Faber: “I Wouldn’t Hold My Gold in the U.S. At All”

Submitted by Mark O’Byrne –Founding Partner of  GoldCore2014-08-12_1821

Dr Marc Faber has again urged people in the world to be diversified, own physical gold and to be their own central bank.

Dr Marc Faber on Gold

In another fascinating interview with Bloomberg, Dr. Marc Faber covered Japan’s massive QE experiment, the slump in oil prices and the importance of diversification and owning physical gold.

The interview was extensive and he covered a lot of ground which helped put the current major economic trends in perspective. The editor of the the Gloom, Boom and Doom Report, is always contrarian but always measured in his insightful analysis.

Japan’s foray into QE as a “ponzi scheme” in that “all the government bonds that the Treasury issues are being bought by the Bank of Japan” according to Faber. He said that in the short term Japan may not have to face consequences because “most countries are engaged in a Ponzi scheme.”

But he warned that “it will not end well.”

When the interviewer put it to him that various economic indicators such as jobs numbers in the US were positive recently he countered that these statistics” are published by the Obama administration, and therefore I would be very careful to take every figure for granted.”

He pointed to first-time home-buyers in the US, the number of which are at thirty year lows.

“A lot of people are being squeezed very badly because the costs of living are rising more than their salaries and wages.” The low home-buying figures show that people simply cannot afford to buy houses anymore demonstrating that no amount of cherry-picked statistics can gloss over the fact the US economy is not in good shape.

He also mentioned his long maintained view that inflation and deflation are not uniform phenomena but that “in some sectors of the economy you can have inflation and in some sectors deflation.” The implication of this is that, again, government statistics are not necessarily an accurate reflection of the state of the economy.

He does not see long term weakness in the oil market. The current low prices, while they may be advantageous to western consumers are damaging those companies in the U.S. who took on large debts to develop oil drilling projects. And Saudi Arabia cannot run it’s social system, he reckons, if prices go below $70 for an extended period. Continue reading

QE Is Dead! Long Live QE!

Submitted by Bill Bonner – Chairman, Bonner & Partners

This time it was the European Central Bank that bought the drinks. US investors bellied up to the bar and helped themselves; the Dow rose 69 points. Gold kept slipping.

Since the Fed ended its QE program, the Bank of Japan and the ECB have come forward promising more money for stock markets.

Draghi has faced increased pressure to do more to support a slowing euro-zone economy after the Bank of Japan last week unexpectedly announced it would add the equivalent of another $730 billion to its balance sheet.

And at the end of its two-day policy meeting yesterday, the ECB announced a plan to buy another €1 trillion in asset-backed securities. This will bring the ECB’s balance sheet back to 2012 levels. Continue reading

Deflation comes knocking at the door

Submitted by Alasdair Macleod – FinanceAndEconomics.org

There is little doubt that deflationary risks have increased in recent weeks, if only because the dollar has risen sharply against other currencies.

Understanding what this risk actually is, as opposed to what the talking heads say it is, will be central to financial survival, particularly for those with an interest in precious metals.
The economic establishment associates deflation, or falling prices, with lack of demand. From this it follows that if it is allowed to continue, deflation will lead to business failures and ultimately bank insolvencies due to contraction of bank credit. Therefore, the reasoning goes, demand and consumer confidence must be stimulated to ensure this doesn’t happen.

We must bear this in mind when we judge the response to current events. For the moment, we have signs that must be worrying the central banks: the Japanese economy is imploding despite aggressive monetary stimulation, and the Eurozone shows the same developing symptoms. The UK is heavily dependent on trade with the Eurozone and there is a feeling its strong performance is cooling. The chart below shows how all this has translated into their respective currencies since August. Continue reading