‘Deep recession’ and new gold price highs to strike, but when? Jeff Christian explains (Pt.2/2)

[00:00:00] Speaker 1: let's move on and talk about the economic outlook uh for you you you and i talked not too long ago a couple weeks actually and you had said in our last interview together that you expect gold to hit new all-time highs in a few years well 2023 to 2025 to be exact on the back of new economic problems i'd like to address this and follow up on what economic problems you're referring to jeff [00:00:22] Speaker 2: yeah well you know our view and and the timing is suspect because our the economic problems are massive sovereign deficits around the world not just the united states but around the world governments are borrowing money left and right to support their economies and their people and their corporations and corporations and people are borrowing money at unprecedented levels so you have massive deficits uh between spending and and and the availability of money and those deficits are being made up with debt so you also have a big growth in the debt levels of sovereigns corporates and individuals too to unprecedented levels those need to be worked out somehow you know there's a a strain of belief in the financial markets that it can only be resolved by fire that's not necessarily true that's sort of like some strange quasi-religious belief we could actually resolve the debt problems but they're going to take many years to do so debt is the number debt and deficit spending are the number one economic problems the second thing is real gdp now we're in a strong recovery right now because we had a really terrible 2020 so you're seeing strong numbers being posted and you were talking you know the imf has just increased its its estimates for real gdp in 2021 that's a rebound and you know our expectation is 2021 2022 you're going to see a rebound and recovery but you have ongoing deficit problems you have excess manufacturing capacity now you have excess retail capacity you have excess commercial real estate and you have excess labor in the united states in europe around the world and so you have a tremendous amount of excess capacity to produce things but you don't necessarily have the demand to meet that and most of these industries are changing now these are problems that have been forming for 10 20 years and they're getting critical and we were moving away from computer assisted uh design and manufacturing to computerized manufacturing the pandemic has sped things up so now you're going to computerized manufacturing computerized service provision computerized ai financial management so all of that surplus manufacturing capacity retail capacity labor is going to get much worse very fast and that's going to put even more weight on sovereign deficit spending and sovereign debt all of this stuff has to be resolved some point and we just don't have the political will to do it not in the united states and not in most countries so you've got this this glob of of economic and financial problems exacerbated by the pandemic uh but really going on and that has to be resolved now if you try to do it economic econometrically you say well when's the next recession going to be you cannot project economic econometrically when a projection when a recession is going to hit how long it's going to be and how deep it's going to be you know econometrics just don't work that way um people try we try but it doesn't work that way you know it's great in hindsight um so you have to put a wet finger in the air and say when do we think the next recession is going to come how long do we think it's going to be how deep do we think it's going to be and given the growth in the economic and financial imbalances and given the breakdown in international cooperation and given the desire of central banks around the world to move to a multi-polar currency regime system and given the resistance of the united states and europe to sharing power within the united nations the imf the world bank with countries that have become more powerful in reality in the real economy you have a breakdown in international cooperation just when you need international cooperation to step up and say hey we've got to manage our way out of these crises so we put a wet finger in the air and we say we think sometime between 2023 and 2025 we're going to have another deep [00:04:54] Speaker 1: recession let's talk about this other deep recession now jeff we just had a deep recession people were saying this was the worst on record since the 30s what kind of deep recession are we talking about is [00:05:08] Speaker 2: this something on the same scale where is it possibly worse well again it's hard to say you know you can't really econometrically project it uh and it's funny because you know there are guys in the precious metals market who say well the whole thing is going to collapse uh and and some of those guys have been saying it since they got into the business in the early 90s some of them have been saying it since the 70s yeah we don't believe in collapses we don't believe that these things when you say a whole [00:05:34] Speaker 1: thing what are you referring to what whole thing the global financial system all right yeah okay i mean [00:05:40] Speaker 2: you have these people who have no knowledge of finance and economics talking about the collapse of the dollar the collapse uh oh yeah you know i was talking to uh investor the other day and he said you know what about uh the currency reset the term that you hear guys talking about all the time on kitco right there's going to be this great currency reset and it's like the end of the world oh it's going to be april 1st no it's going to be april 20th no it's going to be sometime in june if you talk to central banks if you go to the central bank if you go to federalreserve.gov website and you type in currency reset it's not there you know there's a lot of nonsense but it's probably just a term to [00:06:26] Speaker 1: describe the uh describe the phenomenon i don't think the central bank is going to advertise using [00:06:31] Speaker 2: that term it describes an imaginary phenomenon that people have been saying is going to happen for 40 or 50 years and it has yet to happen well we've had some of the strongest growth and some of the uh longest periods between recessions in history that's true yeah there's a reality of the economy and then there's this thing that these guys constantly talk about the ultimate collapse and it's going to happen and it's the end well it's the end of what you know i mean this is life this isn't a movie it isn't a novel this is life what's at the end of is it the financial collapse of the collapse of the financial system which basically has actually survived 500 years including the napoleonic wars world war ii world war ii world war ii and the cold war yeah what are you looking at the reality is something other than a collapse it's a resolution of long-term instabilities that have built up and need to be resolved but the political will to resolve them hasn't been present you mentioned the dollar has it well [00:07:42] Speaker 1: is it not true that the dollar has lost its value over the past couple of decades depends on how you [00:07:48] Speaker 2: define value you know over the last hundred years over the last 200 years the dollar has lost purchasing power and it does that because you can earn interest on it which deteriorates the purchasing power and it does that because of inflation if you look at the dollar versus certain currencies the dollar hasn't actually held up very well and you've had talking you hear people talking about the dollar collapsing it's highly unlikely because for the dollar to collapse or for the dollar to fall sharply you have to have many more you'd have to have investors around the world extremely bullish about other economies and other governments and other countries relative to the united states and the united states still has a tremendous economic advantage over most other countries uh and it has tremendous resources compared to other countries and it has strong productivity we're throwing it down the toilet quickly but it's we still have an advantage and we could turn that around if we had the political willpower to do that you know so if you look at the dollar relative to other currencies the dollar actually is held up very well and much better than you would believe it think if you believe the stuff that you read on the internet you know so and for the dollar to collapse you have to understand 62 percent of central bank foreign exchange reserves is in the us dollar about 70 to 80 percent of private sector financial wealth is in dollar denominated assets so for the dollar to fall sharply you would have to have people say oh i like europe i like europe's economic prospects more than i like the united states economic prospect because of that 62 percent you look at the other 38 percent 20 is the euro 10 is the pound sterling swiss franc and the yen and the other 10 is everything else so for the dollar to collapse you would have to have a tremendous movement out of the dollar into those other currencies because currency rates are reciprocals so for that to happen you'd have to have great liquid much greater liquidity in those currencies which would be hyperinflationary in those countries that's why when you talk to central bankers and you talk about what's a future international currency regime they say well we have different ideas of how it could be and what it could be but whatever it is is going to take decades to move to because right now the dollar has hegemonic power or as a polish central banker said to me in late 1981 if you owe a bank enough you own it and the united states owes the world enough that the dollar has to stay strong because we don't have [00:10:49] Speaker 1: the dollars everybody else does the status of the reserve currency in history has been closely tied with hegemonic power of the nation state holding that currency the british pound at one point was the de facto global reserve currency at the height of the british empire after the deterioration of the empire with the rise of the u.s we saw a shift into the u.s dollar so i think people are making the argument jeff that the u.s will lose its status as the world's superpower at some point to another nation competing nation perhaps china and that's when we'll see the dollar decline do you see that [00:11:23] Speaker 2: happening yeah in the long run well yes and no you know first off and and again it's all interconnected so you have currency market imbalances you have financial market imbalances you have economic imbalances you have military imbalances and you have uh uh political imbalances and and so you know you have all these arguments in the united nations about politics and the imf about finance and the world bank about economics and then among the different governments now if you talk to for example people who are in the chinese central bank or policy makers there they don't want the one to replace the dollar as the de facto currency regime and they don't want that because they understand history so they look at france when the franc was the reserve currency and it destroyed the french economy uh and political base and they look at britain and when the pound was the reserve currency and it was disastrous for england and they look at the united states and they look at the problems that the united states has had economically and politically really since the 50s you know we had a number of currency crises in the 50s and 60s when we were on the dollar gold standard and people don't remember that they have this nostalgia for for a past that was actually not all that great of a time to live you know and the chinese look at that and they say the last thing we want is the wand to be the reserve currency of choice and most central bankers say ideally what we do is we move to a multi-polar international currency regime in which the liquidity of all these other currencies rises to the point where they can be equal to or competitive with the us dollar not necessarily replacing the dollar but coexisting next to it the problem is the world has never reached such a multi-polar currency regime system or regulatory system or political system on a cooperative basis you know the currency regime system has always been imposed on the world by the victors of a cataclysmic war well except the eurozone they banded together and formed a common currency yeah but that's that's in europe and uh as as a former french minister once said to me it's only 20 years old yeah uh but uh okay um that's europe that's not the world okay i'd like [00:13:57] Speaker 1: to tie this back into gold and we'll wrap it up you you did say that gold would rise in uh to new all-time highs around the same time you projected a new recession i wonder what the what the relationship here is are you saying that the world is going to need more of a safe haven asset when this recession hits or you think real interest rates will decline what's the reason for gold's rise to new all-time [00:14:17] Speaker 2: highs at this time jeff it's really yeah it's a it's a safe haven asset and it's investment demand yeah we in 2000 we issued a buy recommendation on gold and we said look uh we think that the economic and political and financial stability of the world over the next several decades is going to be worse than it was in 1980 when the gold price went from 200 to 850 dollars and therefore we think the gold price is going to rise not for two years the way it has in the past cycles but on an ongoing basis because we think there's an inter there's an upward shift in the investment demand curve and that has in fact happened investors around the more investors around the world have bought more gold at higher prices for a longer period of time than ever before in history since 2000 2001 and that's going to continue and when you have these periodic spasms as we did 2008 2009 2010 2011 which was actually quite distinct from the great recession and global financial crisis that was the sovereign debt crisis then you had 2020 you know and we're going to have more recessions you know you can't predict when the recession is going to hit or how big or how deep it's going to be but you can predict with 100 certainty that there will be future recessions sure just the nature of economics when the next recessions hit what's going to cause it probably some problem in the debt market or maybe another pandemic or something else you know but something's going to cause that recession and when you have that something scaring people and throwing the world into a recession they will buy gold you know if you look at 2020 investors bought something like 44 million ounces of gold physical gold real gold 44 million ounces last year up from about 17 18 million ounces in 2018 2019. why did they buy more than twice as much gold last year than they did in the previous two years because they were scared yeah so when the world scares investors they buy gold [00:16:27] Speaker 1: and gold prices rise okay let me ask you one final question jeff this year well this past year in 2020 had we not had covid do you think we would have had a recession anyway we saw gold rise but [00:16:38] Speaker 2: again that was for a lot of reasons yeah no if you go back to the first quarter of 2020 we were predicting somewhat slower growth on a global basis but we were not predicting a recession you know obviously the [00:16:52] Speaker 1: pandemic changed everything okay very good jeff let's follow up on this again and we'll talk more about the debt crisis and indicators for recessions and other metals next time thank you very much you're welcome and thank you for watching kicko news i'm david lynn [00:17:25] Speaker ?: you