,000 in the red. And consider what will happen when the rate of inflation hits 10% or 20% or 30%, until that’s not worth much. [00:38:25]

For example, my father, when I was uh, starting out...[edit]

For example, my father, when I was uh, starting out in the ministry, gave me $100 war bond. This was at the very beginning of World War II. Now that was a lot of money in those days, and it was a big sacrifice for him. Everybody in the United States was trying to, who was a teacher to get into the L.A. school system. Why? Because the L.A. school system was really paying big money for its teachers. They were getting $180 a month. In most places they were getting only $100 a month. So, the L.A. teachers were rich. I saw an old Cary Grant movie on television, uh, this last summer. My wife was somewhere at a meeting, and so I was through studying and tired and turned on the television. It was very interesting, it was one of the first Cary Grant movies, and in it he played a man who was filthy rich, and one of the girls was talking about him to someone else about how filthy rich he was, he made $5,000 a year. That was big money in those days, it really was. You were very rich, because you could buy a home that, today, would sell for $35,000, for $2,500. In fact, there were homes at that time that sold for $65,000 in Beverly Hills, that today are selling for $100,000 to $150,000. As a matter of fact, there’s an elderly woman I’ve called on now then, she is the mother of a very dear friend who passed away quite tragically a couple of years ago, and her husband had this home built in La Canada in California, in 1938. It’s a huge home. Everything in it was handmade by artisans. It has Spanish tile on the roof, and the Spanish tile is not ordered from a tile manufacturing company. He brought in Mexican craftsmen who made the tile by hand there. Every bedroom, and it has a number of bedrooms, has its own full bath with all the tile in the bathrooms and in the kitchen hand-crafted, magnificently. The tile work is worth a fortune today. All the hardware in the house, on the doors, on the windows, on the cabinets, was handcrafted, so that it’s all a work of art. Well, I could go on telling you about the way this house was handcrafted throughout. It’s a work of art to this day. It’s on an acre piece of property, beautifully landscaped. There’s been a full-time gardener all these years. [00:42:11]

Now, that house was built for ...[edit]

Now, that house was built for $6,500. You’d be lucky to pick it up for $100,000 today. That’s what inflation has done. What’s happened? As money has gotten cheaper, everything else has gone up. It isn’t that their real value is any greater. That house today, if you pick it up for $100,000, you’re more likely to pay $125,000 to $150,000, is still the same house it was then. The only difference is that the value of paper has depreciated, paper money is cheaper. Now, that $100 war bond my father gave me, if I kept it to this day it would all be interest, it wouldn’t be worth too much. Then it was about 60% of good pay, an equal, a month’s pay of many teachers. Today, it wouldn’t be worth anything like that, you see. It would be about 1/12th of a teacher’s salary in Los Angeles. Paper money has gone down. But the worst of the inflation is ahead of us, and that’s why it is so important for you to understand the significance of money. The paper is depreciated when it finally reaches the point it snowballs, it becomes worth less and less, and in the runaway inflation in Germany, it finally reached the point where the biggest, most expensive hotel in Berlin was bought for a U.S. $10 gold piece. It was worth trillions of marks. Men who were going to work, and their wives were going with them with wheelbarrows and bushel baskets to get their pay, they were being paid in advance, and finally no one would work for paper and things collapsed and people starved to death, except those who had some gold and silver coins, and they could buy almost anything. [00:44:45]

Now paper money is depreciating every year, this is...[edit]

Now paper money is depreciating every year, this is an important fact. We could, very well, face runaway inflation, or a radical deflation in which everything collapses. Now, when you embark on a course of socialism, and socialism is impossible without paper money because the government can then counterfeit. Institute welfare, public works projects, and so on, deficit financing, endless printing of paper money. But if it’s a hard money policy you can’t do it the same. Now, if a government stops inflation, it has a recession or a depression. If it continues inflation, it has a runaway inflation and a breakdown of money, there’s no other way out. The healthier of the two is a radical deflation or a depression. But most Americans who are anywhere near 45 to 50 and older can remember the Depression, and they’re afraid of that, but they have never had an experience as Europeans have as a radical inflation, so they’re not afraid of that, and the politicians are going to give it to them, almost certainly. So, we have two alternatives, one, a runaway inflation, or they might work to prevent that by going into economic fascism, more and more total controls, which will perhaps prevent it for awhile. So, we have these two alternatives, sooner or later. Deflation, depression or inflation and the destruction of the economy. How do you prepare yourself for those? [00:47:11]

Well, the poorest thing in the world to have your savings...[edit]

Well, the poorest thing in the world to have your savings in is paper money. It’s depreciating in value. It has lost, in the last three or four years, about 20% or better of its value. So that you lost in terms in whatever paper savings you had. But if you had it in gold or silver coins, you would have appreciated it. So, let’s just put down a few figures on what gold coins, for example, the $20 gold piece, the U.S., which is the most common of our gold coins, and the biggest. A U.S. $20 gold piece. As gold has gone up in value and paper has gone down, what it’s worth in 1965 $46. As of last uh, Thanksgiving, it was worth about $95. As of the date I left home, it was worth $185. An English sovereign, one sovereign, was worth about two or three years ago, 10 ¼. It was worth about 18 last Christmas, and when I left home, it was between 34 and 35, let’s say 35. You see what’s happened, the gold coins are going up in value as the paper is going down. So, what makes good sense is to take what paper you can afford to put into gold and silver coins, especially gold coins, and put it in. Now, it may be, and it’s legal, as long as the date is before 34, and all the U.S. gold and coins are. It means that this is a good way of appreciating your savings, so that what you can do as many people have done that I advise. For example, one person who, a year and a half ago, in making a purchase took $10,000 in gold that they had, and instead of selling it, borrowed against it from a friend, and gave it to them as a security. Now, that was in July of 71. Today, this $10,000 in U.S. Double Eagles, which he has almost half redeemed, would be worth about $27,000-28,000, let’s say $27,000. So, as soon as he pays off the balance on it he will be getting back better than 2 ½ times the value that he had when he first borrowed $10,000 against it. And, in another year this would be worth, say, $35,000. Now, maybe it’ll stay $27,000 for a while, but it’s bound to go up as long as inflation goes up, you see? [00:51:34]

Now, if you have a depression, it would drop drastically...[edit]

Now, if you have a depression, it would drop drastically in value. But since inflation is more likely, what you’re doing is, in a sense, taking a risk cause you’re losing on paper, almost certainly. So, you’re likely to preserve your assets and increase them. And this is why, today, there is a very lively sale of gold coins and silver coins. Now, if you were to buy, today, or when I left home, a sack of dimes, a $1,000 worth of silver dimes, not the slugs you get in change. Uh, when I left home, that sack was selling for $1,900. You would have realized 19%. Or if, a few years ago, you would have bought silver dollars, a $1,000 sack, and five years ago you could have bought it for $1,500, now you could sell it for about $6,000. You see, as paper goes down, because it is counterfeit, it depreciates, the real goes up. Now, you may face runaway inflation, or it may not come. But, it does make sense to take some of your money and divide every so often a sovereign or a Double Eagle and put it aside, because you must be wise stewards and protect yourselves against the eventualities of the future. Yes?

[Audience] Would you make some application as to the wisdom, or unwisdom or insurance? Not the term protection insurance, but total life insurance with a view toward, I know you don’t believe in retirement, but toward that age when you’re gonna need more rate of return? Also, with respect to ministers, with regard to social security, because we do have the option, consciences, because some of us do have consciences against social security. [00:54:17]

[Rushdoony] I refuse to go under social security...[edit]

[Rushdoony] I refuse to go under social security. Social security is not an insurance scheme, it’s a taxing scheme. The social security funds the minute they get to Washington, are spent. They are not held there. By act of Congress, they can be taken away from you. They have no relationship to any insurance and they are, in fact, you will only get a small portion back of what you paid.

[Audience] insurance because they don’t invest in money anyway, {?} rate of insurance.

[Rushdoony] Moreover, it’s rising every year, it will hit 10% of your income as a tax before long. The plain fact about it is you can’t afford it, it’s basically unsound, it’s wisest not to get involved in it because you can never get out of it. Whether it will last until you are able to get any benefits out of it is questionable. It will eventually go bankrupt.

[Audience] {?} last week, and at the end of this year, most ministers will have to pay the maximum, $36 a year, that’s how much we’ll have to pay in social security, and one of the arguments that he used for participating in social security is that its value will rise as inflation rises, so that as opposed to insurance, where if you buy insurance now, you buy $10,000 worth now, you can get $72 or $73 in 83, {?} with social security you’re going to be increasing the rate but you’re going to be paid in current dollars.

[Rushdoony] Well, if we’re able to pay. But you see, in France already one-third of the budget goes to paying their social security obligations. They got in it ten years before us, and the country’s going bankrupt on them. In spite of all that, all they can do is to step up the payments because politically, they want more votes. So, whoever is running for office promises more benefits, just as we do in this country.

{Audience} Do you see {?} a way of finding a balance between the real estate, the hard things that you have, houses, real estate, money, hard currency, and insurance, at all?

[Rushdoony] I think what you need, yes, you need to put your money into real assets, real assets. So, I believe in putting some in here. Now, if you put $900 a year in gold coins now, you’re going to get a lot more value out of it than social security, I believe. You need to put it into hard assets because housing is going up continually. Now, if you have a deflation, you may be stuck with a house that will be worth a fraction of its cost, you see? On the other hand, instead of deflation, or depression, you have rapid inflation, you may be buying a house at a fraction of its market value in three years. There are people now who are, who bought a house for $5,000 or $6,000 in the 50’s, and the houses have a value of $30,000, and they are paying $80 a month on them, you see? [00:58:00]

[Audience] This is the problem that some of us who...[edit]

[Audience] This is the problem that some of us who are seniors this year who have {?} who {?} $30,000 three years ago, right now the {?} can sell them for $15,000 and $16,000. That means, $3,000 above what we paid, and we feel a moral obligation to not sell it for that, especially if {?}

[Rushdoony] No, because you see, uh, the price is not really different. There’s been no real change in the real value of that house. In fact, there’s been a depreciation. All that’s happened is, the house has remained constant in value, and paper has gone down in value. That’s the difference.

[Audience] Well then, it might be a wiser investment if you can do it, say I’m going to be 65 miles from the seminary, for me to keep my house and rent it to a student so that if something comes, I’ve got some hard property that will be mine.

[Rushdoony] Would you have a {?} where you are?

[Audience] Right.

[Rushdoony] Yes, that might be a better, uh, solution. If your {?} if you can come out ahead, you might be better off doing that. Especially if you have a responsible student who can keep up the property. So, you’re building up an asset meanwhile, and the student is paying the rent on, which takes care of your payment and taxes. If you can do that, you see, I don’t know what your payments are, and what your taxes are. [00:59:52]

[Audience] {?} three bedroom, one and a half bath, building only $85 a month, that includes taxes and insurance.

[Rushdoony] Oh well, you’re coming out ahead by hanging onto it, yes. But don’t feel that you’re taking advantage of someone if you should sell it, and if the price is up $3,000, there’s no difference in the price. That $6,500 house is still $6,500 in hard money, you see. All that’s happened is that the paper money has gotten cheap. So, things do not change their value. For example, a $20 gold piece today at $185 really hasn’t kept pace with inflation even though it has protected you from inflation more than anything else. All that’s happened is the money has gotten, the paper money has gotten so cheap, the gold coin has come closer to keeping you on an even basis. Now, one thing more, with regard to insurance. Insurance is a losing proposition in a time of inflation, but it is a necessary proposition, so that I’m keeping an insurance policy in case of an emergency, my family has to have something. So, I have a term policy, which is convertible anytime in the next 15 years to straight life, and I can determine what I can do at that time. Increase the rate or lower. Now, one of the problems with insurance, and this is why it’s best to keep it on a basis whereby you can adjust your protection, it to go up or down in value in terms or inflation or deflation. I can recall when my father was being sold policies, and I remember the advertising vividly. It showed a picture, I was a small boy, that it showed a picture of an elderly couple looking over the rail of a boat on a Mediterranean cruise, and was “invest in so-and-so policy and retire at 65 at $100 a month and travel and see the world.” On the other hand, if you are paying premiums on $40,000 worth of insurance, and you have a radical deflation so began {?} earlier this century, $20 a month is big money in pay, you see you’re wiped out in payments, unless you can adjust the policy lower. Yes, you had a question.

[Audience] Suppose I had $185 in savings, and I decided to put that in silver, would I just be able to {?}, $20 gold or silver equally? And that’s {?} savings? It would be worth $185 {?}

[Rushdoony] Yes, what you would do, you’d go down to the pawn shop, they have {?} so much in silver coins, dimes. Now, the value of dimes is this, you should have some. {?} runaway inflation where they take say $100 in paper to buy a pound in hamburger, maybe a dime in silver will buy that pound of hamburger, or maybe not at a point where no one wants the paper, and you can buy with the silver. So you should have some silver. The gold will protect your {?}. Now it could be that the government will outlaw the ownership of it, but it never has work. The Union tried it, Britain tried it for a while. All you do then is just to act as though you never heard of the law, and you never tell anybody you’ve got the coin because it’s theft on the part of the government to take it from you, and it’s best to pay for the coins when you buy them with cash. All checks, by the way, are microfilmed as they go through banks, so the government has a total record of what you do with your money. But if you withdraw the $100 or $200, you can spend it and it’s anonymous. Yes? [01:04:26]

[Audience] Uh, ...[edit]

[Audience] Uh, {?} rather than get the interest, you’re getting appreciation on that value.

[Rushdoony] Exactly.

[Audience] Alright, {?} Question, where do you buy gold? I mean, I’ve never heard of it. I know that people do it, but I thought it was more collectors, I’ve never heard of people doing things the way you’re talking about it.

[Rushdoony] Oh, this is big business. In fact, there is a company doing $1 million worth of business a day just selling coins, on a margin purchasing basis. In fact, there’s several.

[Audience] What kind of margin do they have, {?}

[Rushdoony] I don’t know, one of my sons-in-law, in fact, both of them now, work for one such company, but I’ve never bothered to investigate because their company is Pacific Coast Coin Exchange in Long Beach, and…

[Audience] {?} stock exchange where you have to pay uh..

[Rushdoony] Well, I, what they do is, if you buy, say a lot of gold coins, or so many bags of silver coins, they actually warehouse those coins, and then, uh, you pay interest on what it costs to buy them, plus a down payment, and uh, it’s yours. Whether the price goes up or down, it’s yours. Whenever you’ve paid off the loan, you’ve {?} or if it doubles in price you can sell out and make a lot of money. I know two or three ministers, I suggested that they buy outright, but my son-in-law told them to buy through him, at margin, and uh, within, oh about two months they doubled their money.

[Audience] Well, do you know of any {?} in this area?

[Rushdoony] No, I don’t know the pawn shops here. I get mine from a friend in San Mateo who is a big wholesaler, and I buy outright and I have more than tripled what I’ve put into it.

[Audience] I would imagine this would be an easy thing to also be {?}

[Rushdoony] Just look in the phone, a phone book, classified, for pawn shops. Go around, and {?}. That’s the thing to do, and then just buy There’s not much of a mark-up, and I say this friend of mine is a very dear friend, who is a wholesaler and when he sells a Double Eagle for $185 he’s paying $179 for it. If you take it in and sell it to him he’ll pay you $179, so you see, he’s not making much of a margin on it, there’s a very low mark up. A $35 sovereign, he will pay $33.85 for it, and it could be over $34. So, you can turn around and sell it for a very low mark-up difference, and if the price rises, you’re really up there right away. Yes? [00:01:07]

[Audience] {?}

[Rushdoony] The which?

[Audience] The silver coins that are manufactured.

[Rushdoony] Oh no, no. Those are collector’s items, and you’re not interested in collector’s items.

[Audience] There some place in Utah, I think, where a man is uh, {?} bar, silver.

[Rushdoony] Yes, no. How many places can you negotiate that or sell it? It becomes more a collector’s item. But when you’re dealing with something which has a very commonplace value, the sovereign and Double Eagle, then you’re safe. Now, I know enough about this field so that I’ve gone in for collector’s items. A lot of people have lost money on the collector’s items, I have appreciated it because I have known which collector’s items are most likely to maintain their appeal. But I don’t recommend collector’s items, numismatic items, to anyone, because the average person doesn’t know the people, it’s risky for them, it dabbles in it, because they’re popularity items that, uh, for awhile rise sensationally in price and then fall down. But if you stick with what is standard, you can conserve your values. Yes?

[Audience] If I gather what you say then you would say that the best thing would be to have some term insurance which is convertible but stay away from all these investment policies, and that’s {?}

[Rushdoony] Well, I’m not an expert in the field of insurance, but I do know the coins. And I’ve been able to appreciate my assets that way, and I’ve helped a lot of people appreciate double and triple theirs. So, I wouldn’t want to say too much on insurance. Talk to a good Christian agent there, and you do need some kind of protection, but beyond that I wouldn’t want to say too much, and I wouldn’t want you to go by what I say, but I do know this area, and I do know while it’s not foolproof, if you have a depression their value is going to go down, but if you have a depression your bank is going to close up on you, too. They certainly did the last time, I worked hard as a kid with odd jobs all over the neighborhood, as an office boy, so on and saved money for college. The banks closed, and all the money I had in the bank came back and {?} all the way through my college career checks about $4 or $5 at a time. Our bank was one of the worst in the state of California, I really took a beating.

[Audience] {?} investing in stock?

[Rushdoony] I don’t know anything about the market, and I wouldn’t advise anything in an area I don’t know. But I do know we have a monetary crisis and I know the gold and silver {?} works. Yes? [01:10:53]

[Audience] One, isn’t there a potential pitfall ...[edit]

[Audience] One, isn’t there a potential pitfall {?} keeping the house in that the valuation would leave him maybe with a house that he couldn’t pay the tax on and support, he might lose the whole thing?

[Rushdoony] That’s very possible. What you have to assess is this: What is more likely, deflation or inflation? Now, I would say at least for another four years, we’re going to have inflation. So, the thing to do is to play it by ear. You have to learn to study the paper in terms of these things, to know what’s happening. I figure through 1975-76 we’re going to have inflation.

[Audience] {?}

[Rushdoony] I don’t know, but I figure we’re going to get it for a while so in terms of that for a while, I’m going to figure, I’m betting on inflation. And so far, I’ve come out dramatically ahead. I really appreciated my assets, I didn’t have much, and never made much, but I’m certainly coming out ahead and I’m going to appreciate them even further as they continue. Yes?

[Audience] Uh, {?} what is that, you just seemed like you hinted at something?

[Rushdoony] Oh no, only if the government steps in, and even then, I will hang onto it because if it steps in and for a while says no more buying and selling of gold coins, it will go up on the black market probably, and I’ll still conserve my value because sooner or later those kinds of legislation are rescinded. There are too many people in Washington saving them. You know, I …

[Audience laughter]

[Rushdoony] This is true. I gave a lecture on money in Washington about three years ago, and uh, in fact two nights, and this one night there was a woman there who said, “My husband will have to hear this,” so he was there the next night. And he was an economist in the Treasury. So, he came up and said, “Gold is worthless, it’s not worth anything. Anybody who would invest in gold is just wasting their time. Classical economics is not true, the government is able to prevent any runaway inflation or depression,” and he kept heckling me all the time during the question and answer period. And afterwards, it was just the three of us, his wife, and he and myself arguing and he continued to give me a bad time. And finally, his wife spoke up and said, “My husband says he doesn’t believe in gold but let me tell you, he has just gotten a license from the Treasury where he can finagle himself to fly over to Paris and buy $20,000 of U.S. Double Eagles, $20 gold pieces, and come back here.” And he just kind of grinned and said, “Might as well hedge my bets.” Here was a person who was hostile to the kind of economics I’m talking about as could be, but he was getting $20,000 and he was a young, hot-shot official. Yes? [01:14:31]

[Audience] Do you sell your gold back, or are you still...[edit]

[Audience] Do you sell your gold back, or are you still holding on it?

[Rushdoony] Oh, I keep holding onto it, but I can take it back to the dealer anytime, and he’ll be glad to buy it. I’ve known some people who have, because they’ve been hard up, taken it back and they’ve had no trouble selling it. Yes?

[Audience] Um, {?} going to be inflation? What are the things that…

[Rushdoony] Well, first of all if you see prices going up, that’s inflation, you know that. Yes. When prices are going up, that’s inflation. Second, when you see the prime rate of interest going up, and the, it can be deflationary, but if the money supply is increasing at the same time, you know it’s inflation. Now the Wall Street Journal has, each week on Friday in one section, a statement about the increase of the money supply and so on, so you can watch that. But you could tell all around, in terms of what’s happening in the stores. Yes?

[Audience] I was going to ask you where you keep {?}

[Rushdoony] Don’t know. {?} supposed to be, legally only for papers and documents, not for money. This is a problem. If you keep it in the house, thieves can get it. If you leave it in the bank in the form of a deposit, inflation can wipe you out. Now, you have to take a chance somewhere. If you have a friend who has a vault, that’s the best answer. I happen to have a friend who has a vault, so that solves my problem. But if I didn’t, I’d still keep it, take a chance on it. Some people have very ingenious methods of concealing it. They’ve got a great deal and they fix some kind of false closet in the house or other, or they put a safe in concrete and cover it over with furniture. I know, I had a house in Northern California, and it was not until after I sold it to a friend, and they remodeled the kitchen, that they found there was a secret cabinet in that kitchen which I’d never known about . A beautiful hiding place. [01:17:09]

[Audience laughter]...[edit]

[Audience laughter]

[Rushdoony] A lot of people who are good carpenters or cabinet makers make such things for themselves. Yes?

[Audience] Could you give me {?} of someone that we could be getting some kind of material catalogs or brochures from?

[Rushdoony] Yes, but remember, the prices change without notice, in terms of the market {?}

[Audience] I’d like to find someone who would sell on margin, I’m considering opting out of social security and I have two years {?} and I’d like to do something with that $936 each month. So, yeah.

[Rushdoony] Yes, well. I don’t know the address but Pacific Coast Coin Exchange, Long Beach, California, is where my son-in-law works but as I say, I’ve never dealt with them. I don’t know the address, I really couldn’t say, but well.

[Audience] {?} information

[Rushdoony] What?

[Audience] {?} get it through

[Rushdoony] Oh, alright.

[Audience] Be sure you get the right one. I’ve heard {?} price of gas, {?} regular gas will be $3.50 per gallon. How do we prepare ourselves to, you know, prices are going to go up {?} and gas is gonna be {?}

[Rushdoony] Well, you’re going to walk from your place to class, that’s what you’re going to do. {?} at that price.

[Audience] {?}

{Rushdoony} Yes, and in the ministry you’ll at least have a {?} and you’ll be near the church, that’ll be a savings, and if you’re in a small country town, someplace where you can have a garden, you can cut costs that way, and if you can keep chickens, you can fight inflation to a great extent that way. There’s a lot of ways of beating it. As a matter of fact, I know an elderly couple in Northern California, and they knew a little bit of economics, and they knew that inflation was underway in 1921. Well, earlier than that, in 1920 they figured inflation was underway and they went out of town and bought a farm, a small one, and they started to build it up, and they had chickens and a cow, a vegetable garden and so on, and everybody laughed at them, it was hard work. But, in 1923 {?} runaway inflation began to hit. Months before that they were {?} in and things were, food was getting scarce. They were selling butter and eggs, and vegetables for gold and silver. They made a mint of money out of that little farm, especially when things began to fall apart. My friend, Hans Sennholz, who is chairman of the Department of Economics at Grove City College, said the people were going out and {?} to buy food to keep from starving. They were taking their gold and their silver. They were taking their antiques, their Persian rugs, paintings, everything. The saying in Germany was “The pigs of the farmers walked on Persian rugs.” That’s how desperate they were for food, and were ready to pay anything to get it because life was precious. [01:21:15]

[Audience] {?}

[Rushdoony] Yes

[Audience] {?}

[Rushdoony] Yes, if it goes that route. I think there is a likelihood of it, so I would say the chances are a little more in that direction. So, a country church is a good place to be if you can uh, plan realistically in terms of certain things. But, you have to realize what’s coming, and you have to say, “Now, what am I going to do about it?” If there’s nothing I can do about it in terms of being out in the country and so on, what realistically can I do in the way of preparing myself in the city? And I think the Lord blesses us when we do what we can where we are. We’re not going to be able, all of us, to do the utmost in protection, but we can do something wherever we are, and we have to realize that just as the world is spiritually and morally bankrupt, it is also voluntarily bankrupt, and it’s all a part of the same picture. It’s a belief in something for nothing. It’s a belief that man is his own god, and he can create values. But when you create values by just taking a piece of paper and stamping $10 on it, it isn’t much. Some of you may remember the Lindbergh kidnapping. Uh, do any of you remember, or…yes. Well, somebody reminded me the other day, was it you who reminded me? Somebody did, that the way the caught Hauptmann, the kidnapper, was the kidnap ransom was to be paid in $10 and $20 bills. In those days, the Depression, that kind of big money was rarely seen, so that when he went to the gas station and bought some gas, in those days gas in California was 9 and ten cents a gallon, tax is more now.

[Audience laughter]

[Rushdoony] Uh, the man was suspicious of somebody having that big a bill, and that’s how he was caught.

[Audience] {?} any kind of a universal policy coming out of..{?}

[Rushdoony] No. Very unlikely. Every country is more and more distrustful of every other country’s money. Now, who would want to share, pool their currency with us and assume all our debt, or would we want to assume Britain’s debts? You see. We’re ready to share with people when we feel they have a lot, but not if sharing means that we share their debts and liability, then that just doesn’t set well with us. [01:24:28]

[Audience] {?}

[Rushdoony] Because it doesn’t want to gold to rule. If you have a gold-based economy, you cannot have socialism. We want socialism. You cannot have power in the hands of the government, when you have power of money. For example, when the U.S. was coining $20 gold pieces, there was something like $19 in 50 or 60 cents of gold, and the cost of minting them absorbed most of the other 40 cents, they made two or three cents on a $20 gold piece. But, you can put out a hundred thousand dollars in paper dollars for a few cents, there’s a lot of profit there. Then you just put it in circulation and pay for goods and services you get. Or, you can produce a quarter, which used to cost in silver, around 24 cents to mint, you can produce it for two or three cents. So, there’s a lot of profit in money, in socialistic money, and governments like it. Well, I know you all have studying to do, so I don’t want to keep you anymore.

[Audience] Thank you very much. [01:26:00]

Tape ends.