He spoke about why Americans should ditch their dollars for gold, how Janet Yellen is affecting Americans retirements, and what China and Russia are up to with their gold buying and de-dollarization meetings.
Washington, DC -- (ReleaseWire) -- 05/27/2014 --Nationally Syndicated Financial Myth Busting Radio Show with Host Dawn Bennett, CEO of Bennett Group Financial Services, LLC, on May 18, 2014, interviewed Ed Moy, Chief Strategist of Morgan Gold and Former Director of the U.S. Mint, about why Americans should just ditch their dollars for gold, how Janet Yellen is affecting Americans retirements, and what China and Russia are up to with their gold buying and de-dollarization meetings.
The show airs live on http://www.WMAL.com each Sunday at 11 am EDT. It now has over a year’s worth of achieved interviews for listeners free on-demand at http://www.financialmythbusting.com.
Dawn discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included Rock Legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN as well as take podcasts on the road and forums for interaction. The show is a great complement to Dawn’s monthly investing seminars that take place at Tysons Corner in McLean, VA, where she discusses investing.
Ed Moy is Chief Strategist of Morgan Gold and a former director of the U.S. Mint. After being nominated by President Bush, Moy served as the 38th Director of the United States Mint from 2006 to 2011. Other positions he held in the Bush administration was the Director of Managed Care at the Health Care Financing Administration as well as the Special Assistant to President George W. Bush for Presidential Personnel, where he oversaw the selection of candidates for presidential appointments from 2001 to 2006.
Today Moy is a frequent contributor to moneynews.com. His most recent article is titled, "Rising Gold Prices Hinge on 3 Events." He began this article with a question, "With the bull market recording new records and investors discounting Ukraine, will gold prices decline?"
Q: Will gold prices decline from here? At least according to the media, everything appears well in the world.
A: Yes there’s a lot of bias out there but at minimum there are very fragile and incremental recoveries in both America and Europe. China is teetering downwards. From an economic perspective, it's certainly not robust growth that everyone's looking for. There is also have a huge increase in geopolitical risk. Iran is marching toward nuclear capability and Syria is out of control. There's a lot of global risk. With how fast technology works, when that risk happens, you can have immediate impact on the markets.
Q: Do you feel there's a potential that exists for an epic short squeeze in physical gold?
A: Yes, this happened over the past 18 months, a huge short squeeze on gold. India and China are buying historic record amounts of gold, pushing overall gold demand to the highest it's ever been in the history of the world. These enormous trading pressures result in a lot of volatility.
Q: Ed, it's no secret that Russia has been pushing for trade arrangements that minimize the participation of the U.S. dollar ever since the onset of the Ukraine crisis. China and Iran are participating in these de-dollarization meetings. Do you think they will get away with it? Is Russia actually going to replace the dollar with the dollar-free system?
A: I don't think that any of that will happen in the near term, but you can see the broader strategy. China has made public statements saying it is time to de-Americanize the world.
Q: Let's start with the dollar. China and Russia have made similar statements but on the side they have been buying huge amounts of gold to add to their gold reserves. They're up to something and I think what they're moving toward is some type of market basket of currencies to which they'd like their currencies to be part. They want to t ake away America's dominance of the dollar as the world's reserve currency. I think that's the ultimate midterm goal that they're working toward and I think they have a reasonable chance of pulling it off as long as the United States under this particular administration seems to be withdrawing from engagement in the world and letting these things go on.
The Chinese may be preparing to introduce the gold-backed renminbi, which would push down the dollar and get rid of the U.S. status. Do you think that's possible?
A: I think that's possible, but it's a huge jump for China right now, because overall, when you take a look at this amount of currency that they have and the amount of gold reserves that they have, we don't know exactly how much they have in their gold reserve but it's a small percentage. The United States has a larger percentage than that. So they have some way to go as far as buying enough gold to be able to execute that.
Q: Let's talk about what we have in gold reserve. Back in 2011, Ron Paul proposed some legislation to have an annual audit, it was called the Gold Reserve Transparency Act. It didn’t advance but there was a lot of talk in the media, and there still is, that the last audit done on our gold reserves was actually back in 1974. So is the gold really there?
A: Yes. One of my responsibilities as Mint Director is to oversee our gold reserves, of which a big chunk of it is in Fort Knox. I've been to Fort Knox multiple times, at least once a year to visit the staff there, do town hall meetings, and to also take a look at the gold. We also worked very closely with the Inspector General and our Chief Financial Officer at the United States Mint, do annual audits. Not to the extent that Ron Paul had wanted before he left office, but, still the audits are done and I can tell you that the amount of gold that is written up and audited in the Inspector General's report is exactly the amount of gold in Fort Knox. We also have gold reserv es in our West Point Mint, in New York, and we also have some gold reserves in the Denver Mint. Together, those three comprise about 98 percent of our nation's gold reserves.
Q: So that myth was just busted, thank you. The U.S. Mint was established by the Coinage Act of 1792. One of the interesting facets of the law was that people found guilty of debasing the dollar could be sentenced to death.
Thomas Jefferson wrote that "Paper is poverty. It is only the ghost of money and not money itself." Do you think we've lost sight of The Founders' intent on how America's money should work?
A: Yes. Once we went off the gold standard, which had been in a steady decline from about 1933 'til 1972, and government figured out that no one objected to being able to print money with no backing, they thought, “What a great deal!"
Q: But if you're sitting in the citizen's shoes, you're asking, "Who will pay for all this?"
A: Yes, right, exactly. Jefferson and Madison knew eventually paper money with some questionable backing would be printed, so they gave people an out, allowing the settlement of debts with silver and gold, which is the Constitution. Twelve different states have the ability to have American-made gold and silver bullion coins as a medium of exchange, which is constitutionally allowed.
Q: Back to people found guilty of debasing the dollar being sentenced to death. The Coinage Act of 1792 is still in place. How do you feel about that regarding Greenspan, Bernanke and Yellen?
A: Now that we have this atmosphere in government, based on the leadership of this administration that laws are optional to enforce, good luck with carrying out that one. I don't think anyone in government is will want to explore it.
Q: I bet not. Janet Yellen now is effectively in control of managing the value of the dollar. She said in her most recent congressional testimony that she's worried inflation is not high enough and that the Fed is prepared to take action if inflation remains too low. What does this kind of policy mean for the average American?
A: Guard your pocketbook because in the end, Wall Street will benefit and Main Street's will be hurt.
Q: What could they do to help hedge themselves against this?
A: The reason why the Fed is taking such a strong position is they have legislative authority to manage monetary policy, which goes hand-in-hand with fiscal policy which drives all of the economic policy because that's made by elected officials.
The President and Congress can't even get a budget done, and as a result, the Fed has felt an obligation to fill in the gap, and that's why this unbalance of power exists in Washington. So citizens should be electing more effective representatives and a President that's willing to tackle these tough issues.
Q: But what do you think they should be doing with their investment portfolios?
A: Diversify, diversify, diversify.
Q: If we have inflation, what's your suggestion?
A: Consider gold because out of the four asset classes, cash, stocks, bonds, all those are dollar denominated and dependent on the U.S. dollar. If you have inflation, those assets will be worth less over time. If investors want something in their portfolios that moves in the opposite direction of inflation, historically that's what gold has done. When the dollar's gone down, gold has gone up. Investors want enough gold in a portfolio as an insurance policy to protect against what inflation might do to the rest of the portfolio.
Q: I consider myself a gold bull, not a gold bug and I believe there's a long-term trend for gold, which is why I'm a gold bull. So the risks/rewards setup from where I sit is rather favorable. Heads I win, tails I win type of situation. Do you agree with that?
A: I absolutely agree. When you take a look at the fundamentals, they favor gold right now. All this $5 trillion of excess liquidity that the Fed has to figure out a way to get out of our economy without sparking inflation, I think that's a huge risk that will spark inflation. Gold is a great long-term hedge against that. Speaking as the former Mint Director, I'm not smart enough to make money by daily trading of gold. I look at gold in the long-term, and the fundamentals point very positively toward holding gold in the long-term, which is why I have a bunch of it in my gold IRA but I also have a bunch of it in my portfolio.
Q: I also believe it's possible to accumulate wealth by buying gold in this environment, but 2013 threw a lot of people off this track, right?
A: Yes because it was not trading normally.
Q: It felt like it was being manipulated. What were your thoughts on that, and do you think that we've kind of cleaned up that issue?
A: Manipulated, yes, absolutely. Here's where the manipulation comes in. It's the Fed’s 3-1/2 rounds of quantitative easing. It has greatly distorted both the gold and equity markets. It has fueled what I believe is an overpriced stock market because that money isn't going to people getting mortgages to buy houses or companies to expand their plan, it's going right from the financial institution to the stock market. I do think that manipulations happen, but with the tapering of quantitative easing, it’s beginning to get that effect out, but there is still $5 trillion of stimulus to worry about. I think that manipulation’s happening and once that manipul ation goes, fundamentals will overrule. I think gold is positioned very well with that.
Q: Do you think that the manipulation is going away now, or do you think it's already gone? The world called them on it at the end of 2013.
A: It's beginning to go and I think the tapering is certainly a step in the right direction.
Q: Once they begin unwinding the program, the big impact will be felt. So, you're working at Morgan Gold right now, does the current price of gold accurately reflect the demand for precious metals or do you think it should be higher?
A: It should be much higher. When you take a look at the demand for physical metal, it is huge, setting world records. What you're seeing here in the West is a bit of a Western bias. People have to separate individual investors and institutional investors. Institutional investors in the West have abandoned gold, and as a result, the ETFs that they normally invest in have sold that gold, and almost all of it has gone to India and China. They must love our manipulation because they've been taking advantage of it hand over fist. Gold has gained seven percent this year and is the second best performing investment this year so far.
Q: How does today's dollar differ from the dollar our Founders created?
A: The dollar our Founders created was totally backed by gold and silver. Today, it is backed on the full faith and credit of the United States government.
Q: Do you think we should go back to a gold standard?
A: The gold standard would be great, but anything that would get the government away from the mentality of thinking they can print money endlessly with no consequence would be welcome.
About Bennett Group Financial Services LLC
Bennett Group Financial Services LLC, based in Washington, D.C., is a comprehensive financial services firm committed to providing opportunities to clients’ as they seek long-term financial success. Its customized programs are designed with the potential to help grow, lower overall risk and conserv e client assets by delivering a high level of personalized service and skill. For more information, call 866-286-2268 or visit http://www.bennettgroupfinancial.com.
Securities offered through Western International Securities Inc. (WIS), member FINRA/SIPC. BGFS and WIS are separate and unaffiliated entities.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program on www.WMAL.com called Financial Myth Busting http://www.financialmythbusting.com. She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett or dbennett@bennettgroup financial.com