Last week, James Rickards explained to CNBC why he is a long-term holder of gold bullion. He pointed to the pattern of financial collapses that threatened the global economy over the past two decades.
In the late ‘90s, Wall Street bailed out a hedge fund. In 2008, the Federal Reserve bailed out Wall Street. But in 2018, it’s the central banks that will need a bailout. And what will happen to the dollar when the Fed loses international credibility?
Scott Nations jumped in to interrogate Rickards and took the opportunity to remind Rickards of his long-running debate with Peter Schiff, who shares Rickards’ long-term prediction of gold reaching $5,000 an ounce or more. Rickards patiently gave Nations a lesson in history, and reminded him that he’s not buying gold as a trading commodity for growing his wealth – he owns gold as one of the best means of wealth preservation.
Don’t think of gold as a commodity. I don’t think of gold as a commodity. I don’t think of gold as an investment. It’s money. But it’ll be a kind of money that people have confidence in. You say you can’t eat gold. Well, take a dollar bill out of your wallet, Scott. Are you going to eat it? You’re not going to eat the dollar. It’s a medium of exchange; it’s a store of value…”
A lot of big-time investors are turning bullish on gold.
Last month, Stanley Druckenmiller publicly advised investors to sell US stocks and buy gold. Legendary hedge fund manager Paul Singer said “it makes sense to own gold.” Even George Soros has jumped on the gold bandwagon, recently selling stocks and buying gold. Other mainstream investors and analysts have also gotten that gold gleam in their eyes.
What is driving this newfound gold bullishness? It really comes down to one simple word.
Fear.
With all of the economic uncertainty, negative interest rates, and general instability in the world, people are once again turning to the historical safe-haven – gold.
Peter Schiff appeared on CNBC this week with a dire warning on America’s economic future – “It’s gonna be awful!”
Do you guys remember the financial crisis of 2008? Did you think that was bad? This is going to be worse.”
Peter said this time around, we’re not looking at a financial crisis. We’re staring down the barrel of a currency crisis. Ultimately, the central bankers and government policy makers will sacrifice the dollar on the altar of the stock market. Their main goal is to make sure the stock market doesn’t crash again. Peter said they might succeed, but only at the expense of the dollar.
So we’re going into a currency crisis, and this crisis is going to be much bigger than a financial crisis. The impact it’s going to have on the average American, on his standard of living, on his way of life is going to be much more profound. And sure, people won’t lose as much money in their stock portfolio, but if they try to sell their stocks and spend the money, the purchasing power that they lose is going to be much greater then what was lost in ’08.”
On June 7, the Washington DC Council voted to raise the city’s minimum wage to $15 per hour. DC joins New York and California, along with a number of major US cities that have made the move to boost the minimum wage over the last year.
The DC Council’s vote was a major symbolic victory for supporters of the well-organized “Fight for $15” campaign. According to the Washington Post, the effort resonates with Americans:
Polls find strong support for a $15 wage floor as many Americans have become frustrated by the loss of well-paying manufacturing jobs and the growth of low-paying retail and service jobs.”
Last spring, ReasonTV asked residents of the “trendy, hipster enclave” of Silver Lake in Los Angeles, “What is the ‘right’ minimum wage?” Unsurprisingly, most assumed a higher minimum wage is a no-brainer – a win-win for society and workers.
This article was submitted by Joel Bauman, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
When central bankers talk about gold, it’s usually with an attitude of disdain. So, why do they hate gold so much?
The Federal Reserve operates under a dual mandate. It must maintain price stability while also simultaneously promoting maximum employment.
The Fed hates it when the price of gold rises because it correlates with a rising unemployment rate.
Gold also reveals the weakness in the US dollar and the Fed’s failure to stabilize prices. For this reason a rising gold price is an embarrassment to the Federal Reserve as it undermines its purposes.
The British have gotten gold fever.
According to a Reuters report, uncertainty surrounding the upcoming Brexit vote is driving quite a gold boom:
At Sharps Pixley, a gold showroom in London’s smart Mayfair district, demand for bullion bars and coins is rising, with men and women of all ages buying up the safe-haven metal in case of a British exit from the European Union.”
Sharps Pixley chief executive Ross Norman told Reuters that stocks of gold coins and bars are selling out before they even hit the shelves. Demand for Britannia coins is particularly strong. Since they are legal tender, Britannias are not subject to capital gains taxes.
In an interview with the World Gold Council for the latest edition of Gold Investor, former Bank of England head Lord Mervyn King made the case that it’s sensible for central banks to buy and hold gold.
Interestingly, the reasons he offered are good reasons for individual investors to buy gold as well.
King addressed the fact that many Asian and South American nations are increasing their gold reserves. He said they don’t want to rely completely on US bonds, and pointed out that while most people take it as given the US would never default, debt comes with inherent risk. Just ask the people who invested in Puerto Rican bonds.
I can understand why they feel that some proportion of their portfolio needs to be in gold. Over the last decade or so, the claims by some emerging market countries on the US have grown. Who knows what the future holds, but China and other countries do not want to be in a situation where all their international assets are in effect dependent on the US. Of course the US would not want to renege on its debts, but if some awful conflagration occurred, then all China’s assets in the US might be annulled. So there are plenty of big concerns that make it extremely reasonable to have assets in your portfolio that are not dependent on the goodwill of other countries.”
The shockingly bad May jobs report dumped a bucket of cold water on central bankers and mainstream pundits. A June interest rate hike that was a foregone conclusion just a week ago disappeared like a teenager when it’s time to do the dishes. Suddenly, a lot of people are starting to realize the great Obama economy isn’t quite as advertised.
Peter Schiff has said several times we are in a “phony recovery,” and the US economy is likely already in recession. A few other “contrarian” voices like Mike Maloney have echoed Peter’s warning. If we dig a little deeper, we find buried in the jobs data a major red flag that indicates that they are probably right.
The number of temporary jobs has been on the decline since peaking last December. In May, the economy shed 21,000 temp jobs, bringing the total to nearly 64,000 lost since December of last year.
Why is this so significant?
With May’s shockingly bad jobs report, it’s pretty much a forgone conclusion that a June Federal Reserve rate hike is off the table. After the report came out Friday, Peter Schiff stuck a fork in the June hike possibilities in his SchiffReport Video Blog.
Now with the June rate almost certainly a no-go, pundits are starting to look ahead to later in the summer or this fall. But Peter, along with some like-minded people such as Jim Grant, believes the Fed won’t raise rates at all. It simply can’t. In fact, Peter argues that the next move will be rate cuts and another round of quantitative easing:
This is just the beginning. When people actually figure out the box that we’re in – because they still think the Fed is going to raise rates. Now they’re saying ‘OK, maybe they’ll raise rates in July, or maybe they’ll raise rates in December.’ Wait until the conversation turns to rate cuts. Wait until the conversation turns to QE4, or negative interest rates. Wait until people think that I was right from day one, that the Fed checked us into a monetary roach motel, that there is no way out of this monetary policy.”
Economists say election uncertainty is subduing economic growth. But it seems more likely the horrible economy is driving this strange election cycle.
For months, Peter Schiff has been saying if the US isn’t already in recession, it will be in one soon. Former Reagan Office of Management and Budget Director David Stockman recently told Neil Cavuto on Fox Business that the next president will inherit a recession. Last Month, Mike Maloney said the data screams a recession is already here.
For the most part, Peter and others are still voices calling in the wilderness. The mainstream keeps towing the line and pushing the idea that the economy is fundamentally sound and improving. But Americans know better, as the unrest and turmoil evident in this presidential election cycle makes clear.
