Editor’s note: The following is an excerpt from the November 22nd, 2019 Money Metals Market Wrap Podcast interview featuring David Morgan of The Morgan Report. You can follow him on Twitter and grab a copy of his book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave at MoneyMetals.com and other places where books are sold.
Mike Gleason: Is gold and silver still going to be a good place to be over the long run despite all the consternation and the difficulty that we’ve seen over the last few years?
David Morgan: Absolutely. I mean we’re facing something that’s really never been, taken place in monetary history at least what we know of recorded history, and we’re seeing the demise of the age of empire. I mean basically everything was built on this system, on money and the money system is actually designed to fail from the start.
You cannot have infinite interest rates. And what it mean by that is the, the exponential function, the compounding of interest over and over and over again. They’ll go to infinity eventually.
So, we’ve had adjustments and certainly some very big problems throughout monetary history. I mean there’s several that we can name. The point is, I don’t think it’s ever been one of this breadth and scope where basically you know there are 7 billion people on the planet and very few will come out unscathed. It’s certainly not the end of the world, but there will be an adjustment and how big how hard and how long that adjustment is, no one really knows.
I think the main thing to do is to one, not panic and to realize that all the wealth stays in place. I mean all the agriculture, all of the oil fields, all the buildings, they’re all still there. But what takes place in a financial adjustment, a currency reset, any words that you want to use, is that the ownership changes basically. So, you have a lot of people that might be over leveraged, and the over leverage will take them out of the game so-to-speak. So, real estate investor that’s on the margin, that’s very leveraged, waiting for, let’s say hyperinflation to bail them out may have made the wrong bet.
There will be deflationary forces. It’s inevitable because of the way capital markets are set up. So, when the bond market starts to fail, interest rates will start to be pushed up and that will decrease the value of the bonds.
And since they’re so massive and so widely spread out among the financial capital markets, they basically touch everything… pension plans, retirement savings, savings, even money markets, everything is basically touched by the debt markets. There’s nothing that really could escape it. So, this is something that had my eye on for years and I’ve always stated that, watch the bond market that holds the keys to the kingdom and the bond market really starts to be questioned for its ability to not just pay the interest, but what is the real value of something that can never be paid off, i.e. the national debt?
Then at some point you’ll probably start to see some movement in the bond market.
And as the markets twist and turn, the least valued assets right now are silver and gold, somewhat relative to the S&P, the DOW, the real estate market or anything else. So, both metals are undervalued, particularly silver.
Mike Gleason: Certainly, a key point that you hit on there is that it’s never bad to be early. You definitely don’t want to be late. Being too early is not the of the world. Being too late is catastrophic.
It’s obviously not been a whole lot of fun for gold bugs these days. The Fed has returned to cutting interest rates. They are pouring hundreds of billions into the repo markets and they have launched a new program to purchase Treasury notes, which looks suspiciously like Quantitative Easing. One might think all of the stimulus along with the trouble the Fed is trying to address in the repo markets would drive precious metals’ prices higher, but that isn’t what happened.
For most investors the takeaway from all this extraordinary Fed policy seems to be “buy more stocks” and “there isn’t anything to worry about.” Do you think that is the right takeaway and can the Fed keep this party going a while longer?
David Morgan: Well, it’s not the right takeaway, but it certainly points to the fact that there is a lot of manipulation and control in these markets. I mean anyone that’s subjectively looking at the facts, as you just stated, sees that there’s more money printing going on. This repo thing is scarier than it looks and yet, the stock market continues to make new highs.
I’m just repeating back what you said, but fundamentally all those facts should lead to higher precious metals’ prices and they don’t. And why is that? The reason being, as almost anyone that’s ever listened to me or any most people on your show would say, look, it’s the paper paradigm that runs the futures markets. And that’s how the prices determined. And until that is broken enough for the market to settle based upon the physical market, you have the ability to basically control the price more or less.
And that’s unfortunate. People hear that and they get discouraged and say, well, you know, why fight the Fed? I’m just going to be in the stock market. I don’t want to be in the metals.
But as we said in the last segment, it’s important to be prepared for what the eventuality is because nothing grows to the moon. The Fed Is not all mighty, even though it might seem that way at times, and we’re getting near the end.
I do believe, I know that’s really tough to time, but I can’t see it going on much longer. Our debt is so high relative with what interest payments are, and this is with low interest rates. If interest rates get pushed higher as I outlined a moment ago that it’s more and more difficult to service the debt. So, no, the fundamental facts have probably never been more important for owning some precious metals…
Certainly there’s a lot more to life than money, but nonetheless I think chance favors the prepared mind. So, if you are prepared, you can sleep well at night and regardless if I’m off by a factor of a decade or not…
Let’s say as an example, the banks go down because of some electrical failure somewhere. You can always go to your trusty coins and there they are, and they always have value.
