Greg Weldon, founder and CEO of Weldon Financial Publishing, lays out a bullish case for gold based on a series of macro indicators. He believes that a looming recession will force global central banks to react with policy moves that will be overwhelmingly positive for gold. Weldon views gold as a great hedge against anything from a normal recession to a worst-case scenario. Filmed on July 16, 2019 in Jupiter, Florida and published on Real Vision on July 29, 2019.
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Recession, Gold, & the Central Banks’ Last Stand (w/Greg Weldon)
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In terms of the Fed and did they go too far? Number one. And are they behind the curve now ? Number two. They are very valid questions, and the answer is yes. And yes. But the answer also depends on who you listen to. Because I wrote a piece going all the way back into August, it was called, Take Me Out to the Ball Game, it was about the Fed. It was about Jackson Hole. It was about Jerome Powell. He is not Bernanke, he is not Yellen, they were students of the deflation era of the 1920s. They know how to fight a debt deflation. Jerome Powell told us, I’m not that, I am a student of the 1970s inflation. He was very specific on this giving examples from when he was younger too even in terms of what was happening then with Carter. And of course, we had the gasoline crisis, the OPEC crisis, the Middle East crisis fed into that. But at the end of the day, it took Paul Volcker and 16% short-term interest rates to ratchet out inflation. And he just basically threw the gauntlet down and said, I will not let that happen on my watch. If that’s not a tell that this guy is going to take it a step too far, I don’t know what was. It was a beautiful tell. He told us exactly what he was going to do. And he did it. And when he’s basically says, I want to be a little bit past neutral. And this was big too, actually, because you go back to Janet Yellen. When she stopped using the word normalization, that was the most misused, misappropriated word in history of financial markets and monetary policy, normalization. Normal is what it is now, there’s nothing else normal about where we might go that would be normal. When they started using the term neutral, everything changed. And that was the point where you said, look, inflation is actually at the point was 2% or even a little higher. So, for them to go to 2% of policy would be, make sense, they may be neutral. So, you had a massive move in the bond markets, the 2-Year Note went from 142 to like 285. And we call that move because they call this move. But then you get to the point now where you’re approaching 2%, you get to 2% on policy, and all of a sudden, inflation shows you signs of rolling over. And that’s where we wrote the piece that we last did on Real Vision. And we said, a bridge too far, that the Fed would take this one step too far. And they did in December, by going to 2.5% on the top end of the range, 2.40% has been the pretty much the effective rate this entire time. Inflation now, all of a sudden drops below 2%. And the Fed downgrades their own forecast for future inflation to below 2%. Well, this is the problem. No longer they just a little above neutral. Now, they are outright tight. And that was the problem. And it was a problem specifically for the consumer. One of the things that happened, because of that last rate hike, is you pushed the monthly amount of money that consumers have to pay to float their debt to a record high $348 billion a month. And this is now closing in on a $500 billion a month total retail sales in the US.