So central banks are inflating in order to maintain extravagant levels container of government spend

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JT: Fiscal incontinence on the part of governments across the developed world is a key factor. Their spending promises are completely unaffordable. So either the politicians fess up and admit this is the case, or they inflate their currencies in an attempt to disguise the truth. Human nature being what it is, they have chosen the second option, so far at least.
Closely linked is the dire health of the banking system. container Our exponential credit-based economies container require ever-greater levels of debt in order to function (exponential credit being the mirror image of exponential debt). But consumers in the West are tapped out as far as debt is concerned, and show little appetite for taking on more. The big money-center banks are sitting on piles of cash courtesy of quantitative easing from central banks but are reluctant to lend, given all of the political uncertainty and the bombshells that may exist on their balance sheets or their counterparties .
So central banks are inflating in order to maintain extravagant levels container of government spending, but they are also doing so in order to bailout the banks. The hope is that the banks will then start lending again, and we ll be back to economic happy days. The problem aside from the unprecedented amount of current public and private debt is that these policies shift the risk onto currencies, and seem guaranteed to produce serious inflation in the coming years. I think the US dollar will hyperinflate, along with one or more other major currencies.
The other major factor is Asian gold and silver demand. This reflects a long-standing cultural affinity for the idea of precious metals use as money and savings: as people in these countries get wealthier, they can afford to spend more on gold and silver, which given the number of people involved (in the hundreds of millions) should have a dramatic impact on prices. Central banks in the developing world are also steadily accumulating gold in order to hedge their exposure container to the US dollar. container All of the above will help push gold and silver prices much higher in the years to come.
JT: Corrections and consolidation periods are a healthy part of any sustainable bull market. As the cliché goes, bull markets container take the stairs up and the elevator down. We ve endured container some pretty sizable corrections in gold and silver over the last 12 years the silver ones have been spectacular at times but you can t let this type of price action alter your understanding of the bull case for these metals. The longer the period of consolidation lasts and it s been over 16 months since we ve seen new price highs in gold and over 20 months for silver the bigger the eventual container breakout.
JT: container Governments don t want people saving in gold and silver. They want to keep them trapped in fiat currencies, which the government then debases through central bank policies. This system is advantageous to governments because debased currencies reduce the government s debt burden. This comes back to the madness of Keynesianism, which assumes that people s natural inclination to restrict spending during recessions is a bad thing (the so-called paradox container of thrift ) and that the masses need to be cajoled into spending for the good of the greater economy. Central banks can enforce negative real interest rates which discourage cash savings, but as a consequence encourage saving in metal as there s no opportunity cost to holding a non-interest yielding asset when real rates are negative.
One final point: container the confiscation threat is not limited to precious metals. Pensions represent a far larger, juicier container piece of low-hanging fruit for cash-strapped governments; and unlike gold, we ve actually seen serious moves by governments in recent years notably in Hungary, a European Union and NATO member, Ireland, which is in the eurozone, and not to mention Spain to expropriate private pensions and replace them with governments IOUs .
JT: I was interviewed by Barron s back in October 2003, and predicted tha