In his keynote address to the Mines and Money Hong Kong conference, Doug Casey shared his predictions for the future of the world economy and the mining industry. Casey is a well-respected economist and seasoned, expert analyst of the precious metals industry. His economic viewpoint aligns with Peter Schiff’s, and he believes that the astronomical levels of global government debt and paper currency are going to lead to a “Greater Depression.” What will be the ultimate fallout of this depression? The world will return to precious metals as the most reliable money.
There’s a good reason why gold is money. It’s the only financial asset that’s not simultaneously somebody else’s liability. This is a critical thing in a world as unstable as we live in today. You don’t want to hold somebody else’s liability, certainly not the liability of a bankrupt government or an idiotic and bankrupt central bank. So what are you going to hold? People are going to go back to gold.”
Ron Paul appeared on CNBC to warn that a US dollar currency crisis is inevitable. The host tried to zero-in on a specific time frame for a crisis, but Dr. Paul emphasized that the catalyst for such an event will be an unpredictable change in investor psychology.
Most of the time these things [currency crises] are unforeseen, and most of the time there is a psychological element and a panic. If you have unsoundness and there’s no foundation, [and] it’s just held together by confidence, what happens when the confidence is gone?”
The host’s insistence on a specific time frame is a perfect example of the very problem Dr. Paul lays out. Since the markets can move quickly, both investors and central bankers get caught up in a short-term mindset. The stock market becomes the barometer of economic health, and long-term effects of monetary policy are largely ignored. When those effects finally emerge, investors react quickly and drastically, because they did little to prepare. Dr. Paul points out that this is exactly the problem the world faces today – psychological factors play a larger role than economic fundamentals.
Marc Faber told Kitco News the same thing Peter Schiff has been warning — the United States economy is too weak for the Federal Reserve to raise interest rates in June. Faber believes that eventually the markets will wake up to just how ignorant and powerless global central banks are. When that happens, investors will abandon paper money and flee to precious metals.
While he’s reluctant to tell investors what to buy when, Faber does think that $1,200 is a “reasonably good” price point to start buying gold. Faber looks at gold investment as a long-term commitment. He started buying gold in the 1990s and continues to buy regularly.
In an interview on Bloomberg, former Morgan Stanley chief economist Stephen Roach tears apart the monetary policy of the Federal Reserve. Roach explains that Ben Bernanke has blatantly admitted that the Fed’s goal is to stimulate the economy by growing asset bubbles.
Roach’s indictment of the Fed and the US economy is severe, but he couches his language carefully:
We need to sort of wean ourselves from the temptation to juice up our asset markets to derive temporary satisfaction from bubble-induced economic growth.”
Translation: the Fed needs to get out of the way and stop manipulating the markets with quantitative easing and abnormally low interest rates. The worst part is that the Fed’s strategy only enriches the financial elite while forcing Main Street to deal with the real effects of secular stagnation.
Bloomberg TV interviewed Chris Gersch from Altimus Capital about why he believes gold is due for a price breakout. He sees both technical and fundamental reasons to support gold surging to $1600 in the next year, making him just another stock investor that is waking up to gold’s potential.
The gold price has risen substantially since November, and Gersch thinks this recent spike means a permanent move higher. He also pointed out that gold has continued to hold a steady price despite the dollar’s recent rally — an unusual trend indicating that gold has likely bottomed. Gold has also held steady as European debt has sunk into negative yield territory, making the yellow metal an increasingly attractive option for investors. Finally, Gersch believes that rising demand from India and China will make the price of gold spike.
Well-known Austrian economist and author Bob Murphy recently joined Tom Woods in a strong critique of popular, mainstream economics. Murphy tore apart everything from a recent Paul Krugman blog post to the Keynesian explanation for the 2008 financial crash. The interview is long and in-depth, but a great listen if you want a detailed rebuttal of modern Keynesian economics.
A couple weeks ago, in a surprising policy shift, the United States government announced its willingness to work with the Chinese-led Asian Infrastructure Investment Bank (AIIB). Lew Rockwell explained to RT that after many allies applied for membership to the AIIB, the US had no choice but to cooperate. While there is already an Asian Development Bank in place, it functions as just another subsidiary of the US government. This new bank will reduce American economic influence in Asia and reduce the power of the dollar. Yet Rockwell argues that decentralizing power over international trade makes way for more freedom and prosperity.
I think we’re not going to have a world government anymore. We’re not going to have a power able to exert its influence all over the world, like the US [and] its military influence. Chinese influence tends to be economic influence. That’s all to the good… Let all the world trade together.”
Former Federal Reserve Governor Kevin Warsh told CNBC’s “Squawk Box” that the Fed’s wishy-washy language and behavior has been spoiling the financial markets. Every nuanced speech of central bankers can influence markets, making it impossible for Americans to get a true idea of how the economy is behaving. Warsh finds it disturbing that the Fed has run its quantitative easing and interest rate experiments for 7 years while ignoring real economic indicators.
Warsh believes Fed officials have fallen prey to “groupthink,” which has put them completely out of touch with normal Americans. In this 2-part interview, Warsh says exactly what Peter Schiff believes, only less pointedly — not only has the economy not legitimately recovered, but it’s in for a rude awakening when the Fed’s policies drag it down again.
Another remarkable thing about this interview is the lack of push-back from the CNBC anchors. In fact, they agreed with Warsh that the Fed is relying too much on stock market performance to inform its decisions. Warsh concluded that central bankers need to change their attitude:
The most important thing that all central bankers should have right now is humility. We have never run this experiment, which we should all describe as radical. The idea that we somehow suggest that it is riskless to stay at these sorts of rates 7 years into a recovery strikes me as unnecessary.”
Frank Holmes, Chief Executive at US Global Investors, told Kitco News that an interest rate hike would send the stock market plummeting. In fact, he thinks a drop in the market would far outpace any dip in gold prices. At the same time, problems with mining exploration means that both gold reserves and supply are going to shrink in the next several years. Holmes emphasized that it’s important to ignore the “short-term noise” of asset prices. Gold is an important asset class, and provides a buffer against a plunging stock market.
Kitco News interviewed CME Group’s Executive Director of Metals Products Harriet Hunnable, who talked about how the rise of China’s renminbi is opening up more trade for gold. While her analysis was a bit technical, Hunnable’s ultimate point was that gold is a “fantastic commodity” that holds universal appeal for trade. Rising demand for gold in Asia is just the latest reason to want it in your portfolio.