Bloomberg hosted ANZ Chief Economist Warren Hogan to discuss Asian demand for gold. Hogan co-authored a new study showing that gold demand in Asia is poised to rise substantially. As supply constraints lift and incomes in the East rise, consumers in countries like China and India will continue to buy record amounts of gold. More importantly, Hogan believes that China may be stockpiling gold as part of a maneuver to un-peg their currency from the dollar.
The first thing we need to understand is that we don’t actually get regular reporting on how much gold the PBOC holds. At last count, a few years ago, it was about a thousand tons. We will be due to get an update in the next year or so. China’s clearly got a gold strategy as a broad view… Whether or not it’s the central bank that is buying the gold or it’s in the broader community is not necessarily clear. But the reality is the renminbi moves towards floating and is a major global currency.”
Bloomberg had a roundtable discussion with Nobel Laureate Robert Shiller, author of Irrational Exuberance, about keeping past economic disasters in mind. In particular, they discussed the worry that the stock market is on the verge of another 1937 and a 50% correction.
1937 was the year that the word ‘recession’ was invented. Did you know that? … It was invented because Franklin Delano Roosevelt wouldn’t call it a ‘depression’. He thought the psychology was horrible, just horrible.”
Shiller doesn’t believe harking back to the Great Depression is simply fear mongering, because we live in a “black swan” world. Economic events are unpredictable, and learning from the past is a practical way to prepare for the unknown. Investors might want to step away from the fast-paced world of speculation and take a look at the bigger picture.
Last week, we showed that stocks are currently at a peak similar to the one that occurred just before the Great Depression. To analysts like Shiller and Peter Schiff, it’s becoming increasingly apparent that the economy may be on the edge of another major recession.
In a long interview with Gordon T. Long, Managing Director of the Lindsey Group Peter Boockvar warns that the Federal Reserve has been creating artificial bubbles for years. In fact, we’re now facing the third bubble in 15 years. The mainstream news claims we’re not in a bubble because “things are different this time.” But Boockvar echoes exactly what Peter Schiff has been saying — of course this bubble looks different. All of the others looked different too until they popped. He also shares some fundamental gold investment advice: watching short-term price movements is useless. Once people stop placing trust in the Fed, gold has the potential to skyrocket in value.
With typical incisiveness, David Stockman laid out for Bloomberg the precariousness of the US economy. The former White House Budget Director called out the Republicans for their failure to do anything about the runaway budget deficit. He expects the government to do what it always does: blink in the eleventh hour when faced with a government shutdown. The Bloomberg host often tries to soften Stockman’s statements, but Stockman picks the issues right back up and paints a sobering picture of American economic instability.
Dr. Joseph Salerno, Academic Vice President at the Mises Institute, spoke with Power Trading Radio about the declining value of fiat currencies and the Federal Reserve’s incentive to depreciate the dollar. The interview is long, but Salerno’s comments are a good primer on how precious metals became — and remain — sound money. He also discusses the growing consensus on both sides of the aisle that the Fed needs to be audited. In fact, he believes we’ll see a full audit of the Fed within 5 years.
In a short article for Casey Research, Jeff Clark observes that the gold price has declined for eight consecutive days for the first time since 2009. However, investors shouldn’t worry too much. As the chart below shows, gold prices often cycle through a low point in March before picking up again.
Since 1975, March has been by far the worst month for gold. In other words, the current price behavior is normal for this time of year. In a world of growing currency manipulations and negative interest rates, it’s only a matter of time before we see the inevitable consequences of these actions. It won’t be pretty—but gold will be a refuge in that fallout. This tells us that gold’s current decline should be viewed as an opportunity to shore up our precious metals portfolios.”
Speaking of historical trends, what about the stock market? Gold is likely to reverse this March slump, but will the stock market continue on its multi-year bull run?
Famed author and contrarian investor Jim Rogers spoke with Kerry Lutz of Financial Survival Network about the absurdity of central banks being run by clueless academics. He says that most of the world is under an illusion of prosperity and that our reliance on credit will have devastating consequences. Rogers also echoes Peter Schiff’s message in his latest Gold Videocast — the US is no longer a bastion of freedom. Investors should look to hard assets and emerging markets in countries that have far less debt and more economic freedom.
Alix Steel of Bloomberg spoke with Jim Rickards, author of Currency Wars, about the Federal Reserve’s conundrum over raising rates. Rickards says that despite what the Fed says now, it’s not going to raise rates in June. Meanwhile, gold has shown strength even in the face of supposed deflation. Rickards is confident that the yellow metal will climb when the Fed realizes the economy isn’t nearly as strong as its data suggests.
Jay Taylor of Taylor’s Hard Money Advisers interviewed Mises Institute President Jeff Deist about gold as safe money and the importance of unrigged markets. He warns that soon we are going to be faced with another crash as global debt levels rise. Just like Peter Schiff, Deist believes that when the rest of the world gets tired of the Fed’s money-printing, gold will re-emerge as the permanent store of value it has always been.
David Morgan, a precious metals expert and creator of the Morgan Report, spoke with Greg Hunter of USAWatchdog about the value of silver as a universal currency and how people are starting to wake up to the lies of central banks. He believes that the world is now facing a dangerous “debt bomb” that central banks are avoiding by printing money. However, Morgan says the days of the financial elite are numbered, and silver is already being used again for everyday transactions.
