The Cracks in the Financial System Are Getting Bigger…. Here’s What It Could Mean for Gold

The Cracks in the Financial System Are Getting Bigger…. Here’s What It Could Mean for Gold by International Man

Doug Casey’s Note: In the over 30 years I’ve known him, my respect—and liking—for Frank Giustra has only grown. Not just because he’s a world-class businessman, having built Yorkton Securities into a powerhouse, and then founding Lionsgate Entertainment. More relevant to this interview, he’s a first-rate judge of the markets—one of the best I’ve ever met at seeing turning points and understanding trends.

He’s one of the few financiers in the “Master of the Universe” class that understands gold and economics. Frank knows what he’s talking about. I suggest you read this closely.

International Man: Last time around, the Fed was able to paper over the crisis and create a ten-year bull market in stocks. Is the Fed out of ammo this time?

Frank Giustra: They are, but that won’t stop them, and they’ll call it something else—helicopter money or Modern Monetary Theory (MMT).

In the last cycle, it was QE. It wasn’t printing money; it was QE because it sounded better. It was much more calming and elegant to call it that. It almost rolled off your tongue.

They will never call it money printing.

The new and popular handle is Modern Monetary Theory. But it’s the same old Ponzi scheme. It’s still plain old money printing.

MMT is designed to create demand through money printing, with the idea that you can tax that later as you reach full capacity. But it makes some very naive assumptions about the way politicians operate. It would never work, and the money printing will leave you on the same path as previous disaster stories. Math is math. It’s impervious to bullshit.

If you’re printing too much money, it’s going to influence inflation. We’ve already seen it with asset inflation over the last ten years. Inflation didn’t go into the CPI but went into various asset classes instead.

As you know, Doug Casey has been writing about this topic for 40 years. I started writing about it 20 years ago. It’s become a fascination for me.

Let’s look at how things evolved.

It all started with Alan Greenspan. He was the one who ushered in the era of pleasing markets with free money or easy money.

He was the first to bail out markets at every crisis and the markets cheered him on.

Greenspan was the one that set the stage for the 2008 crisis. Ben Bernanke set the stage for what we’re facing now.

All they’ve done is encourage debt and speculation. And to a great extent, the markets still believe the Fed can continue to fix the mess they created.

I am absolutely stunned gold is still trading at these levels. Don’t people realize where we are heading?

International Man: Do you think negative nominal interest rates are coming to the U.S.? If so, what do you think the effects will be?

Frank Giustra: So far, the Fed has been very reluctant to talk about introducing negative rates.

As hopeless as they are, I think they understand what that would mean if the U.S. went into negative rate territory.

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