Transcript
Jim Brown, Monetary Metals board member and author of “A Black Hole in Economics: Money Creation and It’s Consequences” joins the podcast today to talk about why bank-created money is killing your wealth, exposing the ‘Black Hole’ in economics, and how to protect your savings.
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Follow Jim on X: @hardmoneyjim
Additional Resources
Earn Interest on Gold and Silver
How to Earn Passive Income in Gold and Silver
Transcript
Benjamin Nadelstein:
Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein of Monetary Metals. I am joined by my friend Jim Brown. Jim is a Monetary Metals board member and the author of *A Black Hole in Economics: Money Creation and Its Consequences*, which is a great read and available now on Amazon. Jim, welcome to the Gold Exchange podcast.
Jim Brown:
Thank you, Ben, for having me. Here’s a shameless view of the cover of the book. You can see it kind of echoes the black-hole mystery of the topic.
Benjamin Nadelstein:
One thing I love about not only the book and the cover is that it’s a great one to keep on your bookshelf. Everyone pops out and says, “Oh, what’s that one about?” So even if they’re not into money, they’re going to pick that book up.
Jim Brown:
The other day we had a workman in the house. He was working on some lights, and he looked down, saw the book, and said, “Oh, what’s that? Are you a physicist?” I said, “No, no…”
Benjamin Nadelstein:
Well, actually, that dovetails great into my first question. A lot of people have things they do in their life—plumbing, electrical work, construction—so why would they need to be experts on how our monetary system operates? Why should they really need to know where money comes from or how it works?
Jim Brown:
That’s a really good question. I’d say that in a normal, well-functioning economy with a normal, well-functioning monetary system, you wouldn’t have to know all of this because we can’t all be experts in everything. But when these big systems we depend on start failing, and the “experts” running them aren’t doing a good job, then it becomes important for everyday people to understand how it works—sometimes it can even become a matter of life or death.
Money touches everyone, often in ways we don’t see. So individuals need to learn at least the basics of where their money comes from and how it works, for two main reasons. First, to protect themselves—to protect their investments and savings and grow wealth in a dysfunctional monetary system. Second, to understand it well enough to vote for better representatives who might eventually reform the system and move us back toward sound money.
I’ll admit, writing a book on money creation is a hard sell. Most people aren’t sitting around wishing someone would explain how money is created. But in the first chapter, I try to lay out why it’s so important to learn.
Benjamin Nadelstein:
I meet a lot of people, and when they hear what I do for work—anything dealing with money or economics—they almost always have an opinion on inflation. That’s not really the case if I told them I was a firefighter or a physicist. So why do you think everyone has an opinion on inflation, and how does popular thinking on money creation or inflation differ from your understanding?
Jim Brown:
Well, that first part is straightforward—everyone has an opinion on inflation because it affects all of us directly. And not just through higher prices. The way I talk about inflation is as unproductive money creation, which usually happens at the hand or behest of governments rather than private enterprise.
As for why there’s such a misunderstanding about inflation or money creation, I’d say it’s misunderstood from the top down. Historically, people knew that the vast majority of money is created in the banks when they make loans or buy bonds. That was well understood up until the early 20th century. But academic economics somehow lost track of this.
Starting around 1930, many economics textbooks began teaching it incorrectly—like Paul Samuelson’s famous explanation, where he claims individual banks don’t create money by themselves. But every time a bank lends or buys a bond, it creates money. That misunderstanding leads to all sorts of other misconceptions about our monetary system.
Benjamin Nadelstein:
I like that term “unproductive money creation.” It makes me think about running a bar tab—if you can’t actually pay it, that’s unproductive, right? Let’s talk about this 2% inflation target that so many central banks have. They act like 2% is a magical sweet spot, and if inflation is above or below that, it’s a problem. Why 2%, and what should investors think when they hear about this target?
Jim Brown:
There are a few stories about how we landed on 2%. One version I’ve heard is that Janet Yellen’s husband suggested it to her, she floated it at Fed meetings back in the Greenspan era, and it stuck. The idea is that if annual inflation is at 2%, people won’t protest as much—it’s small enough that most won’t notice they’re losing purchasing power. But if there’s a recession and wages dip a bit, people still feel like they got a raise on paper, so it keeps the peace in a sense.
On a deeper level, though, a constant 2% inflation rate is basically an excuse to erode the currency slowly. It helps government finance its spending because it can pay back debt in depreciated dollars. Over time, that 2% compounds, and it steadily siphons off real wealth from the people to the government.
Benjamin Nadelstein:
Right, 2% every single year is a big deal if you think about it like a fee. If you saw a security with a 2% yearly fee no matter what, you’d probably hesitate. So why exactly does the government want prices to rise over time, rather than fall?
Jim Brown:
Because with inflation, the government can pay you back with dollars that buy less than when you lent them. If they borrow from you at, say, 3% interest, but inflation is 2% or higher, they’re effectively paying a negative real rate. In addition, taxes go up with inflation, so the government can collect more in nominal terms. If your wages rise but your productivity doesn’t keep pace, you’re losing ground. It’s just one way government offloads its debt burden onto the public without calling it a direct tax.
Benjamin Nadelstein:
Some investors say, “I’ll just do what the government does—take a 30-year mortgage at a fixed rate and let inflation handle the rest.” Could you compare that to how the government’s using inflation to manage debt?
Jim Brown:
Exactly. When you get a long-term mortgage at a fixed rate, inflation can erode the real cost of those payments over time, especially if rent or your income rises with inflation. And that’s essentially what the government is doing with its debt. It’s borrowing in fixed nominal terms, planning on paying it back with future dollars that are less valuable. It’s the same dynamic.
Benjamin Nadelstein:
What about TIPS, Treasury Inflation-Protected Securities? Some say, “Hey, that’s the answer. You get the benefit of the CPI adjustments.” Why isn’t that the perfect inflation hedge?
Jim Brown:
Two main issues: First, I believe the CPI understates real inflation. The Bureau of Labor Statistics has revised its methodology something like 25 times since 1980, and nearly all revisions end up lowering the reported inflation rate. Second, the Fed itself owns a large chunk of the TIPS market, which means they can manipulate the yield. So I’m not saying don’t ever buy TIPS, just proceed with caution. There are better ways to hedge against price inflation, in my view.
Benjamin Nadelstein:
Let’s talk about those better ways. If TIPS aren’t the perfect answer, and inflation is a reality, how should investors protect themselves?
Jim Brown:
First off, owning your own home can be a great move. But watch out for affordability in today’s market. Second, “sweat your cash”—don’t leave it in a low-yield bank account. You can buy T-bills or use money market funds to get a higher rate with minimal risk.
I’d also avoid long-term government bonds right now. The government’s incentives with its debt load mean it’ll likely keep rates below real inflation, so that’s a losing battle. Instead, if you’re comfortable with stocks, focus on value and dividend growers—real companies with steady performance rather than chasing price fluctuations.
Finally, gold (and some silver) is huge. It’s a timeless monetary asset. I’ve owned gold for decades and remain convinced it should be part of any serious long-term strategy. That’s doubly true if you can earn interest on your metal, for instance through Monetary Metals. Historically, gold paying interest competes with—or even outperforms—many traditional asset classes.
Benjamin Nadelstein:
So what about silver? Is it just “junior gold,” or do you see a meaningful distinction?
Jim Brown:
They often move together, but silver has more industrial demand—batteries, solar, electronics—so it trades partly on industrial cycles, whereas gold is more purely monetary. Central banks around the world accumulate gold as a reserve asset; that’s less common with silver. But for individuals, silver can still be a decent store of value, especially in smaller denominations.
Benjamin Nadelstein:
Okay, let’s talk crypto for a moment. Some say Bitcoin or other cryptocurrencies are the future of money. Are they actual competitors to fiat, or are they too speculative?
Jim Brown:
I’m skeptical. There’s a lot of hype in crypto—so many joke coins out there. Bitcoin is the most serious contender, but I don’t see it taking over as a day-to-day monetary asset. I’m rooting for market-driven money, but I’m not convinced Bitcoin will fill that role. Never say never, but for now, I just don’t see a clear path to broad monetary adoption.
Benjamin Nadelstein:
I’d like to move to a quick rapid-fire round:
1. Which performs better against the dollar in 2025: gold or silver?
- Probably silver, but that’s just a guess.
2. Favorite economist of all time and why?
- George Reisman. He wrote *Capitalism* and taught me most of what I know about Austrian economics.
3. Economist you dislike the most?
- I’d say Paul Krugman used to bother me a lot, but he’s fallen out of favor. Ben Bernanke also frustrates me—he should know better.
4. Book on finance you recommend most (other than your own)?
- The Intelligent Investor* by Ben Graham is still a classic for stock market investors.
5. A quote by Jim Grant: “Progress is cumulative in science and engineering, but cyclical in finance.” Where are we in that cycle?
- We’re starting to circle back. The old understanding of money creation is coming back among investors, but it hasn’t reached mainstream academia yet.
6. Inflation or deflation in 2025—what’s more likely?
- They’re both risks. We can have a sudden deflationary shock, quickly followed by more attempts to inflate. The bigger threat is ongoing unproductive money creation.
7. An economic metric you watch that most don’t?
- Total liquidity—Michael Howell’s “Capital Wars” covers this well.
8. Biggest misconception about central banks?
- That they actually control interest rates and that those rates matter more than the overall money supply.
9. Will we see nominal negative rates in the U.S.?
- Only if forced by policy—it’s not a natural market outcome.
10. Is the 60/40 portfolio dead?
- It’s suboptimal. Replace some bonds with gold or gold-paying assets to improve it.
11. Which historical period best explains today’s economy?
- Any severe bubble period. We’re in a similar zone of speculation and high debt.
12. Will crypto and gold compete or combine in the future?
- They’re competing now, but I hope we see tokenized gold on a blockchain at some point.
13. A financial event you wish you could have witnessed?
- The Mississippi Bubble—fascinating mania.
14. A bold prediction about the future of finance?
- In the next 10-20 years, we’ll see a major disruption of the current monetary order.
15. What question should I ask all future Gold Exchange guests?
- Ask them what they think really drives asset prices at a deep level—liquidity, animal spirits, or something else?
Benjamin Nadelstein:
This has been great. Where can people find more of your work, and where can they buy the book?
Jim Brown:
You can get the book on Amazon, and if you enjoy it, please consider leaving a quick review—just a sentence or two is a big help. I also write a Substack called *Hard Money Jim*, and you can find me there. I’m not super active on X (formerly Twitter), but my handle is @HardMoneyJim, and I’m on LinkedIn as Jim Brown CFA.
Benjamin Nadelstein:
Jim, it’s been a pleasure. Thank you so much for joining the Gold Exchange podcast!
