The western world is headed to “a state of disaster” says Alan Greenspan and, “without reform of the financial system, another crisis is certain – sooner rather than later” says Mervyn King, the former head of the Bank of England. Greenspan has already suggested gold as “a good place to put money these days given the policies of governments” while King said recently that “when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept.”
An excerpt from the original article by Michael J. Kosares (usagold.com) which has been edited ([ ]) and abridged (…) to provide a faster and easier read.
The problem at…[society’s] core is demographic.
- Retiring baby boomers are paying off debt, not borrowing more. As time goes by, they will increasingly become consumers of government largess…rather than its suppliers.
- The Millennials and GenXers are struggling with student debt, low incomes and paltry savings. For them, owning a home, the traditional means to stimulating overall demand, is more a future consideration than anything imminent. (In 1960 62% of 18 to 34-year-olds lived in their own households. By 2015, that number had dropped to just under 32%.)
- Outstanding mortgage debt, as a result of these demographic shifts, has gone into a free-fall. (See chart immediately below.)
Simply put, the problem for the global economy…boils down to the lack of demand – for goods and services and for money itself in the form of credit.
Fiat paradigm falling apart
In short, the whole fiat paradigm of lending money into existence is falling apart, and no one seems to know what to do about it. If you would have told me in 2007 that within a decade we would be facing the possibility of a deflationary breakdown, I would not have believed you.
It is quite clear that the former Fed chairman and the former governor of the Bank of England are in agreement that the global economy is tacking against some heavy headwinds. The demographic shift Greenspan cites and King’s admission of policy-makers failure in dealing with it point to continuing long-term demand for gold and silver not just among private investors, but among funds, institutions and central banks as well. In addition, it is the failures (or potential for failure) in policy, as cited by both King and Greenspan, that will give pause even to those who most ardently profess undying faith in the central banks. Along these lines, it is interesting to note that Greenspan has already suggested gold as “a good place to put money these days given the policies of governments.” Mervyn King may not be far behind.
([Indeed,] no sooner had the ink dried on the June issue of our newsletter, of which this article was a part, than King was quoted in the World Gold Council’s Gold Investor magazine as advocating gold ownership at a time of what he calls “radical uncertainty”. The full article includes some of Mr. King’s prescriptions for the global economy. There you will find more good reading on current happenings in the gold market.
[He went on to say:]
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold”)…
I might add that the very same logic applies to gold as part of the private investment portfolio. For the full article, which includes some of Mr. King’s prescriptions for the global economy, we recommend the World Gold Council’s Gold Investor magazine. There you will find more good reading on current happenings in the gold market.