James Rickards Says Yellen Has Gone “Full-Dove;” Won’t Raise Interest Rates (Video)
With the Federal Reserve preparing for another meeting, pundits are talking interest rate hikes. Even AP is speculating that a rate hike is unlikely this go-around, blaming problems the “global economy.”
The US job market is healthy. The stock market is up. Home prices are rising. Yet as the Federal Reserve prepares to meet this week, it seems in no mood to resume raising interest rates from ultra-lows. With the global economy struggling and US inflation still below the Fed’s target rate, many economists see little likelihood of a rate increase even before the second half of the year.”
But James Rickards appeared on Bloomberg and said it isn’t just about the world economy. He pointed out that the US economy is “hanging by a thread,” and an interest rate hike would likely throw the country into a full-blown recession. Rickards reminded Bloomberg’s Francine Lacqua that the small hike last December sent the stock market into 10% free-fall, and he said the only reason the market is climbing again is because everybody knows the Fed isn’t going to normalize rates. That, Rickards says, is good news for gold.
The reason stocks are going up is Janet Yellen has gone full-dove. She’s sprouted wings and flies around the room. There is nothing the stock market doesn’t like about free money, and maybe negative interest rates are on the table for the next year or so. That is sort of bullish for stocks, but it’s also bullish for gold.”
Highlights from the interview:
“I think of gold as a form of money…so it competes with other kinds of money – dollar, euros, yen, gold – they’re kind of horses going around a racetrack. Place your bets.”
“As investors lose confidence in central banks, which is what is going on…central bankers have told me, members of the board of governors say, ‘We don’t know what we’re doing; we sort of make it up as we go along. We experiment…’ So in that world, where people are losing confidence in central banks, gold does better.”
“There are tens of trillions of dollars of sovereign debt with negative yields to maturity…As gold has zero yield, zero is higher than negative 50. So gold is the high-yield asset in this environment.”
“The reason stocks are going up is Janet Yellen has gone full-dove. She’s sprouted wings and flies around the room. There is nothing the stock market doesn’t like about free money, and maybe negative interest rates are on the table for the next year or so. That is sort of bullish for stocks, but it’s also bullish for gold.”
“I have a technical level [for gold]…$10,000 per ounce…It’s just a simple ratio of physical gold to printed money. [The amount of] physical gold doesn’t go up very much; printed money goes up a lot. So the dollar target goes up more because of all the money printing. But basically, it’s the implied non-inflationary price of gold. If you have to go back to a gold standard, or anything else like it for confidence, that’s the number you must have to avoid deflation. So it is mathematically derived. It’s not a guess.”
“Twenty-five basis points in December threw the US stock market into a 10% correction in the next two months.”
“The US is hanging by a thread as it is. First quarter GDP we’ll find out this week, but it looks like it will come in well below 1%…and there was only a fraction in the fourth quarter. So two back-to-back quarters…growth is extremely weak.”
“The risk is that the economy is extremely weak and you don’ raise rates in recession. You’re supposed to ease in a recession.”
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