Propaganda and the Financial News - Breaking the Dollar podcast

This is Breaking The Dollar the podcast that dismantles some of the biggest misconceptions about money.

Presented by Gainesville Coins.

Hello and welcome back to Breaking The Dollar. I'm your host, Everett Millman and on today's episode we're going to be discussing something that a lot of you might be familiar with if you're regular viewers of the mainstream financial news media.

If you watch a lot of TV financial news, then hopefully you will pick up on some of the things I'm going to be discussing because it has struck me how we seem to miss the fact that the TV financial news is mainly for entertainment and kind of propaganda purposes.

What I mean by that is it is not objective, unbiased fact. They are not giving away free professional analysis of the markets they're in the industry of entertaining and getting viewers.

Also keep in mind that the media companies that produce these programs are for profit corporations, they are businesses in their own right and they have a heavy conflict of interest with a lot of the assets that they are pushing in their programming, mainly the stock market.

I think you'll agree if you do watch any of these programs that they focus heavily on stocks. They don't talk so much about bonds cause those are boring and safe and harder to understand. They're always talking about the stock market.

Moreover they're always talking about it in a positive and an optimistic light and the idea that they have balanced coverage, it just goes out the window, if there's never any skeptical or bearish opinions to balance out all of the stock market bowls.

Virtually every analyst or insider that they bring on has some type of foot holder interest in the stock market already. When they are giving you advice about how the market is going to go up and why.

To me that is on its face an obvious conflict and they're not very transparent.

Technically they're supposed to disclose all of their positions in the markets when they're giving you advice like that. But in practice that rarely happens.

Imagine if they did, so there'd be a little box in the corner of the screen every time someone was being interviewed and it would have to list all of their positions or their firm's positions. It would take way too long. The list would be far too long to fit on the screen and they really don't want to disclose that kind of information.

A comparison I can make is if every time a politician was giving a speech or doing a debate if onscreen they were forced to disclose that politicians political contributions from donors and lobbyists and what industries give them money. They would never do that because then you could plainly see what might be influencing some of their answers.

And so this same dynamic is rampant in the financial news. They do this to try and persuade you, to try and sway public opinion because as we've discussed many times on this show, that's really the secret sauce of markets.

That's what keeps markets rolling along is people having confidence.

The flip side of this trend or this, you know, disposition of the financial news media to always be bullish on the stock market and spend all of its time focusing on stocks and cheerleading and celebrating every time the markets hit a new high is that on the flip side, the one asset that never gets positive coverage and the financial news is gold.

You could probably also now throw cryptocurrencies into that mix, as those two assets are constantly bashed.

Now I'll get into some of the reasons behind this, but let's just look at examples of how they do this.

So most analysts make very bad logic and bad faith arguments about gold.

They will say things like, you can't eat it. Well, you can't eat pretty much any other asset.

Well, you can trade in your dollars for food.

Sure, but you can't directly trade in a stock for food.

So that might sound ridiculous, but I hear it all the time.

You can't eat gold as if this is some sort of coherent argument against investing in gold.

They also point out that gold offers no yield. Okay, fair enough. And I'll get it a little more into this later. Different investments offer different upsides and downsides. There are pros and cons to all of them.

One of my colleagues, Steven wrote a great article that you can find on our blog at comparing stocks versus gold where he makes the point that these different asset classes, they have different purposes, different benefits and different weaknesses and that's why nobody in their right mind would advocate for an investment portfolio that is 100% precious metals. I would never say that, or anything close to that. It's all about balance and diversification.

That gold and silver are a part of your investment portfolio. You see the opposite with most of the discussion about stocks that's on TV. They act as if you'd be fine if you had 100% of your portfolio in equities, so long as maybe you mix in several different companies or companies in different sectors, but nonetheless, that's 100% in stocks.

So there is an imbalance in how they treat, how much of your portfolio you allocate to different assets when they're discussing gold.

You also see sometimes straight up name calling. Gold is called a barbarous relic. That it is just something from the stone ages and it's this unsophisticated thing that society has and civilization have moved beyond. Is that really an argument?

No, it's an appeal to emotion.

It is a biased view about what gold is and what benefits it offers and one of the common ways this is accomplished is just through attacking the people who own gold or advocate for owning gold.

An acquaintance of mine who is a certified financial planner who is kind of agnostic about gold. He's definitely not against it, made that point to me that he's like, wow man, you guys really take a bashing in the media. Almost every time gold is brought up, suddenly the people who are advocating for it or trying to explain the benefits are wearing tinfoil hats and they are crazy skeptics and there's even a term for this called Goldbug.

I can't think of any other asset in all of the investing world where the people who analyze it or are interested in it are attacked and made fun of that way. That's a very powerful way of influencing people's opinions is if you make these unfounded jokes about an entire industry, then people are who don't know any better, are going to assume that. Yeah, those people are crazy.

Now, one of the main criticisms that underlies this attack against gold bugs is the idea that they are perma bears. They are permanently bearish about the markets. They are always saying that another market crash is around the corner.

Now granted, market crashes don't happen every day, but neither do disasters.

Why do you think people buy insurance? Is it because they like giving away a small portion of money every single month for nothing?

No. It's because there is a huge benefit or pay off in the event of a disaster that you have slowly accounted for and the idea of investing in gold is similar.

A good analogy is that it's like a seat belt.

You don't think about the seat belt you're wearing in your car 99% of the time, but it is there to protect you. And in that rare instance, that 1% where you get in a crash, it could save your life.

Nobody would advise you not to wear your seat belt or not to get car insurance. That's a sucker's bet because it's very unlikely that you get into a crash.

Nobody would say that when you get a mortgage, they make you get proof of insurance. You have to have home insurance.

Would you tell someone who's going skydiving not to have a backup parachute? Whoa. The chances are very low that your first parachute doesn't work, but the risk of failure, the consequences if things go wrong is so high, is so devastating that it you would be crazy not to have that backup plan or that safety net.

And that's one of the differences when we're talking about risk and liability with companies that take public funding or hedge funds that manage other people's money. When you're risking OPM, other people's money, you don't have that liability.

Those fund managers get paid based off of a percentage of the value of the fund itself. So they're getting paid either way, whether they win or lose, doesn't matter if you go broke or you lose your investment, they're not the ones holding the bag.

So it makes no sense not to have that safety net.

That's the logic behind owning gold.

But you never hear them talk about that in the media. They only tell you the downsides. And again, I'll reiterate, all investments have different strengths and weaknesses. So ideally you should have a mix of them, a balance in your portfolio so that you can enjoy all of those different benefits.

And it really is shocking when you think about how one sided the discussion is when there are so many crazier things out there.

It's not as if in all of history, there's never been a market crash.

Quite to the contrary, every eight to 10 years that seems to happen. So is it really crazy to plan for something that is historically proven and likely inevitable?

Isn't it crazier that we have so many corporations that have leveraged debt and have taken on leverage loans?

Isn't it crazy that we have publicly traded companies that have high stock valuations yet they never turn a profit?

Isn't it a little bit crazy that there are companies that trade at multiples of over a hundred of their earnings, so their valuation is based entirely off of future projections that haven't happened yet.

Isn't it crazy that there are bonds that offer negative interest rates, negative yields, so now you're paying someone to give them a loan?

All those examples I just rattled off are real life instances of things going on in the financial sector.

Nobody in the media talks about how those are crazy. No one's ringing the alarm bells and yet anyone who's buying gold or advocating for gold is some sort of ridiculous skeptic. It's beyond the Pale.

That's just very ironic to me. I mean, even during relatively good economic times when business conditions are good, companies still default. Their stock prices can go to zero or they go bankrupt. And that means also that they default on their bonds.

Even governments with relative high-frequency will default. Governments all over the world do this, but gold has never gone to zero in all of its history and it has a much longer track record than any company or any financial market or any government.

So ultimately you should be asking yourself, why does the media do this? Why is gold almost always demonized? What's the agenda behind that? And you really don't have to speculate to arrive at the answer.

And that is, gold competes not just with currencies. That's why governments tend to not like it, but gold competes with other potential investments.

So every dollar that you invest in gold is a dollar that is going to be outside of the stock market, outside of the wealth management industry and outside of a bank or government.

And you can kind of circle back to a topic that we covered in a previous episode about the gold confiscation.

In 1933 during the Great Depression, governments realized that money spent on gold or money more accurately held in gold was not going to make its way into the stock market and into banks and government coffers. It is outside of the system and they don't want that in general.

They don't want you to save your money at all. They want you to spend your money.

We're constantly obsessing about consumer spending and how spending drives the economy.

Fair enough, but at every turn over the past many generations, saving your money is punished.

And this is not limited to the United States either. If you look around the world and even in developing countries like India, the government places major restrictions on owning and trading gold because that is money that is not going toward other investments, other assets.

It's money that is held outside of the banking system.

And so when you make that connection, it's not all that surprising that the corporate media and the government would have aligned interests against gold.

We live in a different world today than we did in 1933. It's not as easy to just pass a law and pry the gold out of everyone's hands.

And that's certainly true when you look at it globally with so much gold held by the public in places like Germany and China and India, it would be a logistical nightmare to just try and force everyone to give up their gold again.

But the strategy of demonizing gold and making gold investments seem like some insane idea that only conspiracy theorists would buy into is a very good way of over time influencing the public opinion against gold.

So the next time that you do happen to be watching the financial news on TV and if God forbid they do bring up gold, pay attention to how they frame the discussion. Count how many times they resort to name calling or they insert some type of skepticism about the premise that gold is worth anything.

And maybe even check to see if they say that you can't eat gold.

So now we're ready for this week's question from the listeners.

We've got one from Louis or Louis doesn't say where he's from and he asks,

Why Is The Fed So Concerned Inflation Is Low?

And that's an interesting way of framing it.

If you didn't catch the recent meeting of the Fed or the Fed chair who's like the leader of the Fed, he had appeared before Congress a little bit before that and in both instances, one of the recurring talking points was that inflation was below the Fed's target.

Now the Fed's target is 2% annual inflation and to some degree inflation is unavoidable as there is more money supply in the economy, each of those units or dollars is worth slightly less.

That's how inflation works, but for the average person, inflation is not a good thing.

Obviously you don't want your dollar to buy less, you don't want prices to be higher, so it is a little bit disjointed for the institution that controls our monetary policy to be talking about wanting more inflation.

So I do see where this question is coming from.

The best answer I can give is that it has to do with debt.

If you have a lot of long term debt, like low and behold the government does, you know we have over $22 trillion in debt right now, just the US Government. That doesn't even count all the other governments in the world.

If you have a lot of this long term debt, inflation is your friend because that means over time the actual dollar amount of the debt stays the same.

But if each dollar is worth less, it becomes easier to pay off that debt. It took less real value to pay off the money and that's my answer.

That's sort of my expert opinion on it. There are probably other factors that play into it, but there's really no good reason we should want lots of inflation. In fact, that's typically a sign of bad economic times.

If inflation is high, that's like a crisis, but if you have a lot of debt, you owe a lot of money, inflation does help you. It lessens the burden of your debt.

So as always, thank you so much for tuning in. We appreciate everyone listening.

Be sure to join us next week where we cover what is undoubtedly the most famous and most controversial gold coin in modern history. So check that one out.

Today's episode was presented by our sponsors, Gainesville coins.

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The views and opinions expressed on the show are for informational purposes only and should not be used or construed as professional investment advice.

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Everett Millman

Everett Millman

Managing Editor | Analyst, Commodities and Finance

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in Reuters, CNN Business, Bloomberg Radio, TD Ameritrade Network, CoinWeek, and has been referenced by the Washington Post.