Steve Forbes has graciously given his time to Birch Gold Group for an exclusive interview, and in this special edition of the Market Report, we bring you some of the highlights. We asked the accomplished CEO of Forbes Inc. a number of questions: On the Federal Reserves role in the economy, how the dollar is being undermined, Americans’ view of savings and what role gold can play in helping to safeguard anyone’s savings. Listen to just some of what Mr. Forbes had to tell us, and get the very first reactions from our own Vince Miller and Will Hart.
Mark Alyn: This is the Market Report from the Birch Gold Group. Hi, I’m Mark Alyn along with Vince Miller from the Birch Gold Group, and also Will Hart from the Birch Gold Group. Gentlemen, welcome to The Market Report.
Vince Miller: Hi Mark.
Will Hart: Hi Mark. Thanks for having me again.
Mark Alyn: Our pleasure. We’re going to feature some excerpts of an exclusive interview that we just did with Steve Forbes, and what I’m going to do is I’m going to ask a question, we’re going to listen to what Steve said, and then I’m going to ask you guys to respond. Okay? So, we’re going to start with the question is, “Will the Fed actually stop Quantitative Easing in October?” Here’s what Steve Forbes said.
Steve Forbes: The Fed will stop the Quantitative Easing, but what is disturbing is that they are going to still keep all the bonds they bought. They’re not going to let them run down, which is now going to be about, when October rolls around, four and a half trillion dollars. So, the Fed is still sinning and those excess reserves are still in overhang, and they’re still working to undermine the dollar, openly.
Mark Alyn: Vince, how do you respond to that?
Vince Miller: I think they are going to have to stop Quantitative Easing. I mean I don’t think it could go on forever. The scenario kind of reminds me of a situation I recall back when I was in school. I remember, in college, I had a girl I was friends with and she came from a very affluent family, and I remember the father paid for everything. And he kept threatening her that if you don’t get your grades up, start showing up to class, and if you don’t start taking this more seriously, we’re going to cut you off. And of course she never got cut off, until one day she turned in her report card or sent the grades to the father and finally he said, “Okay, enough is enough,” and he did actually cut her off.
And I remember it was a huge difference. I remember she went from not having to have a job in college. She had the best car on campus to actually the car got taken away and I remember she was working at a pizza shop and also at a clothing store. So, things got really bad for her really quick as soon as her father stopped paying the bills.
Mark Alyn: As soon as he stopped his Quantitative Easing.
Vince Miller: That’s exactly right, and I think a similar effect is going to take place here, when the Federal Reserve stops taking care of all the debt and all the problems, and especially when you’re seeing other countries that are opting out of buying our debt. I mean we’ve been living off of China, and basically Asian countries have been loaning us money for so many years and now they’re opting to buy other people’s debt, not U.S. debt. When you have the Federal Reserve pulling back, I think it’s going to be a Susie Louis scenario.
Mark Alyn: So, what will happen to the dollar?
Vince Miller: I think that’s an obvious answer. I think the value of the dollar is going to obviously go down, and of course that’s what happens. The more they print, the more it goes down.
Mark Alyn: And at the same time, the value of gold will go up.
Vince Miller: Well, you know, theoretically gold goes up when the dollar goes down.
Mark Alyn: So, Will, what’s your take on this?
Will Hart: Okay, I actually have to disagree with both Vince and Steve Forbes. I think that the government is maybe putting it out there that we’re going to slow down on Quantitative Easing or maybe even, in fact, stop it. I don’t think they’re going to stop it. I don’t think they can. I think this is a runaway train, and it sound convenient to say “Oh, we’re going to stop.” I think they’ve dug this hole so deep that they’re literally going to have to bankrupt the dollar. I think they’re just going to continue this. They’re going to continue this, and to the point where they realize okay, the straw is now going to break and we’re going to have to come up with something new.
Mark Alyn: I know that we’ve talked about this in past shows. Give me a quick overview of what Quantitative Easing is for somebody just tuning in.
Will Hart: Sure. Basically Quantitative Easing, the easiest way to explain is the printing of additional funds to make up with what we don’t have. So, the government, as an example, brings in tax money to run the country. Well, the problem is we’ve been shy. In other words, there’s not enough money coming in to pay the bills, so we’ve got a convenient printing press in the backyard that they’re making up the difference by printing that money. And in essence, that’s where the term Quantitative Easing comes from. The problem is the more we print the more we owe on that money as far as interest and so forth. That’s why we’re sitting with almost an $18 trillion debt. So, what are we supposed to do? Well, the government brings in more money from taxes. Oh, we have that much less, we owe that much more on the interest, and that whole cycle continues.
So, it’s hard for me to understand markets. Some point where the market goes: “Okay, we’re going to stop.” Well, wait a minute: We already know we don’t have enough money to run the country, so I’m kind of confused. How are we going to shut that down? It’s like if you lived on your credit card and every time you pulled money out of your credit card to pay your bills, well, that amount that you owe on the credit card keeps climbing, but once you max that out, you have to ask the bank: “Oh, can you please do me a favor? Raise that limit.” Well, here, they used to ask. The government used to have to ask and raise the debt ceiling. They’ve eliminated that now.
Mark Alyn: They won’t do it.
Will Hart: Now they can just do it as much as they want.
Mark Alyn: They don’t have to ask.
Will Hart: They just do whatever they want.
Mark Alyn: Whatever they want. Got you.
Vince Miller: Mark, I just have to just correct Will’s misunderstanding of the facts here in the sense that it is just impossible that the Federal Reserve can keep Quantitative Easing going on forever because the false inflation of the Dow Industrial Average, this false liquidity that’s happening in the stock market cannot continue. And as we said before, I don’t think the Federal Reserve could continue to prop up our economy with this false sense of security. I think, at some point, the Federal Reserve does have to pull back. I’m not saying it’s going to be pretty. I’m not saying it’s going to be good, but ultimately, if we are ever going to have a full recovery, I think we need to have a full balancing out, and I think it’s going to get really ugly before it gets good again, and this could take a long time.
I don’t know how long it’ll take, but I think they need to set it. They need to let the chips fall where they may, stop printing all this money or buying up all this bad debt in the form of these bonds and so forth, and they need to just let it air out and let it just say, “Hey, look, enough is enough now,” and let it just see what happens.
Mark Alyn: Let it go naturally. Organically.
Vince Miller: Well, it’s going to be ugly.
Mark Alyn: It will be.
Vince Miller: It’s going to be ugly.
Mark Alyn: Yeah. Will, you had a brief comment.
Will Hart: Yeah, just real quick and, again, I’m not saying that this can obviously go on to the point where we have a hundred trillion dollars in debt, but again, something has to stop. And I believe it’s going to be the dollar is going to fail before they say we’re shutting it down.
Vince Miller: I don’t want to interrupt. Look, I’m not saying I think Obama is the greatest President in the world. Like we said before, I’ve watched gold double under Bush and double under Obama. I think both of these guys were bad for business. However, I cannot ever see a President, on his watch, allowing the dollar to really crash the way that he’s talking about here. The way that Will is saying. The dollar has always been around. It’s still considered a global reserve asset. I’m not saying we haven’t lost credibility globally. I’m not saying it has not lost a tremendous amount of value. I just cannot fathom that a President, on his watch, is going to let the dollar crumble and we’re going to go to some other form of currency or something else. So, I just strongly disagree with Will.
Will Hart: Well, again, the captain of the Titanic, on his watch, didn’t expect the Titanic to sink. No captain expects that or wants that to happen. I think this is just to a point where we’ve driven ourselves off the cliff, and then you realize, “Oh, there’s no more ground underneath me.”
Mark Alyn: Got you. All right, we want to continue with our comments from Steve Forbes in our exclusive Birch Gold Group interview. We asked Steve, “Why does the Federal Reserve have such a distorted view of the value of saving?” And this is what he said.
Steve Forbes: Well, they buy in to the notion that saving money is putting it in a black hole instead of realizing that’s capital to create a more prosperous economy. They think people buying stuff is the way to wealth. Well, people do buy, but they believe in counterfeiting.
Mark Alyn: I’m going to start with you, Vince. Can you respond to that?
Vince Miller: Well, I think that it’s the same sentiment with our country as a whole. America used to be the number one… we used to loan money to everybody. Now we have the highest debt in the world, just about. We are number one… we’re a global consumer. You know, what led us up to the credit crisis back in the mid-2000’s, leading up to 2007 and then 2008, was we were buying everything, and it was done on easy, cheap money. Banks were basically giving loans away, and basically we were being funded by countries that were big savers. I mean, it’s a fact that the average Chinese citizen saves about half of their income. They save! And they were saving it, it was being deposited in their banks, and their banks were loaning it to the United States, who was spending more money obviously than they had, and that’s ultimately why we have that problem.
So, when he says the Federal Reserve has a distorted view of value in savings, it’s just right along the sentiment of how our nature is here, as Americans.
Mark Alyn: And Americans are not known in the last, I think, 40 to 50 years as being savers. We’re just not. Other countries save more; as you just said, in China. Will.
Will Hart: Okay, and I agree with both Vince and Mr. Forbes. I believe that our country has a completely distorted view of saving. I mean, it’s living on credit cards. It’s, “Oh, I can’t afford it. Well, good thing I’ve got a credit card.” People living way, way beyond their means. And this is a sentiment across the country, where people just have no savings and the slightest little thing goes belly-up, next thing you know, they’re asking the government for handouts. So, it’s out of control.
Mark Alyn: Alright, let’s ask one last question as we do this preview of our exclusive interview with Steve Forbes. We asked him, “Why do you hold gold in such high esteem?”
Steve Forbes: Gold maintains its intrinsic value better than anything else on Earth. That’s for 4,000 years. And when you see the dollar price fluctuate around gold, that means the dollar is weakening or people’s perceptions about the dollar are changing. And so, for 180 years, this country, the United States, had the dollar fixed to gold. Worked pretty well. It certainly has worked better than the floundering we’ve had since.
Mark Alyn: Vince, can you comment on what Steve Forbes said?
Vince Miller: Well, he’s absolutely correct. I mean it’s just when you have dollars that are backed by something that is a store of value, when it’s backed by gold, it creates a fiscal responsibility. They just can’t have a free printing press to print whatever they want, right? I mean it means that a dollar has to have essentially a dollars’ worth of gold in value to back it up. Now, when we’re off the gold standard, since Dick Nixon took us off the gold standard, the dollar has lost about 86 percent of its value. Gold has gone up almost two thousand percent. So, it’s just simple economics. You take value away from something that creates value; you are left with whatever that is. We have a fiat currency. It’s backed by the promise in the good faith of the United States government, and of course that promise is becoming less and less trusted throughout the world and the global economies.
Mark Alyn: And Will.
Will Hart: Okay, yes, Vince is correct. The dollar is complete perception, and that perception is fading fast. So, gold is expensive to pull it out of the ground. I believe the average cost to a mining company here in the United States is about $1,200 to pull an ounce of gold out of the ground. And so, when you have something that costs money to actually make and to get it versus a printing press, because paper and ink is really cheap, gold is held in that esteem. He says, over four thousand years. And I believe that’s how we need to maybe get ourselves back to.
Mark Alyn: Guys, we are out of time. Thank you for joining us today. Vince Miller from the Birch Gold Group, and Will Hart from the Birch Gold Group. Gentlemen, thank you very much.
Will Hart: Thank you, Mark.
Vince Miller: Thank you, Mark.
Mark Alyn: If you have any questions, we invite you to call our Gold Specialists at (800) 355-2116. That’s (800) 355-2116. Our Gold Specialists will answer any questions you have about buying gold, why you should buy gold, and why you should buy it now rather than later. If you have questions, also you can write us. Send us an email at [email protected], [email protected] And I encourage you to visit our website www.birchgold.com. Lots of information there that will educate and inform you about gold and other precious metals investing. Go to www.birchgold.com. I’m Mark Alyn for the Market Report. We’ll see you next edition.