The World will Panic into Gold & Silver, and both of their market prices will go parabolic when that panic eventually occurs says David Stockman. Today David Stockman, the man President Ronald Reagan called upon along with Dr Paul Craig Roberts to help save the United States from disaster back in 1981, warns that we are now entering the “Terminal phase” of the Global Financial System that will end in a Total Collapse.
David was recently asked by Eric King, of King World News, what his thoughts were on gold in the midst of this big deflation we all see in front of us in the U.S. When you look at the collapse of 2008 – 2009, Gold was one of the best performing asset classes. Gold went down but it went down much less relative to virtually everything else. Contrasting that to 1973 – 1974, where we had a 47 percent stock market collapse, and during that period of time we all witnessed skyrocketing Gold & Silver prices.
What’s in front of us looks very much like Gold & Silver may be ending their 4 year bear market, and are both ready for a 1973 – 1974-style up-move?” However David Stockman believes the two periods are quite different. Although at the bottom it’s Central Bank Errors that underlie each. Back in the 1970s the U.S had just finally exited a semi-stable Bretton Woods Gold Exchange Standard system. There still was, at the end of the day, an anchor on the Central Banks that was thrown overboard by Nixon back in 1971.
“So the first go-round was a rip-roaring Price Inflation because there had not yet been enough time under the fiat money and balance sheet expansion by the Central Banks to create excess capacity in the world industrial system. So as the boom in demand took off, commodity prices soared. That fed into domestic costs and labor wages in particular. There weren’t a million cheap workers coming out of the rice paddies in China yet because it was still in the Dark Ages of Mao and not part of the World Economy.
And so you had a classic Inflation blow-off and flight to Gold in the 1970s as a result of that initial Money Printing cycle. Now, I think 40 years later Central Banks are erring to much greater extent but the cycle is different. We have now created massive excess industrial shipping, mining and manufacturing capacity in the world. Therefore we don’t have a short-run consumer price blowoff. We still have massive cheap labor in the world and so therefore we don’t have a wage price spiral.
We Will See Total Collapse
The result is that all of the massive stimulus from the Central Banks has gone into the Financial Inflation, not goods and services. The financial Inflation is obviously the great bubble that afflicts the entire financial system of the world. It’s becoming increasingly unstable and it will eventually collapse. And when it does I think it will mark the complete failure of a Monetary System that has basically been metastasizing since 1971.
The World Will Panic Into Gold & Silver And Their Prices Will Go Parabolic
When the Monetary System finally fails, there will be a flight to the only money that’s left in the system and that will be Gold & Silver, and that will be the hour in which the next great surge in their market price occurs. It is uncertain to predict the exact moment this rise will occur, but you can certainly have a pretty confident view of the direction, it will be (Parabolic).
The Central Banks are clearly destroying the Monetary System that emerged after Richard Nixon went to Camp David in August, 1971. So here we are 45 years later and we are nearing the end of an unstable Fiat Central Bank driven system, and the alternative is fairly obvious — at some point going back to real money. I don’t think Governments will do that voluntarily, but certainly people trying to protect their wealth will.
When that happens it will trigger a huge Political Crisis and hopefully an opportunity to change the regime and get back to some kind of viable, and Sound Financial and Monetary System.” During the horrific 1973 – 1974 bear market (in stocks) we saw Gold skyrocketing. And we have seen Gold trade very strongly through a number of crises from 2000 – 2011, at one point rising a stunning 700 percent.”
We Are Entering The “Terminal Phase” Of The Global Financial System
I think those cycles that you mentioned are relevant benchmarks, but they were warm-ups. What happened in each of those episodes was a short-run break in the system, collapse of confidence and flight to Gold & Silver. The world is facing now is a terminal phase of a monetary system that isn’t Viable, Stable or Sustainable. Therefore Gold & Silver both have but one characteristic — Massive upside in the years ahead.”
Post found on King World News