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jueves, 27 de noviembre de 2014


Image: dailyreckoning.com
Last week, The Guardian’s Debbie Carlson (DC) interviewed Guillermo Barba on the next Swiss Gold Referendum.
Here, we have posted the entire interview. Enjoy.
DC. Guillermo, you mentioned on Twitter that you were disappointed that the referendum was unlikely to pass. Why is that?
 Yes, because I think negative propaganda is winning and that's not good for the people of Switzerland. They've had an impeccable financial reputation for decades, and now that good and “golden” reputation is vanishing due to their bureaucrats. Keep doing the right things and you will get good results, but if you begin to think that paper is money and not gold as it has been for thousands of years, well you are going to end sooner or later in the same weak economic situation than most of Western economies. What's good for gold is good for Switzerland. If the referendum passed more people in Europe and America would wake up to reality: gold is money, and it is going away from the West because they are broke! Follow gold, not fiat money.
DC. You mentioned that the SNB is getting away from sound money policies and following other central banks. Are you referring to the floor it has vs the euro? Can you explain further your concerns about what the SNB is doing?
 Yes, exactly. The SNB repeated it will defend 1.20 cap with determination. When you are committed to printing currency in unlimited amounts you are basically saying that you do not care about people's purchasing power. You are saying also that the Central Bank is superior to the people. That's neither good nor fair. No public or private entity should be given the power to decide in the name of the people. Let them decide freely!
One more thing: mainstream economists claim that a weak currency is good for exports. That may be true in the short term. But in the long run what you need is a strong and stable currency in order to send the message to investors that they can make their economic calculations on a solid basis. No solid currency means no sustainable economic growth. Let free markets work!
DC. The referendum was able to get on the ballot because it had 100,000 signatures, but it looks like it won’t pass. Why do you think that is the case? Do you think gold’s tumble in the past few years has changed people’s mind about having such a hard peg versus when it was proposed?
 As I already said, it's bad propaganda’s fault. Opponents are scaring voters. Swiss bureaucrats are acting like lackeys of the American establishment.
I think gold's tumble in the last three years has changed many minds, but those are mainly speculators' minds. You know, the so called "strong hands" -the real gold investors- have an insatiable appetite for gold mainly in Asia. That's why gold has been in backwardation recently. There is no enough physical gold out there at least not at the current low gold prices. That apparent "lack of supply" is abnormal because gold is the commodity with the highest stocks-to-flow ratio, i.e. there should always be enough physical supply.
 The Swiss should know that they need more gold, not less, because of its value –which is different from its 'price', as real money.
DC. Speaking of gold’s tumble, the metal has lost a lot of fans since it peaked in 2011. But you’re still very pro-gold. Why is that? Would anything change your mind?
 Yes, no doubt about it. But, as I said in the previous answer there is still strong appetite for gold, in particular, physical gold. Forget about the paper gold price, that's fine for speculators. The real story is being told in the physical market. Try to get gold at any store at any country and you will find high premiums over spot price.
Gold's bull market is still alive; we are witnessing just a correction. You know, gold went up for 13 years in a row and that is very unusual, this correction will be unusual too. Can it go lower? Yes. Typical corrections can be 40 to 50% that means that it is still OK if gold tumbles to $1,000 oz. or less. High value at a low price is a good deal.
 Keep accumulating as much gold as you can. The current economic, financial and monetary situation in the world is terrible. Debts keep growing and growing, all major central banks including the Fed are still printing currency like crazy and keeping artificially low interest rates. That is not a stimulus for the economy as Keynesian economists claim, they are inflating bubbles in several assets like stocks and bonds around the world and when the bubbles pop, they will try to solve the problem printing even more currency. That will end in a global financial mess. When that happens, believe me you will want to have your gold as close to you as possible.
DC. Sometimes people who are very pro-gold are called “gold bugs.” Do you have any feeling about that term (in other words, do you dislike it, or do you like it, or do you not care?).
 I do not care. If Keynesians or mainstream economists call us that way, good, it sounds like a compliment.
DC. Do you propose returning to a gold standard? Why or why not, and how does the drop in gold prices affect your view on that, if at all? Would you consider a return to a gold standard deflationary, as some people have said?
Yes. The world needs the gold standard. Prices do not affect my view at all. The world has been in an inflationary cycle officially since 1971, so you can try to fight against deflation but in the end, deflation will come anyway. That's unavoidable. In fact, Prof. Antal Fekete's theories (the founder of the New Austrian School of Economics, NASOE) state that Fed's policy of Open Market Operations have the effect of making deflation worse by destroying capital. In very simplified terms speculators in the bond markets will buy the bonds in anticipation of Fed purchases. When the Fed comes in speculators will sell those bonds to the Central Bank at a higher price (lower yield). Whenever bonds fall speculators buy them again and the process repeats. This makes bond speculation "risk-free". So, printing currency will not create jobs nor stimulate the economy, but it will inflate bubbles mainly in the bond markets. Two things will happen: the Fed (and other central banks) will keep printing currency by buying bonds and interest rates will keep falling too. The result is deflation and capital destruction.
Deflation is not the cause but the effect of the Central Bank manipulation of currency and interest rates. By the way, gold is viewed as a hedge against inflation. That's true. But in a deflationary environment gold is your hedge against the complete collapse of the monetary system. They (the government and the central bank) can destroy capital but they can't destroy gold and silver.
So, no. The gold standard would not be deflationary. The gold standard would provide a strong and stable interest rate structure, that's the point. Prices should fluctuate all the time according to supply and demand.

DC. Many thanks, Guillermo
My pleasure, Debbie.

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