So Ireland is under the gun yet again. Interestingly, it appears that Ireland’s government was not exceptionally profligate during the boom times – they have just become a victim of the euro structure. It’s hard to see at this stage which of two alternatives will eventuate – will it be default, if strict measures are taken, or will it be QE with all that that implies? Monty Guild, one of Jim Sinclair’s associates, is in no doubt – as follows:
QE in Europe— the European sovereign debt situation
It is not surprising that Europe’s short embrace of austerity has been unsuccessful. There is never a choice for austerity until all other alternatives have been exhausted. History is replete with examples. Why don’t some of these stock market commentators read some global economic history? It is obvious now and has always been obvious that Europe will go for QE. It does not matter what they say about austerity. We have been advising investors to watch what they do. They are bailing out Ireland; Portugal is right behind and will be followed by Spain, Italy, and even France in the future. There is no solution that politicians will embrace other than QE [money printing] because a program of austerity means the end of their political careers. They will put their careers above the national interest.
– Monty Guild
Chris, whose work we have often discussed on our site, gets to interview Ted Butler – another of our “sterling” sources. Ted describes his early work in the 70s and 80s with investment broking houses and how he was introduced to the strange anomaly in the silver short position that existed even in those days. Since that time, Ted has toiled away writing numerous times to the commodities exchange and the CFTC attempting to get these anomalies addressed. It is amazing to think that after being fobbed off for so many years his work, together with others, in GATA in particular, seems finally to be bearing fruit. Ted explains why he has confidence in the CFTC chairman, Bart Chilton, and also the head of the CFTC, Gary Gensler.
Other topics covered include the looming supply shortage in silver, due to the rundown in above-ground silver stocks that we have discussed also on this site.
Ted also mentions the likelihood of extreme volatility coming in the market – along with Jim Sinclair and other commentators, he sees this coming about for both gold and silver.
This interview occurred a couple of weeks ago, but since it is so powerful, I decided to extract important parts of it today. The important thing about Jeremy Grantham is that he is no lightweight – he is chief investment strategist of GMO, which is an institutional investment powerhouse.
What is the market outlook at the present time? Over the last 20 years, the Fed has been manipulating the stock market – attempting to drive the market up when this has been deemed necessary – the effect of the latest attempt is invisible because of the drag of a moribund housing market. The consequences of the easing policies, which keep being applied, is a boom and bust cycle, with the busts being inevitable. This was true for the tech bubble of the 1990’s and the collection of speculative bubbles in 2002 through 2008 – the housing bubble in particular.
To stimulate the economy now, it would be better to tackle unemployment directly – like for example hiring workers to rebuild an infrastructure that is acknowledged to need substantial restoration.
Under the relentless QE policies of the Fed, commodities are up across the board. This deliberate policy to drive the dollar down, when it is already “pretty cheap” is upsetting all foreign governments, and threatening a currency war – some might say that this is already under way. The Fed is guilty of currency manipulation just as much as the Chinese government.
Commodities – Grantham has his own view which put simply is “We’re running out of everything”.
This means that we can expect a sequence of shortages, across the grains, minerals, and oil, among others. Miners that have definite resources (including royalty companies) would seem to be beneficiaries, and definite candidates for investment.