In the latest episode of Money Metals Midweek Memo, host Mike Maharrey takes a deep dive into the enduring value of gold and silver in a fiat-driven monetary world. Here are the key takeaways from the episode.
Gold and Silver vs. Fiat Currency
Maharrey opens the episode by addressing a common question: "Why gold and silver?" He compares it to asking why people hold dollars, underscoring that gold and silver have always functioned as sound money. Unlike fiat currencies such as the US Dollar, which steadily lose purchasing power due to government-induced inflation, gold and silver hold their value over time.
To emphasize this point, Maharrey uses a striking "fine suit" analogy. In 1900, one ounce of gold could purchase a fine suit for $20-$30. Today, that same ounce still buys a fine suit, now priced at over $2,000. While the suit itself hasn't changed in value, the purchasing power of the dollar has been drastically reduced through currency devaluation.
This comparison highlights how fiat currency's value erodes, while precious metals remain a stable store of wealth.
Gold's Record Performance
Gold's performance over the past year underscores its role as a reliable hedge against currency risk. Maharrey reports that gold set record highs globally, significantly outperforming traditional investment assets.
- In U.S. dollar terms, gold rose by 26%, making it one of the best-performing investments of the year.
- In AUD/USD, gold surged 38%, surpassing the performance of Australian equities by about 10%.
- The Australian dollar also depreciated by 10% relative to the U.S. dollar, a sign of broader global currency devaluation.
Maharrey explains that although the U.S. dollar is often seen as the "cleanest dirty shirt," it still suffers from depreciation, albeit at a slower pace than other global currencies. Gold, by contrast, remains the "clean shirt," consistently holding its value as fiat money weakens.
The Federal Reserve and Inflation
In this segment, Maharrey identifies the Federal Reserve as the main culprit behind inflation, which he defines as an increase in the money supply. He references economists such as Milton Friedman and Ludwig von Mises, who famously argued that inflation is always and everywhere a monetary phenomenon.
Despite recent claims of monetary tightening, Maharrey points out that the M2 money supply rose to $21.5 trillion in December 2024, an increase of nearly $1 trillion in just one year. This represents an annual inflation rate of approximately 5%. Maharrey emphasizes that this monetary inflation inevitably leads to higher prices across the board, further eroding the purchasing power of the dollar.
The central bank, he argues, is trapped in a "catch-22." While it needs to raise interest rates to curb inflation, it simultaneously needs to lower rates to support an economy addicted to cheap debt. Ultimately, Maharrey believes the Federal Reserve will prioritize inflation over preventing an economic collapse.
Tariffs and Inflation Myths
Maharrey addresses recent concerns that tariffs could fuel inflation. He explains the confusion between "price inflation" and "monetary inflation." While tariffs can cause localized price increases, they don't lead to broad-based inflation unless accompanied by an increase in the money supply.
He provides a hypothetical example: if tariffs raise the price of certain goods, consumers may cut spending on other items to compensate. This dynamic prevents a general rise in prices across the entire economy. True inflation, Maharrey asserts, is caused solely by the central bank's expansion of the money supply.
To reinforce this point, he quotes economist Henry Hazlitt, who wrote that monetary inflation is directly responsible for price increases. Maharrey notes that policymakers often conflate these concepts to shift blame for inflation onto external factors like tariffs, supply chain disruptions, or corporate greed, rather than acknowledging the role of monetary policy.
Systemic Risk and Gold as a Hedge
In this section, Maharrey cautions listeners against complacency, even during periods of political stability. He acknowledges that while some investors have confidence in current economic policies, systemic risks tied to the fiat monetary system persist. The constant devaluation of the currency, fueled by government borrowing and central bank money creation, presents a significant threat to long-term wealth.
Maharrey underscores the importance of holding gold and silver as a hedge against these risks. Precious metals, unlike fiat currency, are not subject to arbitrary inflation and maintain their value during economic crises. He highlights how past financial collapses, such as the 2008 housing bubble, were exacerbated by excessive money creation—a pattern that continues today.
Final Thoughts and Call to Action
As the episode concludes, Maharrey urges listeners to consider adding gold and silver to their investment portfolios. Despite record-high prices, he believes precious metals remain an essential safeguard against inflation and economic uncertainty.
He advises listeners to contact Money Metals Exchange to explore their options, emphasizing the availability of both physical delivery and secure storage services.
Maharrey also invites listeners to visit moneymetals.com/news for additional resources and to subscribe to the podcast for regular updates. He concludes by thanking his audience for their time and attention, reiterating the importance of sound money in preserving wealth.