The Gold Report: Bob, in the last few weeks,
The Fed has three options: It can continue to taper, maintain the status quo or increase its bond buying. I think there's a good chance it will take that third option. We need a big crash first.
TGR: What message does that send to the general market?
BM: It says we've run out of bullets, head for your bunker.
TGR: That can't be the message the Fed wants to send.
BM: The message it intends to send is one thing; the message it actually sends is something else.
Events in 2008 were only the opening act. The financial instability and the pressures in the markets are far worse today than they were in 2008. We had the chance to fix things back then, but
TGR: You sent me an article by
BM: Of course things will keep getting worse until somebody understands that the real issue is debt. There are
TGR: How does devaluing their currencies help
BM: It doesn't. Every government in the world is spending money it doesn't have. The only solution is to stop spending money. Everyone refuses to do that because governments gain power by spending money. They will spend money until they've bankrupted all of their citizens.
BM: There is no economic improvement. It's all smoke and mirrors. It's similar to climbing to the top of a 50-story building and jumping off. Once you've jumped, it doesn't matter what you do on the drop down. You're going to hit the ground. They need to crash so they can rebuild on a solid foundation.
Calling it austerity is using semantics to play with the citizenry. If one honest politician stood up and said, "We're spending more money than we have. We need to stop," that would put us on the way to curing the problem. But the politicians keep pretending there are other solutions.
TGR: Apparently, he does have the ability to change it, but only in upcoming, new federal contracts.
BM: There are three separate branches in the American political system: the executive, the legislative and the judicial. The president of the U.S. does not make laws; he enforces them. His ability to do something is not the same thing as it being legal. All federal financial bills have to start in
TGR: Wages earned by low-wage workers aren't increasing at the same rate as inflation. As a result, the minimum wage today doesn't give the same amount of purchasing power as it did when it was first implemented. Should the minimum wage be hitched to inflation or should it just be abolished?
BM: If you make the minimum wage
If minimum wage laws worked and helped people, we should pay everybody
In the EU, seven countries do not have minimum wage laws, 20 do. In the seven countries without minimum wage laws, the unemployment rate is just over 8%. In the 20 countries with minimum wage laws, the rate is over 11%. Minimum wage laws, no matter how well intentioned, cost an economy jobs.
The economic stability of any country is based on the number of people in its middle class. There are rich and poor people in every society. That is as true as it is meaningless. The key to economic and political stability is the size of the middle class.
The policies of
TGR: How have they done that?
BM: First, people can't save money. If you save money at 0.25%, you're insane; inflation robs you of your real wealth. Second, taxes have increased. There are something like 48 separate taxes in Obamacare that have nothing to do with healthcare.
The Affordable Care Act, Obamacare, is the nail in the coffin of the middle class. It is a giant payoff to the insurance companies. The insurance companies are protected under law. They are allowed to collude and do things no other industry can. As a result, the U.S. has one of the least effective healthcare systems in the world and the most expensive. We need to burn the healthcare system down and start all over again. The insurance companies have the American public's throats in a death grip and they're killing us.
TGR: Following on the general topic of insurance, you've talked about using precious metals as an insurance policy in a crisis. Do you mean the metal, the equities or a combination of both?
BM: I see the physical metal as an insurance policy. Once investors have that policy in place, the equities are what they do with their investments. There are some wonderful companies selling for peanuts now that will do well no matter what happens--inflation or deflation.
TGR: How much of a portfolio needs to be in precious metals to have a good underlying insurance policy?
BM: That depends on the person and the amount of money available. Everybody has a different level.
If my total worldly assets were
I was recommending metals even when gold was
TGR: I have my insurance policy; I have my gold and silver coins. Where should I look for precious metals stocks?
BM: You need two things: a blindfold and a dart.
TGR: But you just said there were some really special companies selling for peanuts.
BM: Yes, but the way to pick them is with a blindfold and a dart. Let me give you a really good example. I visited and know the management of
I don't think you can lose your money in
TGR: Are some opportunities better than others, or do you believe the entire sector will improve? After all, some analysts say that part of the sector needs to go bankrupt.
BM: I can name five or six people who said, in the last three weeks, that we're at a bottom and it's safe to buy.
My questions to them are: 1) What were they saying in
Bottoming processes last a long time. Silver and gold were at a bottom from the middle of 2000 until the end of 2011. Any one date in that 18-month period was a bottom.
I have a bunch of stocks that are up 50% since
TGR: You have stocks that have gone up 50%, yet True Gold is down 14%. Doesn't that make this market a bit frothy still?
BM: No, because trading volume has gone from, say, 200,000-300,000 shares per day to 4M shares per day. People are using it as a liquidity event. They are taking profits. I don't think that that's a bad thing.
TGR: You also are excited about copper. Why is that?
BM: A lot of people think the copper price will go down with the rest of the base metals. I disagree. I've seen some incredible copper projects in the last six months--very high-grade projects that are reasonably priced to go into production. There are 10 or 20 companies that had projects of low-grade that were going to cost a lot of money. At least 6 to 10 are in the Middle Cauca belt in
I went to
I was in
TGR: Copper is the canary in the coal mine. If we're going to have a deflationary environment and economies are contracting, it would seem more logical for the price of copper to go down. What makes these particular copper projects good investments?
BM: If copper goes down, they'll be more valuable. Because these are all high-grade projects, a lower copper price is good for them, because a lower price will drive the marginal producers out of business. The ideal situation is a company that will make money no matter what the cost of copper is.
TGR: What about some other names?
TGR: Bob, thanks for your time and your insights.
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