The single biggest risk to gold is the government

Well, first of all we had the gold bull market from 1999 to 2011 and we’ve been in depression since then. If I compare the credit growth, monetary growth and asset growth among central banks and the whole banking wealth accumulation that we had in the last fifteen years, I don’t think that gold is terribly expensive. I hold physical gold for the reason that one day I may not be able to remit money from one country to another. I don’t know when this final systemic collapse that I am foreseeing will occur but all I can say is that in monetary, inflationary times, when inflation is measured properly, in real terms: stocks usually don’t do particularly well but gold does.

Nobody knows how the world will look like in five years’ time. I don’t think that gold investment is the best over the long run, because it doesn’t generate cash flows and doesn’t “grow”. But I think it makes sense to hold it for diversification. My business depends on financial markets, so I own stocks, bonds etc. Most of it is in “paper” and I want to be diversified out of paper into something that is not the liability of someone else. In the bank account, I depend on the bank. If I own corporate bonds, I depend on the corporation to pay me back. In the case of physical gold, I don’t depend on anyone to pay me back, but I do rely on well-established property rights. 

All governments now largely consist of bureaucrat socialists that are anti-wealth – and this also goes for the Swiss bureaucrats. If a proposal to collect all the gold from banks and Swiss owners of gold comes up, they are likely to follow through. I think that the collection of one’s gold by the bureaucrats is the largest risk we have today.

Yellen, Greenspan, Bernanke could be judged badly by future history books

I think that future historians will have a very negative view about the great experiment to boost economic activity with monetary measures via creating asset inflation. I think this view will be very badly discredited. Now, we have to understand it will take some time for this to happen because you have the neo-Keynesians, these are the people like Martin Wolf at the Financial Times and Mr. Paul Krugman at the New York Times and Mr. Rosengren at the Boston Fed and Larry Summers, who, if there is a failure in the asset markets or in the economy and so forth, will say the reason the policies didn't work is because we didn't do enough. That may go on for quite some time but I can tell you that I see more and more people, young people, who no longer consider the Austrian economic theory to be heresy. And it isn't heresy. 

It's essentially common sense, a historical approach to economics. I think that eventually, future economic history books will condemn Mr. Greenspan, Mr. Bernanke and Ms. Yellen very badly.

And I will make sure it will happen during my lifetime. I'm not saying this because of any animosity in terms of my having suffered from their system. As I told you, I'm in the financial system. I'm an asset owner. I would never have had the assets I have today without money printing. I just look at the world as an economist and from the point of view of fairness, and I don't think the present system is in the long run desirable. We have a new aristocracy, largely a smart aristocracy – the hedge fund managers and so forth – but in terms of culture, a lot to be desired.

Parents generation richer than kids generation

When you print money it benefits few people. Those with assets such as property and stocks get richer, while the rest see their cost of living rise while their wages do not go up commensurately.

I believe we are in the midst of the generation that for the first time in Europe, US and Japan will die poorer than their parents. 

China real estate could still have hard landing

I think that there is a very high chance for a hard landing in the real estate sector, because we have a gigantic credit bubble. Usually these are created during the periods when credit expands at a faster pace than the economy and are followed by some kind of hardship. I do not rule out that government interventions can postpone the problem. They will bring about new misallocations of capital and maybe even make things worse. However, because China is so large I think that many sectors can still thrive in an environment where, for example, the real estate market collapses, so I do not think that the impact will be that strong.

We’ve seen what happened before with the bailout of Mexico in 1994 and the Asian crisis in 1997. If Mexico had failed at the time, we may have had a more significant setback in emerging economies in the mid-1990s, but we wouldn’t have had the depression that followed in 1998. So in my view, government intervention can postpone the problem but it may also make the situation actually worse by not letting the market clear as soon as some signs of problems appear. If, for example, LTCM hadn’t been bailed out, I
don’t think the whole system would have collapsed. Some people would have lost money, I guess Goldman Sachs and the counterparties of LTCM, but it would not have been a threat to the global financial system. 

But this is what’s being presented to the public by the interventionists, who argue: ‘Had we not intervened, the whole world would have collapsed’

Rich to get creamed one day and Inflation measures

What has happened this year is true, gasoline prices from their highs have come down, oil prices are down from their highs. Also corn, wheat and soybeans are down. Agricultural commodities are nearing a low. They wont stay at these levels for very long.

The fact is this simply. You take oil, its at $92 today its still up substantially from the level it was at 1999 where it was at $12. Food prices are way up. Everything is more expensive. 

Now there are different ways to measure inflation. The BLS calculates its own way and other people have different ways where they show the cost of living of average family is much higher. One thing is very clear, consumption in the US by historical standards has not recovered much. Why ?

The purchasing power of people, they get their salaries, compensation, and 
their cost of living has gone up more than their salaries. They are getting squeezed. That's why retailing is not doing particularly well.

Now I admit in the US and elsewhere we have a dual economy, we have the economy of the rich, they live in San Francisco, in New Port Beach, Aspen, Palm Beach, Mayfair in London, Chelsea and so forth, and then we have the economy of the average person, its a very different thing but the rich will get creamed one day specially in Europe with wealth taxes.