In this brief excerpt, Grant Williams, Egon von Greyerz, and Ronnie Stoeferle discuss fiscal policy, the "crack-up boom," inflation, liquidity, and of course gold and silver.
Central Banks are signaling an integration of fiscal and monetary policy. Retail and institutional investors have been dangerously trapped in the belief that markets are perpetually backstopped. Meanwhile, pension funds are renewing an interest in physical gold as government bonds yield negative return. In short, the signs are increasingly evident that the monetary charade cannot continue much longer. For more detail, watch these highlights from an outstanding discussion!
Watch the full discussion here: https://www.youtube.com/watch?v=M76ys...
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See Full Discussion Transcript Below
Ronnie Stoerferle: If you have a look at what Joe Biden does he basically decided that the country needs to undergo a big transformation and probably a transformation that we haven't seen in generations we know that Joe Biden is probably going to be a one-term president and he doesn't have too much time so I think as I've said he will continue to push the envelope and then of course this basically confirms our view that that we already had before Covid that we developed while listening to super boring speeches by central bankers but they always said well we have basically done what we could after the after the GFC now it's a turn of politicians now, it's a time of fiscal policy and this is happening and you know in short austerity is out nobody cares about this frugal Swabian housewife anymore nobody cares about budget, surpluses anymore and I think this much higher importance of fiscal policy and also this merging of monetary and fiscal policy is something that will continue for the next couple of years, it should be crystal clear now that the Fed is being slaved to the bubbles that they blow and I've really got no idea if there's any out from their point of view what we really see now and I can feel that this what Mises would have described as a crack up boom we're seeing it in real estate all over I just saw recently that an Italian artist sold an invisible piece of art for fifteen thousand dollars so we are already seeing this this craziness of the environment that that we were pushed into and you know
Egon von Greyerz: Why not they're selling they're selling invest invisible money for sixty five thousand dollars although it's gone down to thirty two thousand dollars now so why not sell invest of a lot. As I said before the dilemma is that people have now be conditioned to markets always going up so you know for the majority certainly of individual investors but also for institutional tax investors you that they know nothing else and I think it was the reaction you know to the next fall where that comes it'll be the same as before it'll always come back we'll wait you know the central banks will come in etc. and then at some point as we know when the bear market starts and that I've seen enough of them and you know the one in in 73'-74' was it was one of the biggest ones and but you know all of those have been short bear markets you know we've never seen or in any of us in our lifetime a bear market like the the 29' top and then the fact that they took the Dow 25 years to come back to where it was in 1929 none of us have seen that had you know now as I read the world and the bubble now is greater than ever in history and therefore I don't see any reason why this coming decline, the secular decline in markets and the world economy that I expect because it's global now it's never been global before never , it's been in individual countries or regions but not global and this time it's global therefore I think the risk is greater than ever and therefore you know your warning to investors is absolutely right but I mean I would be a lot stronger than that because I think it's all investing is all about risk but people don't understand that today because there hasn't been any risk for a long time because everything just goes up and up and it's different today it's never going to go down
Grant Williams: Liquidity is what's put markets at all-time highs liquidity is what stopped the bank runs back in 2008. liquidity has been the fuel for this and so you're away from the headlines there's a there's a guy called Michael Howe who runs a fund called Cross-Border Capital and they monitor liquidity flows and they put out some great work on this and they've published a couple of charts recently that show that cross-border liquidity is declining quite quickly now and the problem here is that the thing that retail investors see in the headlines they see markets going up, they see stock prices at all-time highs, they see people make money in crypto they see all these wonderful things happening what people need to understand is away from those headlines about markets at all-time highs what the professionals see what the professionals have access to is information that retail investors don't have and that information, Reverse Repos being one of them, suggests that there are warning signs flashing about liquidity and if liquidity dissipates in this market then the markets will go lower make no bones about it if there isn't ample liquidity then markets are going to struggle because if we do get that deflationary shock we've already seen what they're going to do, they will they will go to lengths that that will make what they've done so far seem you know trivial so we can expect a monetary blitz we can expect a fiscal blitz we can expect them to cap yield curves we can expect them to do all kinds of things they will do anything at this point to stop that deflationary pulse taking hold so while you may get a deflationary outcome in the short term I personally have come down on the side that long term inflation is the thing I have to be most concerned about and I've talked about this before in other conversations but the big thing for investors is to understand that if you've had a portfolio that has been set up to benefit from a deflationary tailwind that portfolio has performed very well for 40 years, it will perform terribly if we have an inflationary environment for obvious reasons
Ronnie Stoerferle: Returning to the gold market it's pretty interesting what's going on at the moment first of all if you if we remember last August when gold made new all-time highs everybody was talking about gold now we're trading at 1800 and nobody cares about gold, Goldman Sachs was recommending shorting gold, UBS said gold will see further Downside, so I think you know we're basically hovering below the all-time highs and the fact that the sentiment is so so negative that that's a pretty positive sign then we're seeing for example some pension funds going in there was the DSM Fund from the Netherlands it was pretty interesting to read their statement they say they are reducing the funds exposure to government bonds by 10 percentage points because of the very negative expected return on the asset class so you know they're selling bonds and they're buying commodities they're buying gold I think yeah we will see many many more of those statements then if you have a look at COMEX gold deliveries they continue to be extremely strong in some months they're three or four times higher than the average so that tells me that people now really want to hold physical gold and not paper contracts then we are also seeing lots of demand from the central banks the Hungarians you know they had the highest hyperinflation in the history they were buying significant amounts of gold the polish I think the Russians just recently said that they will buy 4 billion and that they got rid of all their dollar reserves so there's quite a lot of interesting things going on the other hand nobody's talking about gold so that's a pretty good setup I would say
Egon von Greyerz: But you know pension funds I think and I've been saying for a while I think that will be one of the major groups of investors into gold for the simple reason that if we are right the three of us that we are we are leaning to the inflationary side of the world economy and therefore pension funds and institutions would be obliged to inflation protect their assets by holding some gold and we saw the first one was the police and fire pension fund in Ohio and then we you know saw the Dutch one we saw the Swiss also now recently putting it into physical outside the banking system which is interesting not even in the bank not into ETFs so I think that trend will accelerate in in coming years and obviously pension funds take a long time to make a decision but it's quite significant that this has happened now and I think there will be a very strong trend going forward and of course as we know there won't be enough gold for pension funds having any major allocation to gold and the only way they can have a bigger allocation is just by a higher price not by because there won't be any more gold produced and there will be very few sellers
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