Monday, February 29, 2016

JP Morgan Manager Robert Michele - "People Have More Confidence in Gold than Bank Deposits"

JP Morgan Asset Manager Robert Michele was interviewed recently on CNBC. The topic was the strong move up being made by gold. Mr. Michele made a statement that may seem surprising at first. He says "people have more confidence in gold than bank deposits"  Below are some quotes from the article and then some added comments.
"With the meltdown in stocks sending investors scurrying to safety in gold, JPMorgan Asset Management's Robert Michele said Thursday it's a matter of faith in the metal, or the lack thereof in other assets.
"Gold at $1,200 an ounce, what does that tell you?" he asked rhetorically in a CNBC "Squawk Box" interview. "It tells you that in a flight to quality and a safe haven, people have more confidence in gold than in bank deposits or paper money. I think things have gotten out of control."                . . . . . . .
My added comments: This article suggests that the reason for the move higher in gold is volatile markets and a lower US dollar. No doubt those are probably part of the reason. However, I would suggest that all the talk about eliminating cash and potential negative interest rates from some monetary officials is also a factor. 
This blog does not have an audience like a mainstream media publication has, but I do hear from people from all over the world. Also, in doing research for articles here I visit all kinds of sites where I read readers comments on various articles. I probably read hundreds of such comments per month. (As an example scroll down in this old article on gold and read the three comments posted. All three exhibit distrust in the current system). This article only had three comments, but I see hundreds of similar comments each month looking at various articles. I follow Jim Rickards twitter feed. Here is a recent comment by Jim about elites being disconnected from the real world (note the responses). This gives me some feel for how the average person is feeling along with emails I get and people we know in our circle of friends, etc.
In an earlier blog article I suggested that I think some monetary officials are out of touch with the intensity of distrust that is building up in the general public with the present system. It manifests itself more visibly in the US political campaign as we see very intense anger being expressed by those voting for both Donald Trump and Bernie Sanders. Even those voting for Ted Cruz, Marco Rubio, and Ben Carson are very unhappy and do not believe those running things care about their concerns or can be trusted to address them.
All I can do here is report what I see and observe. From all the feedback I get and see on various sites, it appears that many people simply have lost trust in the system and it won't take too much in terms of more economic problems to send them looking for ways to reduce exposure to the system. I can't blame them. We have monetary officials seriously talking about taking cash out of the system at the same time they talk about charging interest on money held in banks. People feel instinctively that something has to be wrong for these kinds of ideas to be floated by monetary officials. Whether its true or not, people feel that its an admission that the policies that have been implemented (zero rates, negative rates, QE, etc) are starting to fail and officials are desperate. 
If they feel they have to shut off access to cash (people think getting rid of $100 bills is just the first step) and try to force people to spend their savings by using negative interest rates, there is a feeling that this signals a lack of confidence by monetary officials in their own policies. As we have mentioned here on the blog, confidence is critical to any monetary system. When too many people lose confidence they start looking for a way out. It appears to me that part of the recent demand for gold may be due to this kind of feeling (Jim Rickards agrees in the article linked just below). 
This suggests to me that if we were to actually get a real new major crisis worse than 2008 (like Jim Rickards has forecasted), we are likely to see demand for both gold and silver explode higher. The supply of these metals cannot possibly meet demand like that. Right now precious metals make up less than 3% of all investment. If demand increased so that precious metals made up 5% to 10% it would suck all the available metal on the earth up very quickly. The easy way  to see if this is happening is to simply watch the price. If gold starts to move sharply higher later this year (and silver follows), you have your answer and it means we need to watch events very closely. If gold were to drop sharply in price it is likely telling us a major deflation event is underway.

Added note: Here is recent related article on gold by Jim Rickards. Here is quote from this article:

"For the first time since 2008, it looks like central banks are losing control of the global financial system. Gold does not have a central bank. Gold always inspires confidence because it is scarce, tested by time and has no credit risk."

Additional Added note: We have this recent tweet (see screen print below) from Willem Middelkoop on gold.

Fact: Chinese/Russian central banks each bought over 20 tons in a month. US investors bought more than 40 tons in just two working days.


Note to Readers-Friday March 4th

Friday March 4th we will have an article covering a recent discussion (captured on video) on the potential for the SDR to be used as the new global reserve currency for the world. The discussion included both a current IMF official who works with SDRs right now and the former head of the SDR Division at the IMF (Dr. Warren Coats) who we have contract with by email. Dr. Coats even provided a great quote for our article that readers will want to see.

In the discussion it is clear that these officials do not see an imminent crisis coming at this time even though they do point out that the conditions for one in the future do exist. 

Please watch for it and let others know about it as you will not get this kind of direct information from official experts like this very often. It will answer many questions I see from readers and in other discussion forums all over the world about the potential for the SDR as a replacement global reserve currency for the US dollar. It directly addresses the two big questions we follow here on this blog:

1) Will we get another major financial crisis worse than 2008?

2) If we do, will the SDR used at the IMF be used in a new way to address the crisis?

Jim Rickards work on this is invaluable (they mention his book in the video) and now we have direct information on both these important questions from both a current and former IMF official on what we can reasonably expect.

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