David Morgan: If Bernanke was a helicopter, Yellen will be the Concorde!
Published in on October 30, 2013
Silver expert David Morgan from the Morgan Report chats with Cambridge House Live's Vanessa Collette about Janet Yellen's rise to the top job at The Fed and what the silver price is going to do over the next few months. Taped during our Silver Summit 2013 in Spokane, Washington. Enjoy!
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Vanessa Collette: Welcome to Cambridge House Live. I’m here at the 11th Annual Silver Summit in Spokane, Washington. Joining me is David, you may know him as the Silver Guru, and he’s the publisher of the Morgan Report – welcome David, great to have you here with us again.
David Morgan: Thank you Vanessa.
VC: David, let’s start out by talking about some of the recent events we’ve seen – what do you make of Janet Yellen’s appointment to the FED?
DM: Well, what was said at the Summit yesterday – if you’re screaming you should be doing something, if you’re Yellen you should be ‘Sellin? Corny joke but Yellen – we did a write up on her – for the Morgan report, a brief one, but if you think Bernanke had the pedal to the metal as far as loose monetary policy, you’ve seen nothing yet. I refer to helicopter Ben and supersonic Yellen. Having a bit of an aircraft background, the Concorde has been in mothballs for years but the supersonic 2.2 Mach jet - it is what it’s going to take with the amount of money that Yellen is going to print. I’m being a bit facetious but she has a belief that is invalid from an Austrian economist’s perspective and she does not really think that you can over-inflate an economy. And that is a bad, bad way to approach it because history has proven her wrong.
I hate to call anyone at the level she is at the fed – I think she has a good heart and is well meaning, but her belief system is invalid. So I am afraid that as we go further down this treck of trying to cure this debt problem, by adding more debt to it is going to blow up and it would happen under anyone’s watch to be fair to Janet Yellen, but she is the most dovish of anybody that they could appoint. I think that Barack wanted to have Larry Summers but there was such an ill feeling about Summers throughout even Wall Street that he quickly was swept to the side – we all believed that Yellen would be in and she is.
VC: That’s amazing. So it might actually happen that instead of tapering, we could see MORE easing.
DM: Well, they’re going to play the game of moving the market by rhetoric. They’re going to say we need to taper or tapering is around the corner, or this or that, they might rename the QE to something else, there’s lots of games they can play but the fundamental facts remain the same – you can’t cure a debt problem with more debt no matter how you rename it, and if you tone it down, people don’t really know unless you look into the real hard numbers. This is 85 billion per month that they’ve committed to—usually that’s the minimum—they get money back through the Fed from what they have in the market. Meaning that their “investments” – it’s a paper chase. But their interest on those “investments” – if you look back a couple of months they contributed not 85 billion but 114 billion. So they just continually pour more money so of course the big question becomes, well Jesus, David, if they are printing this much money, how come we don’t see inflation. It’s not a function of how much money you print – it’s a function of how fast that money turns over.
VC: Interesting. So what do you think overall about quantitative easing, is there any way that it can actually help create jobs as Yellen is saying?
DM: Well that’s the big thing to keep the public involved, is “well, we care about you, we want more jobs” no – the whole thing is about saving the banking system. The Federal reserve has a mandate – it’s a private banking consortium – their whole edict, their purpose for existing is to keep the banks alive – but it sounds good when you’re in front of the public cameras “Oh we want to increase the jobs, we’re going to keep on the easy money policy until the unemployment figures get to this level, we’ll let the data dictate what we’re going to do” And they sound very liberal, very progressive, ‘we’re going to really help the poor guys out’ No – they’re liquefying the banks because they’re insolvent. They were not valid entities – they could not stand on their own feet. And of course because of more consolidation in the banking system there are fewer players in the game – to make the system even more at risk. The way you spread risk is to diversify – you move it into more entities. They’ve consolidated. So there’s less and less, so now one of these ‘two big to fails’ does fail – whether they like it or not – which is a possibility, then they might not be able to come to the rescue as quickly as they did in 2008.
VC: David, what are your thoughts- the US government shutdown that we just saw – it’s behind us now, but what’s your opinion on what happened?
DM: Well, I’m very opinionated so []. It was a ‘hom-hum-hee-hah’. It was ridiculous. The government wasn’t shut down – the only thing that was shut down – there were some people who were hurt, I’m not going to be insensitive here – but you know the national parks, one of the few things that actually have some merit in my view – the national parks system, and they closed those down! Come on. It’s ridiculous. But that’s really the majority of what happened – you know there were some people who were hurt for a while, but the part of the government that probably should be tapered off a bit were fully functioning, you didn’t see any Congress members not receiving a pay check or anything like that.
VC: Right, well, I guess one upside that could be said about it is Barclay’s is now revising some of their estimates for when they saw a taper from December to March because now they’re seeing there is going to be a loss in confidence and basically just overall confidence in the US government. Do you think there is a loss in confidence in the US because of all of that?
DM: Well if you go back and look at my work on the internet, and a lot of it is for free, it’s not for fu it’s very serious, but I wrote an article called dollar.com – couple of real pertinent points – one about the dot.com industry was all about, but also a play on words with the dollar.con – and I wrote about what a con is and what a confidence man does – and the while system is based on confidence, I mean you used the word three times, it is it’s a confidence game – and what we are trying to do is instill confidence that we are the best looking horse in the glue factory – and that’s a good analogy you’ve heard before, the dollar looks great next to all the other horses but we’re still in the glue factory, it’s a terminal case. No fiat currency has ever stood for ever, they’ve all failed, and no paper monetary system goes on. There’s one that the Mogambo Guru does – an interview with Mike Maloney, and he’s much more animated than me and I’m not exactly static – and he talks about Addison Wiggin’s getting hired at Agora – and he tasked with looking at all of the currencies that have failed and he went by alphabetical order .. A, B..C. and by the letter ‘C’ he had gotten to 1550! I don’t remember the number exactly but he’s saying 1550 have FAILED, at the letter C! But it’s true.
But what happens. We can’t see the future exactly but they are continuing to pretend that we have confidence when the market clearly shows that they are losing confidence day after day after day. So anyone who is really cognizant of something being wrong – I think with the internet even just a cursory examination of the facts can draw their own conclusions. And what that means is that if you think that someone else is responsible for your life you’re not thinking very well. You’ve got to take your own action – and to go off on a tangent – that is what make this country great. Self- responsibility , independence and rule of law, that protected you with your own ideals and ideology – as long as you weren’t infringing on the rights of others and did what you said you were going to do, the system worked great – but it’s become very convoluted from that point on.
VC: I think that’s a great philosophy. Moving over to Silver, are we seeing a squeeze now on the silver supply – there’s people talking about on the gold side the “Shanghai Premium” but what are we seeing on the silver side right now?
DM: Not as much. I think gold – you know I always believed that it would probably be the silver side where you would see a discrepancy between or distortion between the physical price and the paper price. And that did happen in 2008. But now it looks like it’s more on the gold side. You’re seeing China buy an annual mine supply year over year. Well, you know, in theory, you can buy all the produced gold in one year in one entity like a nation state like China. But you know India is doing something almost as much. And then you take the public at large, or traded funds at large with the public and you’re talking half that much. Now wait a minute, that’s two and a half times the annual gold supply taken on an annual basis. That cannot go on forever.
The big movement of physical gold going from the West to the East is well documented. The distortion from entities I won’t name that are supposedly at the top of the heap as far as accurate reporting on what the movements of gold and silver are, are questionable at best. So what we know for a fact is that the demand for physical gold, in Asia, is very strong and continuing to be strong. So one of the premises I had from day one is that paper doesn’t equal real, you know, my mantra, ‘be real, get real, buy real’ hasn’t changed. So there will be a day, and I think the day will happen more with gold than silver – again I thought the reverse some time ago, but now it looks like – and gold is much more popular, much more mainstream, let’s face it, if you want to really compact your wealth into a small area, I could put 40,000 dollars’ worth of gold in my pocket and walk down the street, and nobody knows I’ve got it but me. But try putting 40,000 dollars’ worth of silver coins in your pocket; you’re going to have a hard time walking down the street.
VC: Yes, you might need a wheel barrel or two. When do you think that we are going to see investor’s appetite come back for silver in a real way?
DM: Yeah, that’s a great question. It’s a tried and true answer the cure for low prices is low prices. You need a maverick thinker you know – I’ll use myself as an example - excuse the ego – but I was there pounding the table when silver was at the lowest inflation adjusted price it had been at in recorded history. And nobody was paying attention. I shouldn’t say no one – Warren Buffet was paying attention – he had bought in that range, and Bill Gates, he bought a great stake in in Pan American Silver, and like him or not, George Soros started Apex Silver Mines – so you know the billionaires were buying, not the millionaires, the billionaires. But the general public was a big ho-hum – Silver had been under $5 in a 20 year bear market, why would I buy something that is at the lowest price it has ever been – which proves my point – people don’t buy bottoms. So it takes a unique, maverick type of thinking, outside the box type of thinking, even in the space we are in of contrarians – it takes a contrarian within the contrarians to do it.
I think it’s a tremendous opportunity, especially on the mining shares side – we’re at a level that is a once in a lifetime opportunity. Opportunity, but we need new people in the sector. How does that happen? I don’t know. But with the internet, the right interview, the right whatever- maybe when Yellen comes in office, I don’t know – there could be, could be, not would be, could be a triggering point that something happens in the administration, something happens on the war front, something happens at a major bank, something happens in the stock market or bond market, I mean all of these things are interconnected and tied together. And there could be a trigger event that has nothing really to do with the silver market- that frightens people or elates them, maybe it’s a new technology using silver in a battery – I don’t know – but all of a sudden the consciousness shifts quickly- and there’s a big move into it and once that momentum starts, once that spark is lit, especially in silver, NOTHING can move like the silver market, it will ignite and take off.
Now am I forecasting that to happen? No I’m not. I think we’re in a re-building process […] that ignition I just described, that WILL happen, probably at the end of the market. But there’s no reason to rule it out completely. Because if there is one thing that we know about capital markets and investing is, it’s human activity. And human activity CANNOT be predicted.
VC: Absolutely. Well David, it was a pleasure as always having you back, thank you so much for your time.
DM: My pleasure.
Subscribe to us on You Tube for more video updates!
Vanessa Collette: Welcome to Cambridge House Live. I’m here at the 11th Annual Silver Summit in Spokane, Washington. Joining me is David, you may know him as the Silver Guru, and he’s the publisher of the Morgan Report – welcome David, great to have you here with us again.
David Morgan: Thank you Vanessa.
VC: David, let’s start out by talking about some of the recent events we’ve seen – what do you make of Janet Yellen’s appointment to the FED?
DM: Well, what was said at the Summit yesterday – if you’re screaming you should be doing something, if you’re Yellen you should be ‘Sellin? Corny joke but Yellen – we did a write up on her – for the Morgan report, a brief one, but if you think Bernanke had the pedal to the metal as far as loose monetary policy, you’ve seen nothing yet. I refer to helicopter Ben and supersonic Yellen. Having a bit of an aircraft background, the Concorde has been in mothballs for years but the supersonic 2.2 Mach jet - it is what it’s going to take with the amount of money that Yellen is going to print. I’m being a bit facetious but she has a belief that is invalid from an Austrian economist’s perspective and she does not really think that you can over-inflate an economy. And that is a bad, bad way to approach it because history has proven her wrong.
I hate to call anyone at the level she is at the fed – I think she has a good heart and is well meaning, but her belief system is invalid. So I am afraid that as we go further down this treck of trying to cure this debt problem, by adding more debt to it is going to blow up and it would happen under anyone’s watch to be fair to Janet Yellen, but she is the most dovish of anybody that they could appoint. I think that Barack wanted to have Larry Summers but there was such an ill feeling about Summers throughout even Wall Street that he quickly was swept to the side – we all believed that Yellen would be in and she is.
VC: That’s amazing. So it might actually happen that instead of tapering, we could see MORE easing.
DM: Well, they’re going to play the game of moving the market by rhetoric. They’re going to say we need to taper or tapering is around the corner, or this or that, they might rename the QE to something else, there’s lots of games they can play but the fundamental facts remain the same – you can’t cure a debt problem with more debt no matter how you rename it, and if you tone it down, people don’t really know unless you look into the real hard numbers. This is 85 billion per month that they’ve committed to—usually that’s the minimum—they get money back through the Fed from what they have in the market. Meaning that their “investments” – it’s a paper chase. But their interest on those “investments” – if you look back a couple of months they contributed not 85 billion but 114 billion. So they just continually pour more money so of course the big question becomes, well Jesus, David, if they are printing this much money, how come we don’t see inflation. It’s not a function of how much money you print – it’s a function of how fast that money turns over.
VC: Interesting. So what do you think overall about quantitative easing, is there any way that it can actually help create jobs as Yellen is saying?
DM: Well that’s the big thing to keep the public involved, is “well, we care about you, we want more jobs” no – the whole thing is about saving the banking system. The Federal reserve has a mandate – it’s a private banking consortium – their whole edict, their purpose for existing is to keep the banks alive – but it sounds good when you’re in front of the public cameras “Oh we want to increase the jobs, we’re going to keep on the easy money policy until the unemployment figures get to this level, we’ll let the data dictate what we’re going to do” And they sound very liberal, very progressive, ‘we’re going to really help the poor guys out’ No – they’re liquefying the banks because they’re insolvent. They were not valid entities – they could not stand on their own feet. And of course because of more consolidation in the banking system there are fewer players in the game – to make the system even more at risk. The way you spread risk is to diversify – you move it into more entities. They’ve consolidated. So there’s less and less, so now one of these ‘two big to fails’ does fail – whether they like it or not – which is a possibility, then they might not be able to come to the rescue as quickly as they did in 2008.
VC: David, what are your thoughts- the US government shutdown that we just saw – it’s behind us now, but what’s your opinion on what happened?
DM: Well, I’m very opinionated so []. It was a ‘hom-hum-hee-hah’. It was ridiculous. The government wasn’t shut down – the only thing that was shut down – there were some people who were hurt, I’m not going to be insensitive here – but you know the national parks, one of the few things that actually have some merit in my view – the national parks system, and they closed those down! Come on. It’s ridiculous. But that’s really the majority of what happened – you know there were some people who were hurt for a while, but the part of the government that probably should be tapered off a bit were fully functioning, you didn’t see any Congress members not receiving a pay check or anything like that.
VC: Right, well, I guess one upside that could be said about it is Barclay’s is now revising some of their estimates for when they saw a taper from December to March because now they’re seeing there is going to be a loss in confidence and basically just overall confidence in the US government. Do you think there is a loss in confidence in the US because of all of that?
DM: Well if you go back and look at my work on the internet, and a lot of it is for free, it’s not for fu it’s very serious, but I wrote an article called dollar.com – couple of real pertinent points – one about the dot.com industry was all about, but also a play on words with the dollar.con – and I wrote about what a con is and what a confidence man does – and the while system is based on confidence, I mean you used the word three times, it is it’s a confidence game – and what we are trying to do is instill confidence that we are the best looking horse in the glue factory – and that’s a good analogy you’ve heard before, the dollar looks great next to all the other horses but we’re still in the glue factory, it’s a terminal case. No fiat currency has ever stood for ever, they’ve all failed, and no paper monetary system goes on. There’s one that the Mogambo Guru does – an interview with Mike Maloney, and he’s much more animated than me and I’m not exactly static – and he talks about Addison Wiggin’s getting hired at Agora – and he tasked with looking at all of the currencies that have failed and he went by alphabetical order .. A, B..C. and by the letter ‘C’ he had gotten to 1550! I don’t remember the number exactly but he’s saying 1550 have FAILED, at the letter C! But it’s true.
But what happens. We can’t see the future exactly but they are continuing to pretend that we have confidence when the market clearly shows that they are losing confidence day after day after day. So anyone who is really cognizant of something being wrong – I think with the internet even just a cursory examination of the facts can draw their own conclusions. And what that means is that if you think that someone else is responsible for your life you’re not thinking very well. You’ve got to take your own action – and to go off on a tangent – that is what make this country great. Self- responsibility , independence and rule of law, that protected you with your own ideals and ideology – as long as you weren’t infringing on the rights of others and did what you said you were going to do, the system worked great – but it’s become very convoluted from that point on.
VC: I think that’s a great philosophy. Moving over to Silver, are we seeing a squeeze now on the silver supply – there’s people talking about on the gold side the “Shanghai Premium” but what are we seeing on the silver side right now?
DM: Not as much. I think gold – you know I always believed that it would probably be the silver side where you would see a discrepancy between or distortion between the physical price and the paper price. And that did happen in 2008. But now it looks like it’s more on the gold side. You’re seeing China buy an annual mine supply year over year. Well, you know, in theory, you can buy all the produced gold in one year in one entity like a nation state like China. But you know India is doing something almost as much. And then you take the public at large, or traded funds at large with the public and you’re talking half that much. Now wait a minute, that’s two and a half times the annual gold supply taken on an annual basis. That cannot go on forever.
The big movement of physical gold going from the West to the East is well documented. The distortion from entities I won’t name that are supposedly at the top of the heap as far as accurate reporting on what the movements of gold and silver are, are questionable at best. So what we know for a fact is that the demand for physical gold, in Asia, is very strong and continuing to be strong. So one of the premises I had from day one is that paper doesn’t equal real, you know, my mantra, ‘be real, get real, buy real’ hasn’t changed. So there will be a day, and I think the day will happen more with gold than silver – again I thought the reverse some time ago, but now it looks like – and gold is much more popular, much more mainstream, let’s face it, if you want to really compact your wealth into a small area, I could put 40,000 dollars’ worth of gold in my pocket and walk down the street, and nobody knows I’ve got it but me. But try putting 40,000 dollars’ worth of silver coins in your pocket; you’re going to have a hard time walking down the street.
VC: Yes, you might need a wheel barrel or two. When do you think that we are going to see investor’s appetite come back for silver in a real way?
DM: Yeah, that’s a great question. It’s a tried and true answer the cure for low prices is low prices. You need a maverick thinker you know – I’ll use myself as an example - excuse the ego – but I was there pounding the table when silver was at the lowest inflation adjusted price it had been at in recorded history. And nobody was paying attention. I shouldn’t say no one – Warren Buffet was paying attention – he had bought in that range, and Bill Gates, he bought a great stake in in Pan American Silver, and like him or not, George Soros started Apex Silver Mines – so you know the billionaires were buying, not the millionaires, the billionaires. But the general public was a big ho-hum – Silver had been under $5 in a 20 year bear market, why would I buy something that is at the lowest price it has ever been – which proves my point – people don’t buy bottoms. So it takes a unique, maverick type of thinking, outside the box type of thinking, even in the space we are in of contrarians – it takes a contrarian within the contrarians to do it.
I think it’s a tremendous opportunity, especially on the mining shares side – we’re at a level that is a once in a lifetime opportunity. Opportunity, but we need new people in the sector. How does that happen? I don’t know. But with the internet, the right interview, the right whatever- maybe when Yellen comes in office, I don’t know – there could be, could be, not would be, could be a triggering point that something happens in the administration, something happens on the war front, something happens at a major bank, something happens in the stock market or bond market, I mean all of these things are interconnected and tied together. And there could be a trigger event that has nothing really to do with the silver market- that frightens people or elates them, maybe it’s a new technology using silver in a battery – I don’t know – but all of a sudden the consciousness shifts quickly- and there’s a big move into it and once that momentum starts, once that spark is lit, especially in silver, NOTHING can move like the silver market, it will ignite and take off.
Now am I forecasting that to happen? No I’m not. I think we’re in a re-building process […] that ignition I just described, that WILL happen, probably at the end of the market. But there’s no reason to rule it out completely. Because if there is one thing that we know about capital markets and investing is, it’s human activity. And human activity CANNOT be predicted.
VC: Absolutely. Well David, it was a pleasure as always having you back, thank you so much for your time.
DM: My pleasure.
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