The Gold Report: You've expressed astonishment at the record highs of world stock exchanges. Given the sluggish world economy, can we expect this trend to end, or have equities become completely disconnected from economic reality?
Leonard Melman: Equities have become somewhat disconnected from economic reality. We've heard comments from the European Central Bank, the U.S. Treasury and the Bank of Japan calling for more inflation because dramatic action is needed to improve the world economy. How does that coincide with the bull markets in equities?
TGR: Is there a connection between these bull markets and quantitative easing (QE)? Continue reading "Put Your Trust in Precious Metals, Not Governments"
The Gold Report: You recently told a crowd of investors at Prospectors Developer Association of Canada (PDAC) that precious metals are the best place to invest in an inflationary period. Why is that?
Leonard Melman: When prices are going up, you wouldn't want to be in housing stocks or auto financing, but you would certainly want to be in precious metals. You also might want to short the bond market. That is why you have to be aware of the direction of inflation. It is important to the concept of precious metals pricing. If you've been around for a few years, as I've been lucky enough to be, then you can easily recall a time when high inflation was the absolute key ingredient in massive previous bull markets. That is why I thoroughly look at what has led to past inflation and hyperinflation. I use four examples: the Roman Empire, the French Revolution in the late 1700s, the German hyperinflation in the 1920s and the recent catastrophe of hyperinflation in Zimbabwe. I examine whether America and other countries in the world are perhaps following the same paths that led to those previous hyperinflations.
TGR: Do you think investors are going to see hyperinflation in the foreseeable future? Continue reading "Leonard Melman: Are You Prepared for Hyperinflation?"
The Gold Report: Leonard, what are the most pressing issues facing investors today?
Leonard Melman: Let's start with the fiscal cliff. If America falls into this abyss, the combination of tax increases and spending reductions will slow down economic growth. Interestingly, political leaders in Europe are calling for increasing taxes and decreasing spending in order to solve their problems. I find it amusing that the solution to economic problems being proposed by leaders on the European side of the Atlantic is thought to be the problem on the American side of the Atlantic.
TGR: How do you account for the disconnect?
LM: It is due to a philosophical inconsistency and a lack of economic understanding on the part of the world's political leaders, most of whom are not well qualified as economic thinkers, nor as philosophers for that matter.
TGR: How important is a philosophical stance to making a cogent economic analysis? Continue reading "Leonard Melman Finds the Fiscal Cliff a Boon for Precious Metals"