Welcome to our Friday mailbag edition!

Every week, we receive some great questions from your fellow readers on our recently published essays. And every Friday, I answer as many as I can.

Today, we have questions on gold ownership and the government’s motives with regards to cryptos… And we have some practical tips from one reader on how to reduce your food shopping bill…

Let’s dive right in, starting with this question from Dave, following my recent essay on gold

How many U.S. dollars does it take, or how many shares of GLD does one have to buy-own to be able to convert to gold bullion?

– Dave T.

Hi Dave. Thanks for your question. I’ve written a couple of times now about why I believe gold belongs in every investor’s portfolio. It’s particularly valuable as an inflation hedge.

I like the SPDR Gold Shares ETF (GLD) because it closely tracks the price of gold. And it’s convenient – you can easily buy it through your brokerage account.

Unfortunately, even though GLD is “physically backed” by gold, investors cannot redeem GLD shares for physical gold bullion. They can only sell them on the market.

The “physically backed” part just means that GLD shares are guaranteed by the actual metal sitting in the vaults. Each GLD share represents about 0.094 ounces of gold.

This is something all gold investors should keep in mind. Because it’s not just GLD. With many gold ETFs, even when you redeem it, you don’t get physical gold, but receive the cash equivalent.

For anyone who values holding actual gold, I’ve mentioned popular coins in the past – such as American Eagles and Canadian Maple Leafs. I wrote about that, along with other physical gold alternatives, in this essay.

But bear in mind that coins are typically priced at a premium to the gold spot price. And you also need to consider how best to store your coins, which could add to the cost of ownership.

Next, I wrote to you recently about the Executive Order on Cryptos issued by the White House. Frank questions the U.S. government’s motives…

How would either the Federal Reserve or the federal government back a crypto strategy, since it would basically destroy their dollar-printing capability?

Unless you change the rules for crypto, such that you had an unlimited capability for the number of coins one could produce.

If you did indeed do that, why would you opt for a crypto strategy in the first place, since all you have done is to change the transaction vehicle, i.e., Bitcoins for dollars?

– Frank W.

Hi Frank, you bring up a great point. On the one hand, if the Federal Reserve or federal government were actively backing or buying a large (trillions of dollars) amount of, say, Bitcoin, that could inhibit the Fed’s free reign over money fabrication.

The Fed can’t create Bitcoin. And the federal government can’t balance its budget in Bitcoin. That’s because Bitcoin, by design, doesn’t allow for unlimited creation, as I explained in previous essays (catch up here and here). I don’t see that element of Bitcoin changing.

However, the Fed and the government are perfectly happy controlling U.S. dollar (or potentially, U.S. digital dollar in the future) fabrication and debt creation.

The U.S. dollar remains the world’s main reserve currency. It is therefore tied into U.S. geopolitical power. That’s not changing any time soon.

But the U.S. government finally recognizes that cryptos are going to be part of the financial landscape of the future. Burying its head in the sand and hoping they will go away is no longer an option.

Speaking at the 2022 U.S. Monetary Policy Forum, an annual conference that brings together economists and policymakers, Fed Governor Lael Brainard said:

If the past year is any guide, the crypto financial system is likely to continue to grow and evolve in ways that increase interconnectedness with the traditional financial system…

The Federal Reserve needs to be preparing for the payment landscape of the future even as we continue to make improvements to meet today’s needs…

In addition, it is important to consider how new forms of crypto-assets and digital money may affect the Federal Reserve’s responsibilities…

It is prudent to explore whether there is a role for a central bank digital currency (CBDC) to preserve some of the safe and effective elements of the financial system of the present in a way that is complementary to the private sector innovations transforming the financial landscape of the future.

The recent White House Executive Order on Cryptos officially recognized the “explosive growth” of digital assets such as Bitcoin. And it stated that the U.S. “must maintain technological leadership in this rapidly growing space.”

It also underscores key areas like consumer protection, national security, and illicit finance.

And don’t forget, as I wrote recently, the U.S. government also doesn’t want to miss out on any income from the crypto industry. At the start of 2020, the crypto market was worth $191 billion. Today, it’s north of $1 trillion. That’s a lot of taxable revenue.

And it’s not just the U.S. government that is jumping on board…

Nine central banks already launched their own digital currencies. The Bahamas and seven eastern Caribbean states were the first to do so.

There are 15 other central bank digital currencies in the pilot program stage. Sixteen more are under development. And 40 are at the research stage.

The crypto market is still evolving… I’m keeping a close eye on it. And I’ll report back on any relevant developments in this space as they happen.

Moving on to our next topic…

We’re all feeling the pinch every time we visit the grocery store.

And I recently wrote to you about why rising energy costs and fertilizer prices will likely make the situation worse over the coming months.

Jon wrote in with some ways he is reducing his shopping bills…

Been buying more food products at my local swap meet (AKA flea market).

Got dented cans of beans, last several weeks, for 3/$1. Always finding cereal, where the packaging is bad, for $1 a box. Last week, I got 3lbs of excellent bartlett pears for $2. Had to pay .50 a lb for oranges.

That’s high, but nowhere as high as grocery stores. I always check the weekly supermarket ads and write down any deals, and take a shopping list with me. I do most of my weekly shopping at SuperKing, who specializes in fresh produce, cheaper than elsewhere.

Other primary store is ALDI, which has lower prices than major grocers. Always check the clearance area of Albertsons and Ralphs for day-old bread.

Use a Citi Custom Cash card for 5% reward at grocers. Use a Cit Shop Your Way card for 5% reward at gas stations. Use Coupon Cabin website for all kind of offers. Coupons.com for coupons.

It amazes me, how dumb many people are, using the drive thru at fast food places and/or ordering food for delivery.

I guess that’s why so many don’t have any savings. That means the Fed isn’t going to squeeze too hard and inflation will continue.

– Jon J.

Hi, Jon. You bring up some really good points here. There are things all of us can do to deal with rising food prices.

Unfortunately, those price increases aren’t going away any time soon, given the situation the world is facing right now.

Higher natural gas prices… the fertilizer supply squeeze from Russia and China… and a restriction in the supply of potash from Belarus… are among the major factors at play there.

Meanwhile, the ongoing war in Ukraine is exacerbating the energy crisis and supply chain issues.

Again, these issues won’t resolve overnight. In fact, I expect food prices to keep rising throughout this year. I also anticipate ongoing food shortages.

So I’m really glad you’re finding ways to make your money go farther.

It’s really important that more people think long and hard about the things they buy at the store every month. The least many of us can do is try to cut back on nonessential purchases, or to buy in bulk.

And if you really want to fight back against food and energy price inflation, you can try something that doesn’t involve the store at all.

And that is, to make some of that money back in the stock market.

I’ve highlighted some of the ways to do that in my previous essays (click here, if you need a refresher).

And for more ways you can fight rising prices, check out this boots-on-the-ground presentation I just put out this month.

Lastly, I think Pat is a kindred spirit when it comes to my love of history… Especially when it comes to the cozy relationship between finance and politics.

If you missed it, that’s something I wrote about in the excerpt from my book All the Presidents’ Bankers I sent you recently

Nomi, I am fascinated by your account of Presidents/banking. I am a student of history and have thought about writing a book on treason in the White House. We have had treason at 1600 Pennsylvania Avenue through multiple presidents.

For example, not that Nixon wasn’t wrong with his paranoid Watergate fiasco, but quietly slipping in a couple of sentences taking us off the gold standard in the midst of his speech on a bold economic plan makes Watergate a joke in comparison.

Just one of many major traitorous presidential acts. Time after time, 1600 continues to “centralize,” the very thing our founders constituted to avoid. They rebelled against central government…

I just have to hark back to the words accredited to Lord Acton in the 19th century, “Power tends to corrupt and absolute power corrupts absolutely!”

– Pat B.

Hi Pat, thanks for your interest in history. I could get totally lost in it.

In fact, when I was researching my book All the Presidents’ Bankers, I spent weeks in each of the Presidential libraries around the country, digging into archival material, some of which had never been touched before.

It was a fascinating experience for me, as I lived in history. I would go back to my hotel room every night and rewrite my notes from the day at the libraries. And I’d listen to music from each period as I did that, to experience the feel of the time.

Every president had his Wall Street allies, or sometimes adversaries.

This was the case with Nixon. It’s not widely known that David Rockefeller and other prominent Wall Street bankers ultimately pressured Nixon to get off the gold standard.

So that decision was as much geopolitical as it was pushed by the banking community.

The bankers believed that if there was no gold standard to anchor the dollar, the Fed could more easily help them by loosening monetary policy whenever Wall Street needed it.

But even Rockefeller could not have imagined the extent to which getting off the gold standard manifested in such immense money creation in the 21st century.

It’s a great story. I might share another excerpt from my book about it in these pages some time…

And that’s it for this week’s mailbag. Thanks again to everyone who wrote in.

If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition.

I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice.

And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at [email protected].

In the meantime, happy investing… and have a fantastic weekend!



Nomi Prins
Editor, Inside Wall Street with Nomi Prins

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