Lynette Zang, legendary market analyst translates the financial noise – Rebel Capitalist Show Ep. 16!

If you're interested in the insights of one of the best market analysts there is, keep reading. Her knowledge dates back to the 1960s.

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Lynette Zang

In this interview, I discuss with Lynette Zang the Black Monday stock market crash, the corporate bond market, inflation, digital currency, government-backed currency, and much more!

We have the privilege to learn and grasp her translation of the financial noise.

Lynette Zang's story and experience

George: It gives me a great deal of pleasure to bring someone to The Rebel Capitalist Show that I have not yet had the opportunity to meet.

So I'm super, super excited to get her here. Every single time I post a video I get tons of comments saying, “You got to have Lynette Zang on the program.”

Lynette, you are the Chief Market Analyst with ITM Trading, and I love your goal.

It says your primary goal is to translate the financial noise into understandable language. Perfect, perfect, perfect.

Lynette Zang: Exactly.

George: So welcome to The Rebel Capitalist Show. Thanks for being here.

Lynette Zang: I am very happy to be here, George.

Just like you, I've heard a lot of wonderful things about you. So I'm very excited for today too.

George: Okay, awesome.

So for my viewers and listeners who don't have a good or don't understand your back story, can you go into that for us, and let us know how you kind of got to where you are today?

Lynette Zang: Oh, absolutely. You know, I really feel like I have been born and groomed for this moment in time, because my uncle was a major antique dealer back east.

Jason Hartman Pandemic Investing

So when I was 10, that's when I actually started in the markets, and he taught me how tangibles, how the trend cycle of the tangibles work from undervaluation to fair to overvaluation.

Also he taught me about the benefits of gold, and actually how to hold lots and lots of gold legally when it was illegal to hold five and a story, I'm sorry, I'm kind of going off on a tangent but I didn't realize it at the time, my parents and I were at his house.

And he said to my parents, “If anything should happen to me, Aunt Birdie will be well taken care of for the rest of her life because of what I have in these safes.”

He had two huge floor safes in there. So I turned around to look. And what I saw were stacks and stacks of gold coins.

So as an antique dealer, those were all pre 33s, didn't really realize it at 10.

But knowing what I know now, my bet would be that there were probably at least 1,500 ounces in each safe, probably more than that.

So that would be a substantial amount when you couldn't hold more than five.

But I also started in banking when I was 15, so at a very young age, and then I also became a stockbroker in 86.

I've been through the whole financial industry, that's my background, and that's why I really understand it as deeply as I do.

That's why I'm trying to translate that financial noise because we need to know this. How many times can you be lied to when you do not know the truth?

Black Monday Stock Market Crash

George: Yeah. Yeah, you know, I'm curious, what was your experience with Black Monday?

Lynette Zang: Oh my gosh. Well, we were just talking about that the other day.

I'm an early riser. So that morning and my alma mater was Shearson. And so I went into the office, perfectly normal day, I was looking at my Quotron, which were the computer systems that we had then with the tickers running.

Everything seemed pretty normal to me. I went out for lunch, and when I came back, pardon me, but it was like all hell had broken loose.

Lynette Zang: Seriously, the brokers were literally under their desks, not figuratively, literally under their desks, many of them and none of them would take any calls.

For me, because I was only about a year into it, at that point, and because I didn't understand, even though Shearson had phenomenal training, but they did not teach you how to read the technical language of the markets.

And so I figured that I didn't want to burn anybody. So I cut my teeth on government bonds, on treasuries, thinking, well, they can tax you to get the money to pay you.

So even if I was wrong about interest rates, I really couldn't burn anybody.

So I happened to have this client that owned a small savings and loan in Crockett, Texas, for any of you guys that are out there.

He had me on his Squawk Box in the middle of his conference room with all of his wildcatter guys and business guys in Crockett because they couldn't get ahold of their stockbrokers either.

It was a career-making day for me because they knew a lot more about the technical language of the markets than I did for sure.

They were just saying, “Well, what's happening with this and what's happening with that.”, and then afterward, they all became my clients and I'd gone off salary October 1st.

But these guys were very aggressive. They were traders, they really understood how to do this and what to do.

So they took advantage and taught me how to take advantage of what happened in the aftermath of that.

So we buy a bunch of stock on Monday, we'd sell it on Friday.

But I got to tell you, on Black Monday in 87, it did not matter how sound you thought that company and that stock was, everything plunged, everything.

So it was seriously the best day that I could have ever been a stockbroker, no doubt about it.

George: Yeah, obviously, I mean, you remember like it was yesterday. It's just incredible.

Lynette Zang: I remember what I was wearing.

Does the stock market always recover?

George: Yeah, just so the viewers and the listeners know, I had all this tidy list of questions that I was going to ask you written down here.

But I'm going to completely go off-script because I'm really fascinated to get your opinion on this.

A lot of times in the media or in the YouTube space with these financial advisors, I just hear, especially from the younger ones that haven't really lived through a crash or any type of inflation or a 1987 type of deal.

You just hear it repeated over and over and over again.

Well, if you just always buy, so always buy if the market goes down, well you continue to buy all the way down, and eventually, it will recover.

Everyone knows the stock market always goes up over time.

So I don't care if it goes down. I don't care if we have a crash. I've got my Robin Hood account.

And I'm just going to continue to buy and buy as long as you're buying solid companies, I'm in it for the long term, for the 20 years, for the 30 years.

Correct me if I'm wrong, what they fail to understand in my opinion is that stock markets, just because it's a stock market doesn't necessarily mean that it goes up over the long term.

If you look at Japan, and look at their stock market in 1990 to where we are today, it's nowhere near the level, maybe 50% of the level that it was in 1990.

The European market might just have recently got to a point where it was in 2000.

But just because it's a stock market, or just because it's the United States stock market doesn't necessarily mean it's going to be any higher in 20 or 30 years than it is today.

If you go back and say, “Well, it's happened every time over the past 100 years.”, but that's like looking at a roulette wheel and saying, “Okay, well we've hit black the last eight out of 10 times, so we're most likely going to hit black again another eight times.”

Just because it happened in the past with a stock market doesn't necessarily mean that it's going to happen in the future, and I just like to get your professional take on that.

Lynette Zang: Well, there are a few things that I would say about that.

Number one, when people refer to the stock market, as you said, what they have to understand is that when a stock goes low enough, it's out of that index, and something else gets put in.

So if all you're looking at is the industrial average over a certain period of time, or what have you, you've got to understand there's a rotation of stocks in there.

Then you also have to look at what stocks are driving the company. So for example, right now, it's at the highest level either ever, even before 1929 or before 2000, where you just have the market dominated by just a few players.

So not all stocks are rising.

Now, if you buy the index, okay, then those changes might matter.

But here's the other point that I really, really, really like to make.

And that is that you have to do an awful lot of due diligence and you really have to dig to understand whether or not this company is truly as solvent and solid as they appear to be.

You mentioned Japan, you mentioned the early 90s and they were really the ones that came out with zombie companies.

These are well-known companies, they would be household names, and you would assume that they're awesome.

Except that a zombie company is a corporation where at least three years and looking into the future, they do not have enough earnings to pay their interest or principal or all the principal on their debt.

And so the bank loans them the money or they issue bonds, to take on other debt to pay the debt that they already have, which is kind of a Ponzi scheme, isn't it?

George: And the government.

Lynette Zang: And the government! Exactly, exactly.

The other point of this is that the whole system is based upon constantly compounding debt, because debt creates money and paying off that debt burns money, or takes money out of the system.

So they don't really ever want you to not be taking on more and more debt.

So what happens when you do that? You referred to inflation.

Is it really the rising inflation or are the stocks really worth that much more money or is the currency really worth that much less?

So officially, out of the original dollars worth of purchasing power, according to the Federal Reserve and anybody can go on the FRED website, and put in purchasing power or the consumer dollar, it's at 3.8.

I'm pretty sure, I could be off a little bit, but I don't think so, 3.89 cents out of that original dollar is what you have left officially, in terms of purchasing power.

So when you're looking at the stock market, and you're wondering how long this insanity can continue, you also need to look at what happens.

There isn't one little doubt in my mind. I mean, I've studied the currency lifecycle since 1989.

And there is not one little teeny weeny doubt in my mind, but that the system died in 2008. I stand by that. I can prove it with data.

My nickname's Data Gal.

And all they've done is… well, the whole thing is a big massive experiment, but failed experiments ever since, and their answer to all these QE and zero interest rates and all this alphabet soup full of garbage is that they didn't do enough.

No, well, it didn't work. We're in a global slowdown, but the answer is to do even more. And that is because they are out of tools.

So when you talk about the stock market going up, you have to take a look at Venezuela.

When they reset the currency, the stock market went from a high point, the best performing stock market in the world, to the ground, and now it's got to start all over again.

So we get confused. It's called nominal confusion.

And it's baked into the very design of the system because people marry numbers.

But think about this. If you had a $20 bill 10 years ago, and you have a $20 bill today, nominally, they're identical.

They're exactly the same, $20 bill, but what that $20 bill bought you 10 years ago or five years ago or last year and what that buys you today is a whole lot less.

George: Yeah, and taking that back to the stock market, it's not only you are you losing purchasing power with the dollars that the stocks are denominated in, but I would argue that you're almost getting like shrink inflation with the actual companies themselves.

You're buying them at such a lower multiple, that's called a PE.

And now the cape ratio is over 30. So it's like buying a bag of potato chips back in the 80s where you got the full thing, now, it's only like half the bag, but it's still the same.

So my point is it's still the same company, but you're only getting half the earnings for a higher price.

Lynette Zang: Exactly. And the other phenomenon, when you're talking about your due diligence, I mean, honestly, this is critical.

Let's look at Tesla, for example, and Elon Musk and I'm not taking anything away from his genius.

Clearly he is a genius. But a lot of the debt has been funded with his shares of stock.

Well, when I said the other day when it was peaking, and I don't know where it is today, but the other day when it did that massive runoff, I said if I were him, I'd go out and I'd pledge that stock and take on more debt right now.

But there are a lot of companies that have done that. So what happens when they do that?

They pledge it to the bank at this level, and then it plunges. Well, what happens then?

So if you're going to buy stock, and you're going to properly do your due diligence, you need to understand all of these things that you and I have just been talking about.

You need to know how are they funding it.

And the corporate bond market? It's a time bomb…

George: Well, on that topic, how does the corporate bond market play into this?

Because from a layman's standpoint, I look at the corporate bond market and I see that as far as investment grade, the majority, and I'm going to just throw out a number, I'd guess probably 90% is BBB.

And I don't think most people realize that the pension funds who are the major players as far as buying that corporate debt, they can only buy “investment grade.”

So when it goes from BBB down to junk status, the majority of your buyers are completely gone.

And that can happen by the stock market falling, which then gives us this feedback loop where the stock market goes down.

So that blows up the bond market and the spreads in the bond market going through the moon or the interest rates in the bond market going up, then that creates a downward cycle on the stock market.

So since you've got such a thorough understanding of the plumbing and how that works, how are you looking at the corporate bond market right now?

Lynette Zang: Oh, it is worse than any roulette wheel. It's really a time bomb.

First of all, I always like to explain this. I'm sure your viewers know, but just for those that don't.

A bond is a debt, is debt. It's real simple. And when a bond is issued, it's issued at par and it has an interest rate coupon.

So when interest rates go down, the principal value of the outstanding bonds go up.

When interest rates go up, the principal value of the outstanding bonds go down.

So a lot of these corporations and a lot of banks, they're valued based on this principle value holding.

In the meantime, you have the grading services that did such a great job into 2008 loosening up the rules again, enabling that massive growth in that BBB area.

So you are 100% correct. But it's not just that the buyers dry up, but that they also would then have to liquidate what's in there.

So how does that going to impact the pensions and the bonds that are outstanding that you might also be sitting in, in mutual funds, or in ETFs, or individually.

For that matter, and remember too, there was a day prior to 71, where you had a bond and it had a coupon and you held a certificate and you clip that coupon and you sent it in and they couldn't track the money.

Today, all bonds are done in book-entry only, which means that if you're owning a bond or owning a bond fund, you are merely the beneficial owner, not the legal registered owner, and that can create problems.

We saw what happened in 2008. No one went to jail. Why?

What they did was disgusting and despicable and evil, but it was not illegal.

So I think that is definitely a time bomb. I think that they've got to keep those interest rates low.

I mean, look what happened when they tried to raise them, because the trillions in the bond market is much, much bigger than the stock market.

So when those interest rates start to go up, that has, you talk about a feedback loop.

Boy, it's so much bigger than just between the stock market and the bond market.

It impacts the very financial plumbing of the gold because it impacts all of the banks that are holding this debt but it is a good reason for us to have to reset the pension system, isn't it?

The connecting dots between the corporate bond market, the pension funds, and the Fed

George: Yeah. Yeah. I mean, I think that is a whole another topic, that we'll get into that in just a moment.

But I want to take things back to the Federal Reserve because I don't think enough people connect these dots.

Even people that maybe are interested in your channel or my channel where we discuss these types of things.

I don't even think they always connect the dots between something like the corporate bond market, pension funds and the Federal Reserve.

And as you and I know, it goes back to the Fed and they artificially dropped interest rates, they go to NIRP or ZIRP, zero interest rate policy, and that has the pension funds searching for yield. Well, they've got to get a 7% return to meet their liabilities.

So how on earth do they do that if interest rates are at zero and the treasuries over the 10 years yielding call it 2%?

Well, so what they have to do is have to go further out that risk curve.

They have to go not only into corporate debt, which goes back to what we were saying, but they also have to start investing in crazy stuff like private equity.

Lynette Zang: Private equity, yes.

George: The SoftBank and WeWork and Wag and Uber and all these things, but through private equity, and I'm sure you've got a lot of experience there.

Most of the viewers might not know what private equity is, they hear that and they don't really understand that that's 10 times riskier than all these other investments.

And the pension funds that should be in the safest assets that we know.

That's the money set aside for the orphans, and the widows and just the safest of the safe, treasuries, something like that.

The Fed has made them buy these assets that are, in my opinion, probably riskier than going to that roulette wheel.

Lynette Zang: Well, there's a huge feedback loop in that because and it's so funny.

I was just reading an article about that yesterday.

But it's so interesting because private equity are these companies like SoftBank that went from zero to billions because they could borrow money so cheaply.

You and I cannot borrow money as cheaply as these guys can borrow it.

So it's easy to look big when you do that. But these investments are not liquid.

You can't sell them, and they are opaque.

So the argument in this article was that this was great for the pension plans, because gosh, if it was more visible and it was more liquid, and they are nervous about something, they might be tempted to sell this way because they have no idea what's going on.

They can't sell anyway because it's not liquid.

So it is insanity on steroids, and yes, it is a huge problem.

I mean, WeWork was ridiculous, Adam Neumann, brilliant.

I mean, he walked away with tons and tons.

But the jeopardy that they also put the real estate market in and that ability to keep that supported, which is a huge part of not just the U.S. GDP but globally, I think it's about 30% of the U.S. GDP.

And that already showed signs of deterioration at the end of 08.

So yeah, it goes back to if you get to make the rules, and I tell you, you're going to buy something, that's pretty easy, isn't it?

You can support that market until you can't, until it gets too expensive.

It's not too expensive as long as they can keep the banks afloat, like we saw in 2008, trillions and trillions, and hey, we are in an ample reserve regime, will give you anything that you want, just don't have a hissy fit.

And you know, it's kind of easy to make things look good.

But what people really, really, really need to understand is that the more money that they create, to make things look good, the less value those dollars that are out there that we work for, that we try and save, the less value that they have.

Frankly, the only thing that is holding this system together today is public confidence still in the currency, and it's waning, but still in the system.

The 1970s inflation

George: Yeah, that's a great point.

I wanted to talk to you a little more about inflation, and more specifically, the 1970s because that's something that you had personal experience with not only being kind of in the market, but also you actually lived through it.

So going back to the 1970s, in your opinion, do you think that inflation, obviously it's due to money supply and velocity, we know that that's the groundwork for it.

But it seems like it has a lot to do with psychology as well, going back to what you're talking about with confidence, and that pertains to velocity.

And I noticed that if you look at a chart of inflation, not just in the United States, but in countries around the world that seemingly had nothing to do with the United States.

I'm not just talking about the UK.

But if you look at and I don't have the charts in front of me, but say like Vietnam, they had the same type of inflation as the United States.

It seemed to me that might have been triggered by 71.

Nixon taking the dollar off the gold standard or officially removing it from the gold standard, and then maybe psychological components coming into play.

And that's what created inflation that wasn't just U.S. centric but was really seen around the world. Do you have any insights on that?

Lynette Zang: I have a lot of insights. I studied it a great deal.

But it goes back further than that, because in 48, the U.S. dollar became the world's reserve currency.

And it was pegged to gold at $35 an ounce. But when the U.S. entered the Vietnam War, they started to print a lot of money.

At that point, even though citizens couldn't convert dollars into gold, other governments could.

So we were actually exporting inflation around the globe, and foreign countries started turning in dollars as the world's reserve currency.

Let me kind of back up just to move forward here.

But as the world reserve currency, that means that if you are going outside of your borders to buy anything, medicine, oil, lumber, steel, you had no other options, but to use dollars to do it with.

So everybody had to hold dollars, and here we are exporting inflation to pay for the Vietnam War.

So foreign governments started sending in their dollars and converting them to gold at $35 an ounce.

It was worth a whole lot more than that and the governments knew it, and so did we.

And it got so bad that by 1971, we had less gold in storage than we did before the confiscation in 33.

At that point, I can't remember his name, but the Treasury Secretary actually went to the International Monetary Fund, the IMF, who had created their currency in 69 to possibly replace the dollar.

So that's SDR, which stands for Special Drawing Rights. It's just a fiat. It's just a name.

It's just a fiat currency similar to all the others.

But we had actually gone to the IMF and said, “Here, take a world reserve status title, we can't do it anymore.”

And the SDR was actually slated to take over until Kissinger went to Saudi Arabia and made that agreement that if you only agree to take dollars for your oil, and of course, they ruled over all the other oil-producing nations, then we'll protect you.

I mean, really a sweet deal and all these excess dollars you can turn into treasuries.

And so that is really the reason why we still have the title of the world reserve currency.

But going back to the inflation, that's really why you saw a massive devaluation because we were funding the war.

Historically, prior to 1913, all the other wars, the Civil War, the war of 1812, the Revolutionary War in this country, we would go off the gold standard to fund the war.

Typically, a central bank's lifespan was between 15 and 20 years, and the wars would last about eight years.

So you'd go into it, you'd have that hyperinflationary event, the government would blame it on the central banks, and then you'd have about 40 to 45 years of peace, giving people an opportunity to recoup and resave and forget before you would go in it again.

The genius that was 1913 was it was the first time that they attempted to control the rate and speed of inflation.

And it was also the first time that you had perpetual central banking.

I did a study on the frequency of wars and how that shifted over time.

You'll see if you look at it, that the distance between or the time between wars started growing shorter once we had a perpetual central bank in place, shorter and shorter and shorter until 1989 and then since then, we've been in a perpetual state of war.

Inflation in a free and healthy market

George: Right, right. Yeah. Not only that, but going back to them trying to “manage inflation.”

I think everyone needs to realize that from the year 1800 to the year 1913, prices actually went down in the United States, to the extent that from 1800 to 1900, the prices in the United States went down by 50%, five o percent.

So you can imagine how that would play into the value of your savings.

I did a video on it, how that really plays to the entire economy. But I use the example of a minimum wage worker at McDonald's.

And if they're making $1,500 a month right now, and their expenses were $1,500 dollars a month, and if in 20 years at that same rate of deflation, they maintained their wage, but then their expenses went from $1,500, all the way down to 800, their standard of living would increase dramatically.

Just through proper inflation, which I think I'd like to get your take on this is the natural course for a free market economy and healthy, very healthy.

Lynette Zang: Healthy because it's a competition, but in the fiat system, there's the problem with that.

If a government wants to tax you, you know about it, and you fight back.

On a gold standard, you know about it, it's visible.

On a fiat system, it's baked into the very system because for governments, that inflation tax they don't have to go and legislate it, and make it visible to you.

And it used to be in the 70s, I'm telling you right now inflation was a very dirty word.

Today, they're saying that it's a savior for it.

So a really similar example to what you just gave was the average wage earner in 1971. The average wage was about $9,500.

I can't remember how many but if you divide 95 by 35, and it's like 242 ounces of gold.

If you did not get a raise at all, but you were still paid in that same 242 ounces of gold, that works out to something like $440,000 or something like that.

So it's the same kind of thing but gold has been a monetary standard for 5,000, 6,000 years because it holds its value over time, which was the single most important thing that money was supposed to do.

And a gold standard, I mean takes energy and labor to pull it out of the ground.

So you're really trading your labor for someone else's labor. It's fair.

And the other piece of this, which I personally think is really critical, but frankly I'm the only one that I ever heard say this and make this statement but just stop and think about fiat is by decree.

That's the translation of it. So that's by decree money, governments say it's legal, and bam, as we saw in India in 2016, and that didn't work either.

It's boom! No longer legal, but with gold, well, with fiat, it has use in one place.

With gold, it's used across every single aspect of the economy, everyone, medicine, manufacturing, financial, art, jewelry, so there is always demand.

You have demand for fiat as long as fiat is viable or people view it as viable.

But at some point when confidence is lost.

I mean, in Zimbabwe, 20 billion Zimbabwe dollars for a dozen eggs or two eggs or something like that, Venezuela.

A trillion times zero is zero.

So part of it, and when you're looking at gold and you're looking at inflation, when we were on the gold standard, you wouldn't see the economy going up and down, which is how a normal economy's supposed to work.

For example, you're an island and I'm an island.

You come up with a fabulous widget, and I'm wealthy.

You come up with a fabulous widget, I want it, I send my money over to you, you become wealthy, and then somebody else comes up with a great widget.

Now you can afford to buy that. And so the money passes from your hands to their hands.

And then I go, “Wow, I really need money again, because I just spent all my money on those widgets.”

So I come up with some other doodah, in a normal economy, that's how it flows.

That's a free-market economy. And that's normal, and that's what you're referring to.

Lynette Zang: But here we're in what kind of economy?

A casino economy where winners and losers have been chosen and as you so perfectly pointed out, the central bank uses their tools to force you out on the risk spectrum, to take all of these risks, when really you should not need to be taking any of those risks.

So yeah, inflation for me is a very dirty word because it is not necessary and it's abusive.

Currency is a reflection of productivity, not purchasing power

George: I totally agree. And I think it just over time, it's just so obvious that it lowers the standard of living.

You know what's really bizarre to me, and I don't know if you've got a read on this from just interacting with as many people as you do.

But it seems that the world population, not just Americans, have been conditioned, for whatever reason, to associate currency with purchasing power.

And if you think about it, the currency isn't the purchasing power.

The currency is only a reflection of your productivity.

So if you really pull back the layers of the onion, what you're trading when you go down to the local restaurant or when you put gas in your car, is not a trading piece of paper in your pocket, you're trading your productivity for another person's or entity's productivity.

It's a transfer of productivity.

And if we could just as a group of people start to look at purchasing power through the lens of productivity, and not currency, I just think we would all be so much better off.

What do you think of that?

Lynette Zang: I think you're 100% correct on that because they should be realizing that they are trading labor for labor.

But I think that really what we've been taught is that those pieces of paper are just a tool of barter.

That's all. That's what money is. It's just a tool of barter.

If you're going to earn it today and spend it today, it still has that value.

But if you attempt to save it and this is one of the key pieces again of money is to hold that value over time, so that no matter when you're going to use it, you're always fairly paid for your productivity, for your labor.

But we've been dumbed down, we should teach this.

In fact, that's on my agenda is to set up a channel for kids to understand money and how that works.

Because yeah, they don't want you to know that.

For corporations, because we don't understand that piece, in 1971 the average wage was $9,500.

Today, the average wage, I think is $53,000 and so you'd go well, who in the world wouldn't rather make $53,000 than $9,500?

Except in 1971, a family of four could live on that reasonably.

Today, you need two wage earners. And even then, 42% of the population can't come up with $400. It's paycheck to paycheck.

Why?

Here's my concern. This is not something that any of us are going to really have any control over.

I think that the next system that they're putting us in is most likely to be transaction-based.

So instead of right now, where the money is created from debt because they've been working very hard on getting us all into a consumer-driven economy, that money is going to be created based on transactions.

If it's digital, that's easy enough to do, and the easier it is to spend, the more likely you are to spend it.

So to carry around an ounce of gold, it's kind of heavy.

You got to do something with it to carry around a piece of paper instead of an ounce of gold.

Okay, that's a lot lighter to write a check for any amount instead of carrying a wad of cash in your purse or your pocket, well, that's even easier.

To use a card now, you're not even comprehending this is money.

Now, to use your phone, it's even easier.

And if they can get us to hold the title to all of our tangible wealth in the digital space, and then break that… this is what they've talked about, and then break that down.

Let's say you've got 300,000 in equity in your home as an example. And now all of a sudden, the title is held in digital space, which you have easy access to and it's broken down into a dollar amount.

And you go to the mall or you go online and go oh, I really like that new pair of shoes or what have you.

Yeah, well, I don't really have it from my earned income, but yeah, I have this, okay I'll replace it.

Before you know it, what we've done is volunteered the equity that we have, because what they have in mind, what they're talking about, and I don't say it unless I can prove it and this is official data, this is not mine.

They want, they're steering us to a haves and have nots.

So you have a small little teeny group here that owns everything, and everybody else rents it.

Everybody rents, whether it's the clothes on your back, not just the roof over your head, the automobile, etcetera.

“Own the experience.”

Well, let me tell you, if I needed to buy my children's health or get out of a circumstance, I could take this off really easily.

It wouldn't bother me one little bit and buy my way to freedom or do what I needed to do.

If I don't have this and I get into trouble, what am I going to do?

It's all about gold coins, jewelry, and those types of things

George: Yeah, I would love to go down that rabbit hole of digital currency.

Let's circle back to that. But one thing that I wanted to ask you before I forget and that is talking about storing your excess productivity.

That's what money is, to me, it's storing your excess productivity, and the currency is just a way to trade that productivity of one another.

But what do you think about gold confiscation? And do you have any concerns or advice on that?

Lynette Zang: Well look, they've been stealing our wealth from us since the day we were born.

I don't really think they're going to stop at the eighth hour and go oh, we're going to let you keep it.

For me personally, I do think and not just me personally, but even recent history in India and other places, we've seen monetary gold get confiscated.

So I do think that that is likely to happen, but that's where that experience with my uncle Algo comes in.

Because what did he have?

You couldn't hold more than five ounces of gold legally in 1964, but he had at least 3,000 ounces of gold, legally, which means you also get to use it in the normal marketplace legally.

So personally, this has not always been true.

But once we hit a certain level in the trend cycle, I personally never felt comfortable holding any gold bullion.

Silver bullion, yes, because I'm not concerned about a confiscation.

And because of the manipulations in the spot market, which was designed, admittedly, not me admitting it, but the guys that designed it, admittedly to moderate what you see in the gold market.

So manipulation, etcetera, I personally know that when I'm buying the collectible gold coins, which are in a completely different classification, there is almost no premium and certainly not the normal historical premium that those things are in.

So I'm buying them very, very cheaply.

In fact, I buy them less than the fundamental value of an ounce of physical gold, and the fundamental value is not the spot market.

That's Wall Street's value.

But it's the true value of an ounce of gold based upon its most important function because when they conduct a reset of the system, there's only one way to do it.

Not 1,000, one, not even two, one, and that is they revalue that fiat money, which has no intrinsic value, against gold money, which is all intrinsic value because it has the broadest base of the buyer.

And that's why the central banks are accumulating more gold than they ever have since they started tracking how much gold central banks are buying.

I got to tell you, I don't think we're getting all of the truth there either.

But still, it's at the highest level. Why, if it's just an old relic?

But it's the monetary gold.

Here's the guideline that I use. Can I hold it in an IRA? If the answer is yes, I don't want it.

You can hold gold bullion in an IRA. But it's easy enough to confiscate because I don't know that they would say, “Oh no, we're going to protect our clients, Mr. Government.

You can't come in and take this gold.” No, it's going to be really easy to sweep that up and just release a whole bunch of fiat.

George: So you think it's all about gold coins, jewelry, those types of things that, from a legal standpoint, are in a completely different category.

So if that did come down, then you'd have much more protection there based on U.S. history?

Lynette Zang: Exactly. And another history, so not just U.S. history, but this is really more global history.

Also, I'm not talking about really far back, some of it does go far back, but also recent history, look at what's been happening around the world and in Venezuela.

Venezuela has gold coins, numismatic collectible gold coins, but they did, actually Ernst and Young runs an annual survey of the biggest risks to mining and metals, and I haven't looked at it for this year or last year.

But mine nationalization is one of the biggest problems in the top 10 problems that the mines have, because there's a whole bunch of different ways to confiscate.

It doesn't necessarily have to be outright. It can be through taxation. It can be through nationalization.

It can be a number of different ways. They just use different terms just like this is not QE.

We're moving towards a government-backed digital currency…

George: Don't even get me going on the repo market.

That will be a whole another series of videos, Lynette, that's for sure.

Okay, so that brings me back to digital currency.

I want to get your view on digital currency, if you think, and to be specific, a government-backed digital currency if you think that's the direction that we're going.

If you do think that's the direction that we're going, do you think that they'd do that to implement negative interest rates?

Lynette Zang: That's what they're talking about.

George: Oh, great. Let me get your thoughts on that.

Lynette Zang: Yeah, I love the IMF, is one of my favorite websites because I get reports all the time.

They already in 2015, laid out how they could take us cashless, get us to volunteer to go cashless within weeks, their words not mine, of the next financial crisis because they could do it at the central bank window.

And what they would do is, they want the retail public to distribute that to the general public, because they want distance between their policy choices and how you see it.

So you don't equate the two.

But what they've talked about is, if you go to buy a cup of coffee at Starbucks, if you use your debit card or credit card or your phone, it will be $5.

If you use cash, it will be $6. What are you likely to do? You're going to use this, you're not going to want to pay this.

If you go to withdraw money from your account, there'll be a fee attached to it.

It will cost you $20 to take out $100 or whatever.

If you go to deposit it, there's going to be a fee attached.

So they're going to make you volunteer the cash, and because you perceive that it's your choice, you do not blame them, but they need to go negative.

So let me just stay on cash for a minute.

A more current piece on taking us cashless was on how to take us into deeply negative rates, not little teeny negative rates, but deeply negative rates.

And that was regarding cash, they would put a chip in the cash, so that rather than charging you that overtly, it would track whatever their negative rate was, and whenever you went to use it or deposit it, it would reflect that negative rate.

So for those viewers that are thinking, because, for me, I think cash is the first line of defense because that's what people are used to.

Yes, it loses all value, but that's still what people are used to.

So they call the current cash that's out there now, “cash in the wild”, and it would carry a premium because it doesn't have the chip yet.

So for those, I mean, really, I created a strategy for myself based upon the normal life cycle of a currency and how that works.

And so everybody here, all of our precious metals consultants have been trained in that strategy.

So there's a certain level of cash, there's a certain level of barter ability, there's a certain level of growth depends on what you're doing and all of that, but cash is certainly part of it.

If anybody is considering that, they'd probably want to get their cash out of the system sooner than later while it's still “cash in the wild”.

But going back, it would be a government, you want to call it backed, or I would say mandated currency in digital form.

And the IMF is actually talking about having a retail SDR, which would be for you and me, versus a wholesale SDR, which would be for the banks.

I do think that's the direction we're going in, not a Bitcoin or any of those, but it will be government-mandated.

Watch China.

We're kind of waiting for them to come out with the first government digital currency.

But yeah, because if they want you to spend money, and all of a sudden you look at your bank account today and you got $1,000 in it, okay, tomorrow, you got 900.

The day after you got 800. Well, what are you likely to do?

You're likely to go put it into anything that you think can hold its value better than the currency, and that's hyperinflation.

Whether it's hyper deflation or hyperinflation. It's the same thing. It doesn't matter.

George: That's a great point. I never thought about that with them putting the chip in the actual piece of paper.

So if you used it, you wouldn't get the nominal value.

So if you go to Starbucks and your coffee's $1, let's say, If you use a piece of paper, it would only give you a credit for 95 cents or something like that.

Lynette Zang: Exactly, you're teasing it. You got to give credit.

I mean, it's an evil genius, but look, these guys have had hundreds of years well, at least 100 and some years, to know how to do this and when you read their documents, they refer back to 1913.

And the way that they do it, the way they did it then, and the way they did it in the 70s, is they keep things looking as normal as possible.

So I can tell you in July of 1971, I had a $20 bill on my pocket.

In September of 1971, I got another $20 bill in my pocket. When you look at both of those bills, even if it's an old one versus a brand new one then, they look almost identical.

Not quite, there's a little tweak in there.

But unless you were really examining that, you wouldn't notice it, just like the gold certificate in 1912 and the Federal Reserve note in 1914.

They look very, very similar and they keep the name.

My bet will be that we're going to end up with two.

A local one, maybe the Fed coin or the U.S. dollar coin or something like that, probably the dollar coin, because that's what people are used to, as well as the SDRs, which is where they really want to hold your title to all of your wealth.

George: Yeah, that's it.

So that was another really interesting comment that you made about just being able to access your equity in anything.

It's like you've always got an equity loan, just on this car that you can spend at will.

Man, that's like a Keynesians dream come true. Like Paul Krugman, you can see him just like getting giddy about it.

Lynette Zang: I would say so.

And just kind of adding to that, which I think is so interesting, I was just reading an IMF speech by Georgina Gorbachova or something, I don't have her name down yet.

But at any rate, she was just talking about this, they're always talking about the unbanked.

The example that she used in this was something like, I could be off but, it's something like 2 million Cambodians… Cambodia, for example!

Where most of the population is unbanked. But over the last whatever since FinTech came in, they now have 20 million more people that have taken on debt.

Now, at no point does anybody explain to you that hey, there's two types of debt.

There's self-liquidating debt, then not self-liquidating debt.

Self-liquidating debt where you take on debt and maybe you build a business and you have customers so it pays itself off might not be a bad thing.

But non-self-liquidating debt, you're going to go out and you're going to buy those new pair of shoes that are just going to cost you money, which is mostly credit cards are, that's the bad kind of debt.

So they're talking about how great they're doing in Cambodia by exposing these people that have never even had a bank account before and enabling them to take on all of this debt.

I mean, if I can reach through and swaddle them, I tell you, I would, no doubt.

Today's economic landscape

George: Yeah, it just goes back to what we were saying before about your productivity being purchasing power.

And if you disconnect the two, then all of a sudden, it takes you down this path of Keynesianism, or modern Keynesianism, whatever you want to call it, where it's just all demand side.

That just is the best thing since sliced bread.

Well, I want to be very cognizant of your time Lynette, so kind of one of my last questions. I'd like you to give some advice.

I just call them the average Joe and that's the average person that watches my videos or listens to the podcast that I have.

The normal question that I get is these people don't understand the economic landscape like you do.

They're not a professional, but they know or they have this feeling, they can tell that there's something wrong with the system.

They don't know if we're going to get massive inflation.

They don't know if we're getting a hyperinflation.

They don't know if we're going to get deflation, the 1930s, and 1970s.

They don't know what's coming down the pipeline.

But they can look at what's going on with the repo market, the Federal Reserve, quantitative easing, the consumer debt, the sovereign debt, the pension funds, the corporate bond market, all this debt, and they know okay, this is unsustainable.

So what type of advice would you give to that person that maybe doesn't have a lot of money, but whatever purchasing power that they have been able to accumulate, they want to at least maintain it?

Lynette Zang: Well, I think it goes just a shade deeper than that.

I have a personal mantra that I live by, which is this is and it doesn't matter what the circumstance is.

Everybody always needs food, water, energy, security, shelter, community, barter ability, and wealth preservation.

So what I've been doing over the years is I look at where do I feel the most vulnerable, and then I do something there.

If it's about food. Well, we were talking just a couple of minutes before this, and I personally put it in an urban farm, but not everybody can do that.

But you want to make sure when those grocery stores shelves go bare, that you can always eat no matter what.

So rice and beans, complete protein, throw in a can of tomatoes.

It's not such bad eating, some good sprouting like broccoli sprouts, you rinse them off for three days and boom, you have live food that is super nutritious.

So that's the kind of thing that anybody can buy for very little money and put back so that you can weather that storm.

But when you think about the mantra if things are going well, you still need your food, water, etcetera.

And when things aren't going so well, silver is severe, both gold and silver physical are severely undervalued.

Thank you very much.

That's something we can thank the central bankers for is presenting us with that opportunity that they are definitely taking advantage of.

So am I.

We have a minimum here which is $500. So that's not too bad.

But also people need to remember that gold and silver in any form is still monetary at its base.

I used to go to, well I still do, but I used to go to yard sales and estate sales, and they'd have these sterling silver forks or chopsticks or picture frames or broken jewelry or whatever else tarnished.

Whatever, I'll take it.

So if somebody doesn't understand that, well look, I don't care if it's dented or dinged or broken, it's still monetary.

So there are all sorts of ways to accumulate even if you don't have a lot of money, seriously.

I do believe very strongly that you need a combination of both gold and silver because gold is the primary currency metal and this is how they revalue the currency and reset everything, but silver is a secondary monetary metal.

There's barterable gold as well as barterable silver but the barterable silver is more for the day to day stuff and at $17, $18 an ounce is ridiculous.

Both of them are severely undervalued.

But I would say, think about, no matter what you need, to sustain your standard of living, food, water, energy, security.

The community is a big one. Because maybe I can't grow my food but hey, I can go build a barn and now I'm going to a farmer and the farmer has food.

So your skill sets are definitely barterable. Anything physical is barterable, including toilet paper is a big one, actually.

It sounds funny to people but I have a lot of extra toilet paper and grape leaves, so I might not need that toilet paper.

You get my point?

Wherever you are, there is something that you can do to make sure that you can sustain your standard of living as much as possible.

George: Yeah, that makes a lot of sense. Lynette, for my viewers or listeners who want to find out more about you, how can they do that?

Is going to your website the best place or Twitter, social media? What would you suggest?

Lynette Zang:

Well, I think the YouTube channel I'm on there three days a week, plus I do the interviews, etcetera like we're doing today.

And then I typically do a question and answer a deep research piece and then kind of headline news, but it kind of depends on what's going on.

But if you just go into YouTube, ITM Trading or if you put my name in Lynette Zang, I will probably come up on our channel or rather on our website, itmtrading.com. if you go into the blog.

I'm an evidence-based person. So you have the links to all of my research. I make it easy for you.

George: Data Gal.

Lynette Zang: Data Gal, that's it. And we really like human contact.

So you can always call us at 888-696-4653.

I've been here since 2002. Most everybody, most of the precious metals consultants have also been here, like just a really, really long time.

I think anybody that calls and talks to anybody is going to find… We're all pretty bright. And we all pay attention and work together.

George: Yeah. Awesome. Well, thank you for your time. Lynette. Let's make sure that we do it again soon.

Lynette Zang: I agree. George, thank you so much. This has actually been a lot of fun for me. Thank you.

George: I completely agree.

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