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Don Coxe Advises Buying Gold as Hedge Against Economic Crisis

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With election day looming and the Fed seemingly in a civil war with itself, more and more financial experts are looking to buy gold in order to weather the recession. In a recent Financial Sense podcast, financial advisor Don Coxe explains how bad monetary policy, central bank overreach, and the coming economic crisis should prompt investors to consider buying gold.

golden eggs sitting in a nest

It should be apparent to anyone watching world economies over the last eight years that central banks have acquired unprecedented power by expanding and creating new forms of economic stimulus. Coxe agrees: “The new power center that emerged in 2008 is central banks.”

However, central bankers’ foray into quantitative easing and negative interest rates doesn’t come without an economic cost. Zero-bound interest rates make buying almost anything possible, but very little “easy” money has gone to capital investment. Instead, it’s being used to buy stocks, which is leading to overvaluation and creating asset bubbles.

“If you look at what is happening with asset classes, what you have to understand is that we have reached the limits as to what central banks can do,” Coxe said. “Yet, we’re going to have a recession at some point.”

Coxe believes current monetary policy is building up a variety of “forces” within the economy that could have disastrous side effects. One dangerous implication to running economies “hot” with low interest rates is unsustainable levels of public debt.

Law and monetary policy makers are in a catch-22 situation where low interest rates make servicing national debts easier, but quantitative easing and asset purchases are only adding to the debt, making both a larger principal and interest payment. Raising interest rates becomes impossible without defaulting on those loans or gutting the national budget to pay for them.

“[Governments] are continually rolling over debt at very low rates, but if we went back to normal rates, given that they gigantically increased government debts, the effect on fiscal policy for governments would be near catastrophic,” Coxe said.

When the anxiety of the upcoming election is thrown into the mix, the economic outlook is rather bleak. Gold is one asset class that can remain unaffected. The financial advisor advocates holding precious metals as a way to hedge against the current situation.

“[Gold] is the only asset class that is not subject to manipulation by governments,” Coxe said.

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