That is HB, at about 16:35 in his radio show 04-08-15 (August 15, 2004).
That was a pretty strong statement from him, as he generally qualified his statements much more than that.
I'm sure he would have been surprised by the 12 year bull market that we saw from 2001-2012!
(Note: I don't think it's over yet.)
You get a full bull market in gold only when there is strong inflation in the US
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Libertarian666
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Re: You get a full bull market in gold only when there is strong inflation in the US
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Re: You get a full bull market in gold only when there is strong inflation in the US
This is JMHO, of course, but I never felt like HB fully understood the effect on gold of negative real interest rates and a set of secular deflationary conditions.
What I think is happening is that the Fed is preventing strong appreciation of the dollar and gold is simply doing what the dollar would be doing absent Fed intervention.
Take a look at the yen over the past 20 years or so to see what might be happening with the dollar if the Fed wasn't doing everything in its power to keep the value of the dollar stable or even force it to decline a little.
I know not everyone here will agree with this point of view, but that's what I see.
What I think is happening is that the Fed is preventing strong appreciation of the dollar and gold is simply doing what the dollar would be doing absent Fed intervention.
Take a look at the yen over the past 20 years or so to see what might be happening with the dollar if the Fed wasn't doing everything in its power to keep the value of the dollar stable or even force it to decline a little.
I know not everyone here will agree with this point of view, but that's what I see.
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Re: You get a full bull market in gold only when there is strong inflation in the US
I also think that gold reacts to negative real interest rates, or expectations thereof.
Inflation can cause negative real interest rates. If cash is paying 10% and inflation is 13% you lose.
We have the same thing today. Or at least the markets expect the same thing.
Inflation is around 3% or so officially and cash pays 0%. Still negative real. Still a loser.
Then who knows what the markets are thinking. It still seems like a majority believe the dollar is going to be in some trouble after the Fed is done doing what they are doing. If that is what happens gold could go a lot higher. But if everything just kind of settles out the other way then look out below for gold prices.
All I know is I sleep like a baby owning some gold in my portfolio, especially in light of the rather extraordinary things going on in our monetary policy and spending. I would be much more nervous holding none of it.
Inflation can cause negative real interest rates. If cash is paying 10% and inflation is 13% you lose.
We have the same thing today. Or at least the markets expect the same thing.
Inflation is around 3% or so officially and cash pays 0%. Still negative real. Still a loser.
Then who knows what the markets are thinking. It still seems like a majority believe the dollar is going to be in some trouble after the Fed is done doing what they are doing. If that is what happens gold could go a lot higher. But if everything just kind of settles out the other way then look out below for gold prices.
All I know is I sleep like a baby owning some gold in my portfolio, especially in light of the rather extraordinary things going on in our monetary policy and spending. I would be much more nervous holding none of it.
Last edited by craigr on Thu Oct 03, 2013 9:02 pm, edited 1 time in total.
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LazyInvestor
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Re: You get a full bull market in gold only when there is strong inflation in the US
HB was clear about the link between gold and USD as the world reserve currency. He was explicit that USD is the first currency of choice, and that gold is the second choice only when there are some issues with USD. The most obvious problem that could be visible with USD is the inflation, but there could be others such as actions related to loss of faith in USD as the world reserve currency. Maybe that's what was happening during 2001-2012?! Many are also blaming all these recent wars to the attempts of the respective governments to get rid of USD dependence. Maybe the recent drop in the gold is somehow an indicator of the win of whatever US government was doing to strengthen the position of USD?
In any case, this relationship of USD and gold is what makes me always a skeptic towards non-US PP.
I don't mind gold dropping in price if it's an early indicator that things will be good in next few years. I'd take gold losses any time in exchange for prosperity. It sucks when gold is going up.
In any case, this relationship of USD and gold is what makes me always a skeptic towards non-US PP.
I don't mind gold dropping in price if it's an early indicator that things will be good in next few years. I'd take gold losses any time in exchange for prosperity. It sucks when gold is going up.