James U. Blanchard III is one of the most widely followed experts on precious-metals investing. His Gold Newsletter is a well-known source of information on economic and political trends affecting precious metals. And though Blanchard himself is perhaps best known as the sponsor of a large annual investment conference in New Orleans, his main purpose is grounded in a political philosophy.
As a young man, Blanchard was disabled in an automobile accident—a fact, however, that has shown no effect either on his strength of will or on his commitment to certain philosophical and political principles. In the late '60s, he established the National Committee to Legalize Gold and orchestrated a publicity campaign and a lobbying effort on behalf of Americans' right to own gold. Following the success of that effort in 1975, he enlarged the scope of his campaign with the National Committee for Monetary Reform.
Since the mid-1970s, the primary vehicle for his monetary-reform movement has been the "investment conference," which has sparked numerous imitations. Free-market supporters and hard-asset investors will gather in New Orleans this fall for Blanchard's 10th annual conference.
He is now president of James U. Blanchard & Co., one of the largest marketers of US silver coins. First developed as a conference sideline, the corporation is both respected and profitable. Blanchard also founded Adam Smith Publishing to print and distribute books and reports on investing.
Recently, REASON Contributing Editor Joe Cobb interviewed Jim Blanchard.
REASON: Jim, I've read that you were influenced in your early days by the writings of Ayn Rand. What is it about the philosophy of individualism that first attracted you?
BLANCHARD: Well, it went back even further than Rand. In my high school days I had a very individualistic philosophy. I wasn't actually clear on it—it was sort of a gut feeling, influenced by some of my teachers in high school, Walt Whitman, Emerson, and those kinds of people. I always liked the sort of heroic, individualistic framework within which people discussed American history. For years I've had a fascination with the American West and the entrepreneurship that went into building the great mining industries and the cattle industry, and just the guts it takes to be an explorer. That was sort of a framework before I first heard of Rand.
I was sitting on my front porch—I guess it was 1961. A next-door neighbor came up and threw a little paperback book on my lap and said, "Hey, you ought to read this, science fiction," which I have always had a love for. It was a copy of Anthem. Shortly thereafter, I read all of Ayn Rand's books, and that's where I got really interested in free-market ideas.
She, at that time, was writing a publication, the Objectivist Newsletter, and in that publication she had a recommended reading list. Among those authors were Ludwig von Mises and F.A. Hayek, and that's when I started reading a lot of economics. It's really a hobby for me, and through my college years I educated myself by reading everything that was published by anybody who was free-market-oriented and Austrian. From that I got interested in the hard-money aspects of what Hayek and von Mises were saying—in effect, that we had this tremendous growth in government intervention and, without a gold standard, without any kind of governor on spending, there would be a colossal buildup in debt and a trend toward fiat money and currency depreciation. That spelled to me that hard assets of all types should be good investments.
REASON: When and how did you get interested in the idea of legalizing gold?
BLANCHARD: I had been a gold and silver investor since late 1967. I had always been an entrepreneurial type and was always, during my years in school, in the afternoons and in the summer, working and doing various things and had built up a little investment capital. In late 1967 and early 1968, because I was really convinced more than ever that we were going to have a long-term inflationary scenario, I went out and bought gold-oriented investments. You couldn't buy gold bullion, though, and that really pissed me off. But I bought US gold coins and silver and gold-mining shares. The more I thought about it, the more I thought it was ridiculous that you couldn't own gold bullion. I sat down one evening in my apartment with a friend at that time, Evan Soulé, and I just decided we should try to do something about it.
About a year and a half before that, while I was in school, I had written an open letter to Milton Friedman, trying to convince him that there was a contradiction in his thinking. He was obviously a great thinker in favor of the free market, but when it came to money there was a contradiction. I wrote him this long letter that gold was really the only answer, to get him to change his mind on that or at least be more open about it. I sent a copy of that letter to Harry Schultz, whom I had become sort of a pen pal with, because I had respected his writings and I took his newsletter very early. And he published that letter as an entire issue of the Harry Schultz Letter.
Because my letter was published there, I would say 50 different people wrote to me. I wrote a letter to all of them, saying that I was starting this little committee, the National Committee to Legalize Gold, and I wanted contributions. I put in the first $200 to buy stamps and stationery and got on the phone and begged and borrowed some more names—100 names here, 50 names there. John McFalls, an investment advisor in Seattle, was very instrumental, because he let us use a list of 2,000 people. From that first list of 50 people, I was shocked that we got back a total of $500.
REASON: What were the first activities of the committee?
BLANCHARD: They were purely of an educational nature in the very beginning. That was in the days, you remember, of Vietnam and draft-card burning, and the press always likes a protest stunt or whatever. I got the idea that what we would do is use gold as a protest and challenge the US Treasury. At that time it was 10 years in jail or a $10,000 fine as the penalty for owning gold bullion. A friend of mine who went to an Eastern school was helping to pay his way through school by smuggling small amounts of gold across the Canadian border. I bought my first illegal gold, which was a Bank of Montreal two-ounce gold bar, and we used that little bar as the first challenge. In Houston, the Midwest, the East, California, and here in New Orleans, we would call a press conference, say we were going to display illegal gold bullion, and challenge the Treasury to take legal action against us. It was clearly breaking the law, and of course it worked fairly well. All the news media would come, including some of the national media, and take close-up photographs of the gold bar. We would pass out literature saying why it was totally irrational to make gold illegal and to throw somebody in prison for 10 years for just trying to protect himself against currency depreciation. And we did other stunts. We buzzed Richard Nixon's 1972 inauguration with a big biplane with a sign that said "Legalize Gold," and we wrote tons of letters to Congress.
We concentrated on a dual effort of trying to go for the conservatives and for moderates and liberals. The conservatives were interested, in many cases, because they understood the fundamentals involved. The moderates thought that maybe there was a contradiction—I mean, why prohibit Americans? The Treasury at that time had the opinion that gold was not money, and they were going to demonetize gold. But why were Americans prevented from owning it if it was just another commodity like lead or zinc? So we used that angle with both the moderates and the liberals, and many of the liberals just really didn't know how valuable a tool gold could be against government inflationary policy. We used their ignorance to our advantage, and we got a coalition of conservatives, moderates, and liberals to get behind the thing. There was a lot of Treasury opposition to it—very, very strong Treasury opposition—but it went through Congress.
REASON: Did you have a Washington office, or did you do most of this from home?
BLANCHARD: No, most of it by just friendly contacts in Washington. People like Phil Crane and Jim McClure of Idaho and Steve Symms and a long list of others. We sent a lot of newsletters and personal letters and that type thing. A lot of telephone calls.
REASON: I noticed that you didn't mention Jesse Helms, although he was the one who introduced the bill in the Senate. What was your relationship with Helms in this activity?
BLANCHARD: Very good. We always have had a very good relationship with Helms. I have my differences with Helms on some things, but as far as his economics goes, I think he is probably one of the only senators who has a tattered and torn, underlined copy of Human Action [by Ludwig von Mises], so on economics there's a lot I can agree with Helms about. He really fights for his convictions in those areas, so we have always had a good relationship with him and one of his key staff members, Howard Segermark.
REASON: When did you start having major investment conferences?
BLANCHARD: We had the first one—and it was really the first hard-money conference ever held in this country—in March 1974. It was a way to raise money, and it worked out very well. I was surprised. I thought we would have 200–300 people. People were starved for investment-protection information—in other words, how to buy gold, where to buy it, how to buy gold shares, that type of information; issues like, what is really going to happen to inflation, what is the long-term outlook for government spending and debt, and all those issues. And with very little promotion, we ended up attracting about 700 people to New Orleans, and each year after that we expanded. With the legalization of gold, we changed the name of our group to the National Committee for Monetary Reform and continued the educational efforts with much less direct political involvement. NCMR is a long-term educational campaign with occasional papers and cassettes and the conferences themselves, which allow us to finance this internally. The whole proposition becomes profitable, so we don't have to go to the various people who come to the conferences and take the newsletters and ask for "donations."
In the conferences and the various publications, we try as much as commercially possible to have pro-free-market people. We have had Milton Friedman, F.A. Hayek, Bill Simon, Hans Sennholz. We always try at the conferences to cover the general economic overview of why government intervention in the economy is so destructive, and then from that, of course, it flows that something is going to happen to you and your money. That's where an investment angle comes in, and that's what makes it commercially viable. You really don't have to run around bugging people for major contributions to continue the thing, because it's a service that the market demands.
REASON: Let's talk about the current economic situation. Often times you have forecast that gold would be at $2,000, $3,000, $4,000, an ounce. What is your outlook for the economy in the next 12 months?
BLANCHARD: I think that this will be the last year of single-digit inflation. I think that precious metals had their severe sell-off last year. The market had gotten really carried away with itself, and a correction had to come. The excuse was this drop in the oil prices, and of course in the long term that is not going to have anything to do with the colossal amount of inflation that I see down the line. The next 12 months will see continued moderate inflation figures. I think there will be a general business recovery—we passed the bottom of this cycle. I think that precious metals will tend to establish a trading base and probably be higher—in the high $500s or the low $600s—by the end of the year. So this is the base-building period, the last year of single-digit inflation before we go into a real explosion of inflation rates to new all-time highs over the next three years. For the period 1984 to 1985 and perhaps even early 1986, you can see the inflation rate go to a peak 20 to 25 percent.
Under those conditions, associated with tremendous new speculative interest in gold, prices could explode. If you remember, in the last cycle there was a lot of excitement about gold, but primarily it was just the gold-oriented, hard-money investors in the United States who got on board. Very few average Americans purchased gold. It's been estimated, and there have been several pretty extensive studies done, that only about 4 percent of American investors bought gold and silver. I think that in this next cycle it could get up to levels of 10, 15, 20, percent. Who knows? I think it will get overdone, and that's why I think even $4,000 an ounce is possible. I've always said that it's possible, but I've always been careful to say that you shouldn't absolutely expect those extremes.
Certainly $50 silver and $1,500 gold are reasonable expectations based on just the fact that we are going to have much higher inflation levels and the fact that we are in a period of unprecedented growth in government debt. All you have to do is look at the relationship between the growth of government debt and the consumer price index, and you see that there is an unbroken correlation. Of course, it's obvious that there would be. You know, one of my favorite books, which I read years and years ago, was by Charles Holt Carrol, The Organization of Debt into Currency. A large percentage of the huge budget deficits over the next three to four years is going to be monetized, and we are, I think, going to see record inflation rates. Now I disagree with those people who say we are going to have hyperinflation anytime soon. I don't think that is the case at all. Down the line it is more a probability than a possibility, but who knows how long down the line.
REASON: You sound very pessimistic about the ability of Ronald Reagan to achieve anything similar to what everybody originally expected.
BLANCHARD: From the very, very beginning I was pessimistic. Shortly after he was elected, we had our New Orleans conference, and I predicted at that conference that although Reagan was obviously a very sincere person and believed he could turn the thing around and was going to balance the budget by 1984 and all these things, he would go down in history as the biggest taxer and biggest spender ever. And I think that is exactly what is going to happen.
The problem is just bigger than one man, plus Reagan has abandoned most of his free-market-oriented advisors. Early on, he was advised by people like Jack Kemp and Lew Lehrman and others to issue an emergency declaration—that the country was in an economic emergency, that we were going to have to go through a period of belt-tightening that would be unprecedented in modern times; but from that we could have a huge new growth, we could slash taxes and slash spending, and we could have several decades of massive boom in the US economy. In a sense, that was obviously excellent advice, but in a sense it was impossible that it would be fulfilled. There is a basic contradiction. The people of America—and this is the key issue—the people of America by and large, even moderate and conservative Republican businessmen, are philosophically collectivists. And many of them don't know they are. Americans as a people still have a lot of individualistic traditions. That's great, and that makes us a strong and beautiful country in many ways. But at the same time, you know, most people tend to look to Washington or local government to solve problems when they really get bad. And as long as you have a socio-economic movement in the country that is philosophically founded and long-term in nature and that says, in effect, that it's all right for government to interfere in our lives and government needs to get involved in this and that and the other, then you are going to have massive growth in government intervention. Government debt and all the detrimental things that that implies down the line are going to come about.
REASON: Jim, how have you developed your own portfolio, your own investments? I know that you have the brokerage firm, James U. Blanchard & Co., as well as the publishing firm, Adam Smith Publishing. What other investments have you made?
BLANCHARD: Very early on I decided to get into the actual hard assets themselves, and that's why I started the coin business and the bullion business, which at first was handled as just a sole proprietorship, on a very part-time basis. Then four-and-a-half years ago it was incorporated, and we expanded our activities. That company has grown to be one of the biggest in the country that operates not only as a broker but as a dealer.
Our specialty primarily is the seminumismatic area of US gold coins and US silver dollars and that type of investment, which I think in many ways has more potential than bullion itself. Certainly it has the added protection that it is extremely liquid. It is a double-play investment that would tend to go up as much as the price of gold and silver but at the same time tends to have less downside risk. It also offers protection against government-orchestrated gold confiscation, which over the longer term could even be argued as a probability. I don't think this is something anybody needs to be worried about in the next two or three years, but certainly in the longer term, the next 5 to 10 years, it is something that people should keep their eyes on. Under the Gold Reserve Act of 1934, numismatics are specifically not covered in the confiscation powers. So that is an area that we concentrated on, and it's been very profitable for us. And I think we are also doing a service to the hard-money community by supplying that.
REASON: As a wrap-up, are there any subjects or comments that you might like to raise?
BLANCHARD: I think that this issue, this special financial issue of REASON, is coming at a very critical time, because as I said, this is going to be the last year for single-digit inflation. It is a year that will be dominated by bargain prices in all the hard assets. Of course, people who read REASON magazine tend to be way beyond most people in the sense that they do understand the awesome implications of this tremendous growth of collectivism in its various forms in the world. One of the things that implies is that fiat money is going to be destroyed on an unprecedented scale in this next decade, and this is the foundation for a massive move down the line in the hard assets, in both coins and bullion, to prices that will be shocking. So it's really the last chance for the person who is free-market-oriented, who does understand the implications of all this, to get on board and put away some fully owned precious metals and not—repeat, not—get involved in highly leveraged, speculative futures situations. If the investor can afford to buy even one Krugerrand or one roll of Morgan silver dollars—whatever he buys now is almost certainly going to be worth a lot more money both in real terms and paper terms down the line than it is now.
REASON: Gary North, a year ago or so, recommended that his readers buy US silver dimes, because if the ultimate disaster comes, you want to be able to spend your silver for food in the smallest possible units.
BLANCHARD: Yes, I think there's a lot to that. I've said all along that I think every family should own a bag—or if you can't afford a half bag or a bag, a quarter bag—of what I call "junk silver" coin. Now is a good time to buy them, too, because the premium is very, very low on dimes and quarters and halves, and I don't think you need to concentrate just on dimes, but dimes and quarters. Most of the bags are quarters, and I think quarters are fine. Everybody should have some of those. But everybody should keep in mind that that is just for your survival. As a silver investment for survival purposes, it has excellent points; but for investment income, you are going to make a lot more money buying some of the nicer-quality uncirculated silver dollars, US gold coins, and that type thing than you are going to do by buying this junk silver. But everybody should have some for the long-term survival aspect.
REASON: What do you think of the survivalist movement? Do you think that, given the forecast of a collapse at least of paper money, we are moving into a stage where perhaps 100 years from now we will be back in the Dark Ages?
BLANCHARD: Well, I tell you, I'm more optimistic than that. That's certainly possible, and who knows what is going to happen? There are some very scary trends at work. But also I'm very encouraged, because I can remember when I could read every newsletter, every book, every publication, every magazine—anything that had to do with free-market economics, libertarianism, etc. Now I have stacks and stacks of books that I haven't been able to get to, massive amounts of correspondence, newsletters up to my ears. There is a tremendous intellectual movement in this country toward the free market.
If we just can buy enough time and we don't have either one of the extremes—either a total collapse or hyperinflation (or the ultimate evil, a world war)—if we can just buy enough time.…And I think it's really probable that we can, because I've learned over the years that almost all things take longer than most people think.
This article originally appeared in print under the headline "Interview with James U. Blanchard III".