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Alan Greenspan: Money Printing Will Be Response to Debt & Entitlement Crisis
Gerald Celente Discusses Election-Year, Middle East, and European Chaos -- and GOLD!
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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up we’ll hear an explosive interview with Gerald Celente, publisher of the Trends Journal. As usual Gerald pulls no punches when speaking about the Fed’s follies, election-year craziness, Europe in turmoil, and what’s ahead for gold. Stick around for a can’t-miss interview with Gerald Celente – coming up after this week’s market update.
Well, as the presidential race continues to play out, it’s becoming clear that our nation’s biggest problems will soon be solved. Totally! Regardless of who ultimately declares victory on Election Day, the American people will be the true winners. That’s because all of the candidates are offering detailed and realistic plans to balance the budget, pay down the debt, and put us on a path to greater and greater prosperity. Democrats and Republicans alike are absolutely committed to making the hard decisions, even when they’re politically inconvenient, for the long-term good of the country. And we can surely count on Congress to fundamentally reform unsustainable entitlement programs – rather than kick the can down the road and saddle us with more debt.
We can be so gleefully optimistic because, what the heck, it’s April Fool’s Day! Yep, the political establishment continues to play the American people for fools – and the joke is most definitely on us.
Unfortunately, anyone who seriously examines the federal budget, and the political pressures that drive spending growth, will find it next to impossible to be optimistic. Former Federal Reserve chairman Alan Greenspan, who recently turned 90, isn’t optimistic these days. He helped blow up bubbles in the stock market, in housing, and in government debt with his easy money policies. But he’s now warning that government spending commitments are crowding out the real economy.
Just listen to these extraordinary remarks from Mr. Greenspan in a recent Bloomberg interview.
Interviewer: Are you optimistic going forward here?
Alan Greenspan: No, I haven't been for quite a while and I won't be until we can resolve the entitlement programs. Nobody wants to touch it, but it's gradually crowding out capital investment, and that's crowding out productivity, and that's crowding out the standards of living… and you get an extraordinary demand for entitlements and all sorts of programs which are not funded. Why? Because why do they need to be funded? We just print the money.
Why cut back on unfunded spending commitments when the Fed can just print the money? Greenspan’s stunning remarks are the closest we’ll probably get to an admission that the central bank he once headed serves to enable fiscal recklessness.
Greenspan’s stunning remarks are the closest we’ll probably get to an admission that the central bank he once headed serves to enable fiscal recklessness.
Even the Congressional Budget Office is projecting a bleak fiscal future, with trillion dollar deficits returning within six years. Social Security’s deficits will continue to grow, with the so-called Trust Fund being fully depleted by 2034. And by that time entitlement programs, plus Obamacare, plus interest on the debt will consume all projected revenues. There will literally be nothing left for other government functions, including the military, without some combination of higher taxes, more borrowing, and more money printing on a truly massive scale.
This debt crisis that’s coming could have been averted had the United States remained on a gold standard. As Alan Greenspan himself admits, politicians don’t want to fix the government’s spending problem, because under our monetary system they don’t have to. There is no upper limit to how much fiat currency can be created.
Given how much greater the pressure will be on the Fed to print money in the years ahead, investors need to hedge themselves against the risk of higher inflation and a possible currency crisis. The best protection against a malfunctioning monetary system is to own real money in the form of physical gold and silver.
Checking in with the metals markets this week, gold prices are now down 0.4% since last Friday’s close to trade at $1,214 an ounce as of this Friday recording, selling off a bit here today. Likewise silver was in positive territory through Thursday’s close but is dropping today with prices coming in at $14.96 an ounce for a weekly decline of 1.8%. Platinum is down $20 so far today but is actually still up 0.8% this week to trade at $958 an ounce, while palladium is off 2.2% and currently comes in at $564.
Precious metals markets spent last month consolidating, and backing and filling after experiencing sharp gains to start the year. At the moment, traders are sorting through and weighing mixed economic data according to how they expect it to influence the Federal Reserve’s future interest rate decisions. An April rate hike is widely seen as unlikely, but Fed chair Janet Yellen continues to telegraph the likelihood of rate increases at some point this year.
In the meantime, the likelihood of diminishing mining supply and tightness in the physical precious metals markets should lend fundamental support for another leg higher in prices. For gold, the $1,300 level represents the next big psychological hurdle. If that can be decisively taken out, then many of the remaining gold skeptics would likely be convinced that the bottom is in and the bull market is for real.
For now though the metals seem to be range bound, which may prove in the end to be constructive for the bulls if the metals can build a base at or near the highs from the first part of the year.
Well now for more on the central banking and political insanity we are facing, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to be joined by Gerald Celente, published of the renowned Trends Journal. Mr. Celente is a frequent and highly sought after guest on news programs throughout the world, and has been forecasting some of the biggest and most important trends before they happen for more than 30 years now, and it's a real honor to have him on with us today.
Mr. Celente, welcome back and thank you for joining us again.
Gerald Celente: Thanks for having me back on Mike.
Mike Gleason: Well to start out here, the first two months of the year were very bad for stocks, and now the markets have come roaring back. What is behind the rebound? Is the economy really improving or is something else driving the recent gains we're seeing in equities?
Gerald Celente: Sure, the U.S. economy's doing great. What did we have? Existing home sales were down 7.1% in February. We're seeing profits plunging from Fortune 500 companies. That's all positive, isn't it? Of course, we just saw consumer spending roar ahead 0.1% in February. They downgraded January's 0.5% gain in consumer spending to 0.1. Oh yeah, that's real strong. And you look at wages, and it's declining a bit, but so what.
What's keeping the markets going, obviously is not the economy. The economy's stagnant. You're looking now at GDP growth in the last quarter came in at a roaring 1.4%, and now in the first quarter of 2016 estimates are around 1 or 1.25% growth. What's only keeping the markets alive are the criminal Ponzi scheme by the central bankers, and that's they're dumping they're dumping in all this cheap dough, fiat money, and negative or low or zero interest rate policy that's just fueling equity markets. That's all its done. And that's not a speculation, it's a fact because when you go back to 2009 when this criminal operation really started to grab hold where quantitative easing fueled world growth you saw, for example in the United States, the numbers are there. 95% of the wealth gains from 2009 went to the 1%. So the only thing that's fueling the equity markets is the Ponzi scheme.
Mike Gleason: We see an unbelievable amount of flip-flopping from the Fed. For instance, in March alone, they indicated their intent to scale back the number of potential rate hikes from 4 to 2, economic conditions are too weak to stay the course – yadda, yadda. Then the next week we hear the economy is doing just fine, and they may go ahead and raise rates as soon as April, and then Yellen backtracked again making some dovish remarks during a talk in New York earlier this week.
Why do people and the markets continue to hang on every work they say Gerald? At what point does the Fed lose all credibility?
Gerald Celente: The market's hanging onto it because they need the cheap money. When you look at the reality here, what's juiced the markets? As I said, it's not corporate profits.
That's for sure. What were they down in 2015 over 5%.
The market's holding onto it so they get the cheap money for stock buybacks and mergers and acquisitions. End of story. That's all they're doing. It's a carry trade. They're borrowing for nothing to gamble. What they call investors are nothing more than gamblers. So this has nothing to do with true price discovery. The markets are hanging onto every word because that's what's driving the Ponzi scheme.
Look, go back to just a few weeks ago. We heard the former President of the Dallas Fed, Dick Fisher say that what the stimulus and the easy money policy has done was like adding cocaine and heroin, injecting cocaine and heroin into the financial system. He used the words cocaine and heroine. We've been calling it monetary meth for the money junkies since they began this whole scam.
That's what's going on. That's all it is, it’s a scam. The Wall Street gang are nothing more than money junkies. If they don't keep feeding their habit, the markets go down. What we're looking at is just with Yellen's, “dovish” statement is more promise to keep the interest rates low so that the markets could be juiced up.
Mike Gleason: Leads me right into my next question here. Is it realistic to believe the U.S. Fed would be raising interest rates when so many central bankers elsewhere are experimenting with negative interest rates?
Gerald Celente: No, it's not because here's the deal. You go back to when Yellen announced on Tuesday that they were not going to be raising rates, or hinted as such, and what were the effects?
The first thing you saw was the DOW reverse from being down 100 points earlier in the trading day closing up nearly 100, but more importantly, the I-shares, the MSCI emerging markets, ETF jumped 1%. Why? If the dollar goes up and gets stronger, interest rates go higher. These emerging markets submerge real quickly.
Here's the reason why they can't raise rates, and we don't see them raising rates. It has to do the global outlook, as she said because all of these countries, as I mentioned earlier with all that cheap money that the Fed began to pump out back in 2008 and 2009, 2011, 2012, a lot of that dough went to the emerging markets. And when Ron Paul, when he was Congressman, and he ordered the Fed to issue a release of how much they did release into the system, and it's never reported anymore, at that time it was over $17 trillion. And that went global.
Now, let's go back to the MSCI index and see why the emerging markets are so thrilled with the news that interest rates are not going up because when they borrowed that money their currencies were much higher, and the dollar was cheap. They were borrowing cheap dollars, both corporations and countries in the emerging markets. When interest rates go up and the dollar gains strength, they have to pay back that money as their currencies are devalued, which they have been in many of these emerging markets. So they have to pay back a lot more than they borrowed because their currencies aren't worth what they used to. So that's why they can't raise interest rates because of this great overhang of debt that has to be paid back in dollars. If the dollar gets stronger, how are they going to pay back this dough, which they can't even pay back even if the dollar stays weak.
So now you have that, and then you couple on top of that, really what's going on in the whole energy sector. You're looking at wipe outs around the globe. You've seen energy prices down some 70% from their June high back in 2014. Then you look at all the related; transportation, all the equipment, on and on that was bought and expanded during the energy boom. That happened between 2009 and 2014. And you're looking at the amount of bankruptcies. You're looking at the downgrading, not only of junk bonds, but of nations. You're seeing places like Oman and Bahrain being downgraded by Moodys, and now they're going to be downgrading more as well throughout the Middle East and around the world. Look what's going on in Brazil and Venezuela. So you have a crisis going on.
And here's something important to really look at, follow the money. These low interest rates are hurting banking stocks because they can't loan money out with negative, zero or low interest rate policy and make any money on it. Now go back to what I said with energy, it's estimated that the European banks have 20% exposure into the energy sector, between 10% and 15% in the United States. Then, when you put the junk bonds in the United States from energy and mining, you're looking at about 20% of them. So they have to keep these rates low.
And let's put this into perspective, they raised them one time in almost ten years, raised it to nothing.
Mike Gleason: Certainly much to do about nothing there. It's amazing how much conversation there's been about that teeny interest rate increase, and now they don't even seem to want to do it again. We'll find out.
I want to focus in on Europe here for a moment. You have a knack for accurately forecasting the consequences of geopolitical turmoil before it happens, and I want to get your thoughts on the Syrian refugee crisis, and the growing infiltration of Jihad into the heart of Europe. It seems the attacks in Paris, and now Brussels are only the beginning of the violence we may see. People are angry about a range of other problems from sexual assaults to increasing the burden on social programs. So what's going to happen there? What is the economic fallout likely to be?
Gerald Celente: Well one of the things Mike, it's very important. No one wants to look at what caused this, this refugee crisis and you mentioned Syria. It couldn't be because the President of the United States and the former Secretary of the United States, Hillary Clinton (said) Assad has to go. You remember that one? Yeah, Assad has to go, over there in Syria. And what happened? The Secretary of State, Clinton and Obama started funding those moderate rebels. You know what a moderate rebel is, you've seen them everywhere. Moderate rebels, how about murderers. They killed over 300,000 people in Syria. This is a very well-to-do nation. A place where people used to go to for tourists around the world for their antiquity and their style of living. A nonsectarian nation. Did they have their own problems? Of course they do, every country does. Now in total turmoil. Four million refugees, 11 million misplaced people.
Oh, and I forgot Libya. You remember Libya. Our Nobel Peace Prize winning President Obama (said), Qaddafi has to go. Clinton (said), Qaddafi has to go. Destroyed the most prosperous nation in Africa. Go back to our Trends Journal, 2011, Spring. The great migration. A half a million people were flooding out of Libya as the United States was bombing it into oblivion, and setting the stage for the so-called militants to take over and overthrow Qaddafi. The people that we supported to do this.
And I forgot Iraq. Yeah, the war, you know that one. Saddam Hussein has weapons of mass destruction says Bush and Cheney. Killed over a million people.
Then there's Afghanistan. Another million wiped out.
Countries totally destroyed. If you lived in those countries, and your houses and neighborhoods and cities and entire countries were demolished, you think you'd want to leave there? And if you were a young guy, and this is happening all your life as you’re a teenager, and now you're in your early 20s, and everybody you love has been killed, you have no future, your nation is in ruins, and you're being occupied by a foreign country, you'd think you want to go off the deep end and want to blow people's brains out?
Mike Gleason: Some say that America is responsible for the destabilization that's taking place in the Middle East. What role and what responsibility do the Europeans have to play? Are the U.S. lone rangers in this effort, or are our allies and the rest of the western world somewhat responsible for what's happening here as well?
Gerald Celente: They supported it too. They're as responsible. Look at the people who started the overthrow of Libya. Sarkozy of France. Cameron, Blair with Iraq. Cameron with all of them. Syria, they're bombing away. They're all responsible. Nobody wants to look at the cause and effect. No one. I'll tell you what, start a fight with your neighbor, and then the neighbor across the street from that neighbor, and then the other neighbor. You've got a bone to pick with them? Listen, blow their brains out. Do anything you want because you can call yourself the Commander in Chief, and you don't need any laws to do it. They were a threat to you, and you wanted to launch a preemptive strike. Wipe out your entire neighborhood. Call yourself King, better yet El Presidente.
So what I'm saying is, you have a human wave of people that's non-stoppable unless there's peace, and no one's allowed to talk about peace. No one. You don't talk about peace. It's off the radar. It was peace that brought the end of World War II didn't it? It was the Marshall Plan that rebuilt Europe wasn't it? It was peace that brought prosperity and joy and beauty and greatness, but we're not going to talk about this. I'm going to tell you Mike, you elect me, I'm going to kick their ass. I'm going to wipe them out. I'm going to carpet bomb. I'm a tough guy… I can't fight my way out of a paper bag. I'll call myself Trump, Rubio, Cruz, Lindsey Graham, and the rest of the losers.
So what I'm saying is the only solution that the presidential reality show is giving is for more violence, and it's going on globally. The only way this is going to end is with peace. And nobody wants to talk about. Hey, it was the Easter season. Anybody ever hear of the Prince of Peace? So what I'm saying is the solutions that they're giving are only going to cause more problems.
I want to put this into perspective. We're talking about the economy. Now you have the migrant crisis, people out of work, commodity prices are plunging, you're looking at downgrades as I said in the oil sector, yet you look at commodities, whether it's South Africa, Congo, Nigeria, Niger, Algeria, go to Venezuela, go to Columbia, go to Brazil, go across Chile, prices are way down. Copper, iron ore and all the commodities. Now you have a wave of people leaving for migrant reasons.
To put this into perspective, the greatest refugee crisis in our modern times was World War II. You had 2.3 billion people on the planet then. Guess what? We've added 5 billion more. This refugee, immigrant crisis is going to be, not only a major political issue in the United States, but throughout Europe. You're going to start seeing a great reversal going on. And there’s going to be a lot of what they call nationalist parties pushing these people out, and a reclamation, reclaiming of their countries for their people. Whether or not you agree or disagree with it. And in Europe it's also going to be the beginning, we believe, of the end of the Eurozone.
Mike Gleason: Well as we begin to close, let's talk a little bit about the metals markets. Gold and silver have fared well this year. Gold specifically. We've seen a big uptick in the amount of inflows into some of the ETFs like GLD for instance, which is a good indicator that broad interest in the yellow metal among western investors is returning, perhaps because of all the uncertainty that we've been talking about. Do you see that continuing, and will this be a strong year for the metals given all of the turmoil out there?
Gerald Celente: We believe so. And it's not only the U.S. Look at the numbers that just came out in China. People are buying it up, and they're not buying it up for jewelry purposes anymore, only 1% gain was from jewelry. Most of it was from buying either coins or bars. And of course, there's also an uptick as well in India. So see it, again go back to Janet Yellen's speech earlier in the week, and what happened? You saw gold as the more she spoke, the higher gold spiked. It went up over 20 bucks. It pulled back a little bit.
Because who wants fiat currencies when they're just printing it for more quantitative easing, and of course in Europe, not only are they buying government bonds, but now they're buying corporate bonds. The stimulus went from what? 60 billion euros a month to 80 billion. Why would I want to hold euros? Why would I want to hold Brazilian real? Why would I want to hold Argentinian pesos when they devalued them? Why would I want Russian rubles or South African rand? The only reason the dollar is gaining any strength at all is because the others are so weak. So we believe that with all of the quantitative easing, all of the stimulus, all of the fiat currencies, and again, the old argument used to be, "Well why would I hold gold? It doesn't pay any return. I'll hold dollars. At least I'll get interest on that money."
Guess what? Now you don't get interest on it anymore. If you're holding gold or dollars, which one would you rather have?
Mike Gleason: Yeah, it certainly seems like a compelling case, especially if we see widespread negative real interest rates. That should be a definite good environment for gold if we do get that, and I think we probably have a good chance of seeing it here in the states as well as what they're already doing in Europe.
Well Mr. Celente, thank you so much for joining us again. I always love hearing you, and you never pull any punches, and as usual it's great to hear your thought provoking insights.
Now before we let you go, as we always do, we'll ask you to tell folks how they can learn more about the Trends Research Institute and the Trends Journal and what you're doing there online, anything that people need to know about.
Gerald Celente: Yes, of course. It's TrendsResearch.com, and of course we publish the Trends Journal quarterly. 54-pages full color, no advertisements. We put out a Trends Monthly Magazine. That's digital. That just went out exactly this week. We send out Trend Alerts each week. And each weekday we do Trends in a News broadcasts, every Monday through Friday. And of course many, many more opportunities… conferences, et cetera. And really, we believe it's the only place where you're going to be able to read history before it happens.
Mike, we know that there are people out there who are having difficult times. We have a discount request page. We try to make the Trends Journal available to everyone. We do our very best to do that. If you can't pay the full subscription price, which is only $99 a year for the online service, we'll do our very best to see if you could get it at a price you can afford.
Mike Gleason: Well it is great stuff. I've got the winter edition of the Trends Journal here in my hands right now, looking forward to the spring edition when that comes out shortly.
It's excellent stuff as always. I hope you have a great weekend, and I look forward to catching up with you again real soon.
Gerald Celente: Thanks for having me on Mike. All the best.
Mike Gleason: That will do it for this week. Our sincere thanks, again to Gerald Celente for his wonderful comments and insights. For more information, again the website is TrendsResearch.com.
And don't forget to check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend everybody.