Mike Maroney Interviews Aftershock Authors
Mike Maroney:Good afternoon! My name is Mike Maroney and we are coming to you today from the Monex Precious Metals Studio. We have two very special guests here today, Bob Wiedemer and his brother, Dave Wiedemer. Bob and Dave are the authors of Bubble Economy, The Aftershock, Aftershock Investor, and Aftershock Investor 2. In Bubble Economy, both of these gentlemen predicted what would take place as far as the real estate bubble was concerned, and obviously... the aftermath of this event, and the way that the governments around the world fixed it-- is what Aftershock is all about, and what potentially sits out on the horizon. We're going to talk a little bit today about something else that's popped up recently. That's something that many of the customers that I've spoken with over the last six months are very concerned with. That's the potential war on wealth that sits out on the horizon. Interestingly enough, if you think about the beginning of this year, gold was trading at $1045 and silver was trading as low at $13.60. In the last four months, we've seen gold rally from $1045 all the way up to $1300, Silver from $13.60 all the way up to $18, and we've seen this without any major fundamental changes. The changes that have taken place out in the investment community is something that's very subtle, but it's called a change in confidence and perception. We are going to talk about some of the key catalysts that exists in the market place that potentially have changed that confidence a bit and how they can affect the price of precious metals in the future.
Now Bob, great to see you today. Dave, great to see you today also. We were talking a little bit this morning about the war on wealth and the overall situation that exists out there as far as wealthy individuals are concerned. Obviously, one of the big subjects that seems to be on everybody's mind and may have been the initial catalyst that pushed gold from the $1045 price to $1100 was the announcement by Japan and then the announcement by Europe and then the announcement by Canada that we would have negative rates. Can you guys give us your opinion on negative rates and how they affect the market place?
Bob Wiedemer: Sure, I think a lot of what happens with negative rates is just the feeling...just the name. I mean, does this make any sense? This makes people uncomfortable. The idea you have negative interest rates that you pay somebody to keep your money. That starts to get them worried about the whole financial system in a sense. I mean, where are we heading? What's going on here? So a lot of the negative aspect of negative interest rates is just that it sounds so crazy and it is. Of course, it also does help build the case for gold, because traditionally one of the tax on gold is not earning interest, right? It's just sitting there. So, that has helped gold as well, but I really do think that the fear element, the uncertainty element of just the concept of negative rates and what that means about our financial system and what's going on with our Central Banks is really what is bothering people. I think that makes them more interested in something more solid in value like gold.
Mike Maroney: Interesting, now a lot of people think...well, could it happen here? Janet Yellen in a statement said that she doesn't see negative rates as a possibility here in the United States, but she wouldn't rule it out if the statistical information said that it was necessary. What would we have to see here in the United States to potentially see negative interest rates?
Bob Wiedemer: Well, I think that what you're going to see is probably not negative interest rates... and the primary reason... I think the Fed will have to print money through QE before they start going to negative rates. My feeling honestly is that the Fed is out there to support the stock market and if it tries to raise rates and the market is weak or the economy is weak... I don't think they're going to do it. Hence, I think, that they're going to keep it above negative just because it looks better. Just what I said before is that if you have negative rates it really is very disconcerting, I think, to investors. For that reason, I think she's going to be reluctant to do it, won't do it, and if she needs to do something...to your point...if she needs to do something to really boost confidence, it's going to be massive money printing like QE...meaning like $85 billion a month and it could be a lot more than you might think, a lot more than $85 billion actually.
Dave Wiedemer: Yeah.
Bob Wiedemer: I know we've been talking about that...how much money they might need to print?
Dave Wiedemer: ...and that's something that's very important for investors to realize is that last time the Fed thought $40 billion a month would be enough. They finally had to go to $85 billion a month before they found that they could adequately stabilize the markets. This time, because we've had a long lag from the last money printing, it could be a lot worse. In other words, we could begin to see $150 billion, $200 billion, $250 billion a month to stabilize those markets. Now, right now, this would be absolutely shocking to most people. When it really happens, they're not going to like it, but they're going to say, "Well, it's better than having the market really collapse."
Bob Wiedemer: It was shocking that we had money printing in the first place back in 2009. No body would had predicted that back in 2005 as we had written about.
Dave Wiedemer: Right, the combination of money printing in the U.S., negative interest rates in other countries, people... this is a warning sign to people. The world economy is going down and this is why need to talk about gold. Why gold is so important in your investment strategy at this point.
Mike Maroney: Now, it’s interesting because it almost seems as if this monetary stimulus game-- and we called it a confidence game, in essence-- it's creating some sort of confidence, but it's like we hand the ball off. First it was the U.S. and then the Japanese join the party. Now, the Europeans seem to have the ball and they're the ones that are really printing money. Now, we've seen the Japanese government actually buy ETFs where they're major owners of Japanese stocks. If we were to see additional quantitative easing here in the United States could a tune of $85 or $100 billion, would it solely be based upon buying bonds, or would we potentially diversify, or would the Fed diversify their portfolio?
Dave Wiedemer: I think that is an interesting and a very important question. The U.S. financial system is a little different from anywhere else in the world. In other words, we not only have the most powerful financial system, but its a very sophisticated system. So in the U.S., the Fed just by buying bonds, what happens is that will lower the interest rate. We probably aren't ever going to negative interest rates...we won't need them, but what happens in the U.S. is this sophisticated financial community will say, "Hey, interest rates are getting really low on bonds. We need to move some of this money over to stocks and get a return to stocks" and this is where the money sort of automatically moves through. In Europe and Japan, they don't have the very sophisticated ability to move money quickly that we do. So in that sense, it will... we don't need to buy stocks. It will be bought automatically by the market. The market will make that decision once the Fed puts money into the bond market.
Mike Maroney: Oh, I see.
Bob Wiedemer: Let me give you my take on that. Will the Fed ultimately buy stocks? That's really your question. Will they do more than buying bonds? First, lets all realize the government is buying not just U.S. government bonds, but Freddie Mac and Fanny Mae bonds--It's mortgage bonds. They are actually entering into much more private markets in that sense...that money goes to buy people's homes. So, they already have been diversified in what they buy.
In corporate bonds, and I might add that the ECB is now buying corporate bonds. So that's helped their market. In fact, Unilever has just announced the first corporate negative interest rate bonds for, you know, big corporation. In terms of actual stocks though, I think that what Dave is saying is...we're a little bit different I agree, but I think back to a behavioral perspective... I think it would just scare people a lot. There's a point at which you really can scare them so much that the benefits are...are...you don't really get them. In other words, people go like, "God, the government is buying U.S. stocks? I'm sort of pleased, but I'm also getting scared to death. How bad has it really gotten? You know, I think I'm going to take my profits now and go to the sidelines." It's a scary thing for the U.S. government to be out buying stocks. Yeah, the other governments have been more actively involved in their markets. Japan has had massive government intervention for awhile. Certainly, China has, but I think for the U.S. to do that I think you've got to bridge too far in a cost-benefit trade-off. The cost meaning, I think people are going to be more scared of that than you are going to get benefit from the markets going up. Also, it's tricky, what stocks do you buy? How do you do it? What indexes, etc? but...
Mike Maroney: So what we have then is...we have Japan printing money, we have Europe printing money, we had the U.S. print money, the Feds holding on to trillions of dollars in U.S. bonds, so we've seen the world-wide money supply increase exponentially. Then we look at GDP growth through out the world, it's minuscule at best. So hypothetically speaking, if that money wasn't injected into the world economy, we potentially are on the brink of much more than just recession. And... if inevitably that has to end, where does this all play out and are we still on the brink of a potential black swan event?
Bob Wiedemer: Well, I'm not sure it's a black swan. I think its almost a guarantee. Dave will use the term, "All the Fed can really do is make things worse." It's a money printing machine. They really can't save you. They can make the problem bigger down the road. That's all that really happened. After 2008, 2009, as you mentioned in Aftershock, we basically said, "The government will..." I mean, we didn't just predict the bubble had popped. We predicted the government responded to the bubbles popping by borrowing lots of money and to support that printing lots. Where does it all end? Well, you print more. You print, because right now we don't have a ton of inflation that investors are worried about. So why not print money? Especially if it saves the market. At a certain point, you're going to get some more inflation, you're going to get less confidence, it's going to work less, people... they're not sure the Feds got our back. As what Dave had said, "The Fed can only make things worse," and ultimately you're just back to 2008 times 3 or more. I mean, Dave could probably tell you more about that, but bottom line is...you're not in a good place. You shouldn't have gone down that road in the first place. You shouldn't let market forces just determine what prices are and not have the government have such massive intervention that, by the way the U.S. government has never done before to increase asset prices. Even the Japanese government didn't intervene after the Japanese stock market collapsed to push the prices of stocks back up--they let it fall 80%. Let the market decide.
Mike Maroney: So we have this massive bubble, as far as sovereign debt is concerned, and if you look at the mathematical equations to try to calculate if this bubble is ever going to potentially pop or if this debt crisis can be solved, it looks as if there's no way that the governments around the world are ever going to be able to pay back the money they borrowed unless we see dramatic decrease in value of paper money. Would that be a fair statement?
Bob Wiedemer: Well, I think the government has a hard time paying back what they bought and they're not even trying. You know, I'd say in my book, "Where's the mortgage plan to pay off the debt? Have you seen a 30-year plan to pay off the debt? No." I mean, right now, we're still adding debt at a phenomenal rate. It doesn't sound like much compared to what we used to borrow, but a half a trillion is what we're going to borrow this year to keep our government going. There's no plan whatsoever to pay off this debt. You've simply got one that keeps growing. In fact, even the government's own experts say the debt is going to grow, not the debt, but the deficit back to a trillion dollars a year. It's massive. So there's really no plan to pay it off. I was speaking with one person the other day that said, "Yeah well, I think we'll just inflate it away." Yeah, yeah...you can just inflate it away. Even my father said that some years back, but the damage of that to the value of bonds, stocks, real estate is huge. I mean, the only asset that benefits from that is gold.
Mike Maroney: So wealthy investors saw the beginning of quantitative easing. They saw gold track from $2000 all the way back down to $1000. They've also seen that the problem was never fixed. It was just increased. So here we have a debt crisis. So what we do is we add a massive amount of new debt. Gold has put in a potential bottom and we were talking a little bit about that before we started. Now, it's starting to come back up because people are starting to realize, people are starting to see that mathematics is like gravity--it's non-negotiable. So what sits out on the horizon, its not a matter of if, it's only a matter of when, and things are going to get extraordinarily interesting as far as the price of gold and silver and these safe haven investments. Would you agree?
Bob Wiedemer: Yeah, I'd agree. Somebody asked me the other day to predict a Presidential Election. I don't predict elections. They're not always run by fundamentals. The economy is. It is just a matter of time before what we're saying happens. Yes, what the Fed can do can postpone things, but ultimately it's really guaranteed economic fact. I defer to Dave also. Your thoughts on... will this happen or not? I think it's a guarantee. You're the Economist.
Dave Wiedemer: It is a guarantee. You can say with a 99.9% certainty that it will happen and the reason it happens is because you are in a bubble economy right now. The only way to keep that bubble economy up is to print money. As you print more and more money, you eventually have inflation. As you start having increasing inflation, you're going to destroy the value of all assets that are based on interest rates--stocks, bonds, real estate. Gold is the only thing that can not only survive, but it does spectacularly well because all this money is fleeing these assets where they're losing value and going into the one asset that's gaining value.
Bob Wiedemer: That doesn't mean there isn't a timing question though. I mean, to predict the exact time that's back to reading a crystal ball, maybe that's back to predicting Presidential elections, which I don't think anybody can do a very good job given what we've seen over the last year or two. Timing is still tricky. I'm not going to say it isn't. That's why I know you're an expert on following exactly how gold trades, silver trades. We were talking about that before this interview, but timing could be tricky, but in terms of the fundamentals...the fundamentals in economics are very clear and that's what we’ll come through.
Mike Maroney: Now, you're based out of Washington D.C. and obviously the political system here in the United States is a little shaken up right now. Based on the fact, that an outsider potentially looks as if he will be the Republican candidate. Would you have to say that based on that fact alone and based on the overall situation that exists here in the United States that the population in this country is starting to realize that something is broken, something is wrong, and that the government is not doing what's necessary to fix it? Would that be a fair assessment?
Bob Wiedemer: There's no question. There's enormous amount of anger out there at the government, at people's current situation. They're starting to realize... and there's a hope that maybe with this big turn around in the stock market and so forth everything might work out for the economy, and there is a tendency for people to say that if the stock market is good the economy must be good. What we're really seeing is that's not entirely true. It's really not. In fact, I even go back to when I was growing up in the 70's, I mean, the stock market was worth 95% less than it is today, but our lives weren't falling apart. They weren't 95% lower in the 70's. Everybody lived fine. The economy was growing, but the values were not what they are today. I think people are hoping that the value of the stock market means I'll do better and they're seeing...No, it's not happening. I'm not doing that well. I'm angry and it's not just on the Republican side. You've had kind of a semi outsider on the Democratic side, who’s done very well against the consummate insider on the Democrat side. So, I think there's anger on both sides of the fence politically and I think there's just a lot of people who realized that what they had hoped isn't quite working out, which is... "Hey, if the Fed can pump up all these asset prices maybe that'll be good for me" and it really hasn't turned out to be all that good for many, many people on an income level day to day basis who don't have a lot of money in the stock market or in real estate.
Mike Maroney: Now that's interesting, because Bernie Sanders is an older gentleman and I heard the numbers yesterday. A lot of his base is built on the age group of somewhere between 22 to 30 and I guess they're called the Millennials, or whatever the new nickname is. I guess we were the Yuppies. They're the Millennials and they seem to be gravitating towards socialism. There's a lot of frustration out there right now, as far as, wealth is concerned. It's almost a dirty word, the word "rich." Why is that? Because that means you must be doing something wrong. When you get into this type of environment, doesn't it get to where government looks and says, "You know what? We need your money more than you do." That seems to be the path that we're on right now and maybe Trump can stop it, but it doesn't look like that could happen. With that situation in play, more and more people need to have assets that remain on shore, but remain off balance sheet. Do you see that situation increasing as we go along?
Bob Wiedemer: Yeah, I think you certainly will find you're back to your fundamental point on the Millennials. Yeah, I think the same thing is happening there as a lot of people is they're not seeing the good jobs that maybe they saw earlier and it's really true it's hard for Millennials to get a good job. I think they were hoping with the stock bound increase or the stock rebound that they'd get some benefits out of it. Maybe some guys that Facebook and others that certainly have there's no question that there's been people that have, but I think most people, most Millennials, haven't seen them getting their piece of the pie. I think there's going to be pressure on government for continued progressive taxation, more taxation, and ultimately as we say in the Aftershock, "Printing money ultimately won't work, borrowing money won't work, in which case you're entirely dependent upon taxation to support what could be significant social welfare programs." It's a different situation today. Today, you still have a little bit of a release that you can print or borrow more if you need to spend more. As time goes on, that's not going to be the case and the pressure to tax wealthy, the pressure to tax others is not only huge politically, but it's huge realistically. There isn't the alternatives that we have today.
Mike Maroney: Now it's interesting, because the words "cashless society" seems to be popping up. Obviously, everyone says, "Oh, it's safer. The only people that use cash are terrorists and drug dealers. If we eliminated cash, we wouldn't have terrorism. We wouldn't have these major drug issues and then everyone would be safer." Obviously, a lot of people look at that and say, "Wait a second. Suddenly, all of my wealth is transparent, in the government's hand, can be turned off at any time, can be monitored, can be changed, and government seems to be pushing in that direction." Negative interest rates, cashless society, all these laws as far as potential capital controls, is this because they recognize that inevitably they're going to have to take a large chunk of the wealth that exists in the United States to continue to exist?
Bob Wiedemer: Well, I may not give the government as much credit as you do Mike in certain ways in terms of looking down the road and figuring things out, but what I will say that I very much agree is that the technologies is clearly leading in that direction. I mean, there's no question that everything is more electronic--all our communications, our financial transactions. It is probably inevitable, as you have integrated circuits and so forth. All these things get cheaper, easier, massive communications. There's no question our information is now being distributed in a way that's much easier to track than before. Whether it be opening people's mail or whatever. Now, opening people's mail isn't going down to the post office and ripping open a letter. It's easy on a mass basis. Like in a financial transaction, that's easy on a mass basis now. So there's no doubt that obviously the government is doing more of that and that's been something of great controversy today and there's no doubt that technology is going to allow an even greater amount of that to be done. You know, costs are going down so I don't think there's any question about that. There's no question that the government will certainly be... they're not fighting it that's for darn sure. In fact, they're taking advantage of this technology to do much more snooping on just about everything that's going on in our email or our electronic lives. Our electronic lives are a huge part of our lives now than they were even 30 years ago.
Mike Maroney: Now, there's some interesting activity that recently took place and there have been laws that have changed. People talk about the fact that in 2008 we saw AIG, Chrysler, some companies here in the United States and the banks, they were bailed out. What's recently changed is the laws on the books now include something called, "Bail Ins." We saw it in Cypress, we just saw it in Austria, all the laws in Europe have changed where now the depositor is definitely going to be responsible and potentially could become part owner of a bank with all of the money that they have in that bank that's over a certain amount and people seem to be a little scared about this "Bail in" thing. Do you have an opinion on that at all?
Bob Wiedemer: I want to throw that to Dave, because we talk a lot about that...
Dave Wiedemer: I do, because this is a serious issue. In other words, basically what happened is is the last crisis we had in 2008, no one really wants to say it, but a lot of the banks basically, technically went under and only the Feds’ bail outs really saved them. When we're moving into this future world, the situation is going to be a lot worse probably almost no bank will be able to survive at that point independently. In other words, it's much more likely the government will say, "Hey!" -- Just like they did to General Motors-- "Too big to fail. We can't let these banks go out of business. We're just buying them up and we're going to support them," but what does that mean when they do that? Basically, your bank is part of the IRS. It's electronic at this point. The IRS can... this Federal Agency would be happy to ship all your information to the IRS. Well, that's bad enough--that's very bad, but it gets worse. What they can do and almost certainly will do is extend withholding. We've seen a couple of attempts in the past, but almost any transaction you do they can withhold against. That's a very serious matter. So, we're talking about potentially very high taxes to pay, a huge welfare budget. We're talking about, banks being agents of the government. We're talking about massive withholding. There's no way out of it except for gold. That's why Monex is doing such an important service for the investment community. Is they're telling them this can happen. I'm saying it will happen--it's not something that's speculative. This is going to happen. We can talk about it in more detail why all the conditions that force it, but this is where investors need to be aware, this is coming and this would be devastating, what they need to do, and then this is where we talk about purchasing gold. We usually think of it as just another investment, but this is the time you want to buy gold. Why? Because as you move forward... oh sure, maybe... in a couple years it's like $1400, $1500 or so forth. At some point it's going to sky rocket, but the problem is at some point the government is going to start acting and if they can look at your bank records they can see what you're doing. If you buy gold now, they don't know. I mean, I've been doing this and my friends have been doing this, it's off the books and you don't need to worry about it. Remember, this is not something that people have done just recently. I mean, thousands of years this is what they've had to do. Many people have had to deal with very Draconian governments much worse than our government. They actually would execute people or torture them to find out where their gold was.
Mike Maroney: You know it's interesting, because the human mind refuses to believe what it doesn't wish to see and it almost seems so obvious when you look at all the things that are taking place right now. First of all, no one would have ever expected that we would have broke the one trillion dollar debt increase in one year. They thought absolutely impossible. Then needless to say, nobody would have ever expected that the Fed would have had quantitative easing to the amounts and the magnitude that we saw. Now, we're watching Japan, we're watching Europe. It almost seems as if the system as we know it is going to go through a dramatic change. I know you guys call it the "Aftershock" and I guess it's not only the aftershock from what took place in 2007, 2008, this has all been building up. It's broken and we continue to try to fix it with a band aids, but the reality of the situation is one day in the not so distant future some event is really going to trigger some sort of domino affect and none of know what that will be but you better own some gold in that situation.
Dave Wiedemer: Definitely.
Mike Maroney:Yeah, I mean it almost scares you when you think about it, because...
Bob Wiedemer: It does.
Dave Wiedemer: And you want to do it now. You don't want to wait. You don't want to try to perfectly time the market. You're not going to be able to. It's easy to get caught off guard. This is the time to buy. Gold has stabilized in price. Yeah, it could fluctuate a little bit more, but at some point we're going to see a strong upward curve and... this is a good time. Just like, I think, in our latest book we wrote, "When would be the best time to sell stocks and buy gold?" It was the year 2000, because if you look now at stocks afterwards, you put in inflation, taxes, so forth, you haven't had that much of a gain since year 2000 in real terms. Gold has gained enormously since then.
Mike Maroney: You know it's interesting, because Bob always would point that out. That if you look back over the last 15 or 16 years as far as what the stock market has been able to do, we've had gyrations in price, but basically it's been positive, but not extremely positive. Where as, Gold has been one of the greatest investments. But for some reason, everyone looks at it as, "Oh, it hasn't really done anything." It's done exactly what it's supposed to do--it's protected people. But... Is there an event? I always like to try to zero in. You know we've got the English potentially exiting out of the European Union. We have potential as far as Japan adding to their quantitative easing. Do you see the banks in Europe as the major problem? Do you see a specific catalyst right out on the horizon that could be that first domino?
Bob Wiedemer: Well, as we've talked before, you don't always need a catalyst for a bubble to pop. The Internet bubble popped in March of 2000. What was the catalyst? There wasn't one. On the other hand, if I had to say what's the biggest catalyst around here, right now, "China, China, China." So it's the elephant that everybody sees and knows. It's what's slowing down. It's causing the world economy to slow down and causing our economy to slow down. It's causing our companies earnings to slow down. It's causing commodity prices to fall. China has been a real key to growth since 2008. We have, the U.S., has done a lot to pump up asset prices, but nobody has grown its economy like China. Now that it's slowing down, that's huge because people now no longer have the excuse of... well, stocks are going up because the world economy is growing. It's not true and something could go wrong in China more likely than even European banks for all their problems. Chinese banks, Chinese lending, a much more likely place for things to blow up. In fact, people as different as Kyle Bass and George Soros has said the next big problem in China is their loans, bad loans, not their stock market, but bad loans going bad. I would say that, of course, since the difference between China's banks and China's government is very little that basically also says a lot about their whole financial system. I think it's China, China, China, as your next catalyst. It may be it comes in some big financial crisis over there. Maybe it just comes over time from the slowing economy. Either way, I think China is your catalyst.
Mike Maroney: Now it's interesting that you say that, because just recently China has opened up the doors to trading gold and trading silver. Ironically, we've seen an incredible increase in price. I was looking back at the historic precedent; China has been very in tune with the value of silver over the course of history. They've used it as a form of money. When you think about $1.6 billion as far as a people were concerned and the fact they've been burned in real estate. They went out and spent a ton of money on real estate and yeah those cities that have no people...you know what, they may fill up soon. Now, they've been burned on the stock market. You know they were opening up those stock accounts, but the one thing that they've always been happy with are the results that they've been receiving based on precious metals. That is just a tremendous population, a gigantic force, that could do unbelievable things to silver. Am I right in assuming that?
Bob Wiedemer: No question and again with China it's a matter of, of course, there's a down side from an economy going down. People may just feel like they have less money, but at times it's still going to be a... It's a big economy and a lot of money is there and it doesn't take much to push gold and silver up if it comes out of Chinese real estate, Chinese stock market, which you're seeing. You still have some real estate bubbles over there in the Tier 1 cities, the Shanghai and so forth. So there's still some money going in that, but there's no question that at some point China given its background and love for gold that money is going to shift out of stocks and real estate if they're badly burned and it's going to go into gold. It doesn't take that much money to push gold right up.
Mike Maroney: So here we have an American election in approximately six months, and we have a lot of people with a lot of fear and anger, and I’d have to say there's a lot of uncertainty out there. We have a situation and we haven't really touched on it yet, where the pensions here in the United States are under funded. Matter of fact, the state of Illinois couldn't pay the lottery winner and the reason it couldn't is because the laws in that state were made where the first thing that has to be paid is those pensions. So the lottery doesn't get paid and bills...
Bob Wiedemer: A lot of people aren't getting paid in Illinois right now, but yeah.
Mike Maroney: Yeah, exactly. The bills didn't get paid, but that's a problem too. There's a lot of fear about that and in each individual state there's a lot of fear that what happens in that situation-- property taxes go up, everything goes up...
Bob Wiedemer: Puerto Rico just defaulted on their bonds.
Mike Maroney: Exactly, so the government goes after. So we have fear, uncertainty, we have pension issues, we have a war on wealth that seems to be developing, we have the onslaught of socialism penetrating into the American political system, we have the price of gold rallying from $1045 all the way up to $1300, and we haven't even seen any real big problem explode yet.
Bob Wiedemer: Right! Here or in China. No kidding. Yeah.
Mike Maroney: If I'm not mistaken, I think George Soros came out and said that China was a $30 trillion problem. I don't...
Bob Wiedemer: In terms of the...
Mike Maroney: The Debt.
Bob Wiedemer: ...no body knows exactly, but yeah the amount of debt is about $25 trillion to $30 trillion that's private, public, it's massive. China has not only been the engine of growth, but it's been the engine of just massive lending and leverage and a lot of that money has to be printed by the Chinese government too. So it's both a debt problem and a money printing problem. Kind of like what we have, but a little different form. Yeah, it's huge.
Mike Maroney: Now it's interesting because I always try to get you to give me a price. Now, I've got your brother here today and I think he might be a little more open to giving me a potential target. So Dave, I'm going to start with you and you threw out it could go to $1400 or $1500 and I know you're very conservative as far as estimations are concerned. I've seen some incredible numbers tossed about as far as where gold could be headed. Needless to say, it's going to go up and it's going to go down, but if this is the beginning of something very interesting in 2016 a lot of people think 2017, 2018 could really see these situations escalate. In the next three to four years, if you're talking about the upper band as far as your range is concerned, give me some prices as far as gold and silver is concerned as far as where you think it could head in the next three to four years.
Dave Wiedemer: Yes, ok. In the next three to four years, we could easily see it, I would say a band $3,000 to $5000, but here's the key. What we need to understand about the gold price is basically as stocks, bonds, and real estate, decline substantially in value all around the world, enormous amount of money is going into gold. As it's going into gold-- and gold is a very small potential of investment--everyone wants it, they're ready to pay a lot of money. So at some point we're going to see it sky rocket, maybe not in three years, four years, five years. At some point, it's headed through the roof and all I will say is upwards of well beyond $10,000 an ounce.
Mike Maroney: Not a matter of if though. It's just a matter of when.
Dave Wiedemer: ...of when. This could be... it could take over five years for us to see it. I don't think it will take that long, at this point, but this is where we have to study China very carefully. China is going to be a big determinant...
Bob Wiedemer: There's a lot of psychology here in terms of timing, but I think it is back to the fundamentals...it, it goes up and within the next three or four years it should be a good time for gold no question about it. The better times are probably after that, but...
Dave Wiedemer: Yeah, most of it would be after...I mean later. You could see an enormous...
Bob Wiedemer: As you can see Mike, I'm hedging on my price.
Mike Maroney: Yes, of course.
Dave Wiedemer: I'm willing to talk about it because I strongly... I mean we're talking about fundamentals here. Fundamentals that we understand very well. We understand what's going to happen and because of that we know that gold has to at some point really sky rocket. This is going to be... I think in our first bubble book I said, "The next 20 years or so are going to be probably some of the best years in human history for investors. The right investors, those that sell stocks, bonds, at the peak of the bubble get into gold. You've got another huge increase in value and then later, they're going to be assets just like in the depression, but much more severe where you can get assets at a very low price that are going to rise in value. So it's a wonderful time to be an investor. There's just a lot of opportunity and this is the time to move.
Mike Maroney: Now, it was interesting when Milton Friedman was alive there was a conference where he was actually talking about the Euro coming out. He felt at the time that once a country gave up it's sovereign right to create its own currency it was no longer a country and he felt that the Euro would never work and a lot of people were very fearful of that whole situation blowing up. But... he was asked another question in that conference. He was asked when gold was trading around $300, could gold trade above $1000 again? He pondered it for a second and then he ended up saying, "Of course, but would you want to live in a world where it has to?" The bottom line is...we aren't going to move to Mars yet. So if you live in a world where all of these things are taking place, you have money, you have wealth, and you need to protect it, it's not a matter of if, it's only a matter of when and we don't know what the catalyst will be. Buying $1100 gold, $1300 gold, if you're a trader, yeah it's important to pick a price, but now may be, if you own no precious metal, the best time to own precious metals. It's a time that you probably want to get in now. What do you think about that?
Bob Wiedemer: I would agree.
Mike Maroney: So I'm not going to tie you down to price today. Guys, I really appreciate you coming out. I think that it's incredible what you guys have put together as far as your books and needless to say I hope that you continue to produce these works of literature that help the individual investors and keep coming by and spending some time with us. Bob, thank you so much. Dave, thank you so much.
Guys, needless to say, when you sit down and when you talk to economists, and you look at the fundamentals... and I know a lot of us don't want to think about these things, because quite frankly it makes us a little bit uncomfortable, but now without a doubt may be the most important time in history to look at the way your portfolio is diversified and make a decision to protect yourself, protect your families, and own a little bit of precious metals or own a lot of precious metals, because not only does it supply potential protection it could be extreme profit. What Dave was talking about is... when this thing that is going to takes place, you can convert that gold into other assets that will be undervalued and you can literally change generations as far as your family's wealth and financial situation is concerned. Please give us a call at Monex so we can help you today. Thank you very much for watching.