Financial Repression Authority with Rick Rule
Special Guest: Rick Rule, is Chairman and Chief Executive Officer of Sprott US Holdings, Inc. Mr. Rule is a frequent speaker at industry conferences, and is interviewed for numerous radio, television, print and online media outlets concerning natural resource investment and industry topics. He is frequently quoted and referred by prominent natural resource oriented newsletters and advisories. Mr. Rule has a long experience in many resource sectors including agriculture, alternative energy, forestry, oil and gas, mining and water. Mr. Rule is particularly active in private placement markets, having originated and participated in hundreds of debt and equity transactions with private, pre-public and public companies.
Rick Rule is a no nonsense and frank market participant with sound commonsense from over 40 years of being part of the nature resource sector.
"Financial controls or 'trickery' imposed on the public by the state."
"There is certainly financial 'trickery' imposed on us by large financial institutions but they do that utilizing the state or in conjunction with the state. The practical manifestation of Financial Repression are all around us. I would suggest that a large part of the manadate of the Securites and Exchange Commission as an example is to effect barriers to entry to smaller participants in the securities business.
The most egregious forms of Financial Repression are in the first instance:
- Tax (which many regard as slavery - I don't but regard it as extortion!)
- The Manipulation of Interest Rates and
- The Manipulation of the Currency."
"The interest rates payable to savers relative to the real rate of depreciation of the purchasing power of - pick one: the dollar, the euro, the yen - are despicable!"
"As recently as October last year I had the pleasure of listening to Alan Greenspan who ironically (despite the fact he is a vowed libertarian and architect of a lot of this Financial Repression) and he said something very stark too the audience! He said that a sound currency is not consistent with a representative democracy. A sound currency benefits the productive class and savers. In a representative democracy most of the people are spenders. Low interest rates and a depreciating currency aids the spenders and borrowers. It doesn't aid the savers. In that context Financial Repression is understandable and I'm afraid inevitable."
Extraordinary Faith & "Return Free Risk"
"We appear to be in a place in history and the economy where there is extraordianary faith in the big thinkers in the world - the Merkels, the Obamas, the Greenspans, the Yellens. It is partly this faith that is allowing them to keep these interest rates this low. It is a belief that the big thinkers of the world "stick handled" societies global financial crisis of 2008 and by managing the levers of the economy, managed to save us from ourselves. I would of course disagree with that diagnosis (but no one cares much what I think). I certainly believe that savers will tire of buying financial instruments that have no real yield. If you think about the value proposition as an example offered up by the bellwether savings instrument world wide (the US 10 Year Treasury) yielding 1.8%. What that means is the Fed absolutely, positively guarantees you 1.8% per year for 10 years. The difficulty I have with that is that even at their ascribed CPI inflation rate, what they are promising you is 20 basis points a year in real yield. Jim Grant famously described that as "Return Free Risk".
Investment in Long term Productive Assets
Rick Rule feels that the perverse incentives from manipulated data has resulted in a lack of investment within the US in Productive Assets that would allow the employment of technology and the real wages of workers to rise.
The reason is:
1- If you aren't seeing underlining demand and top line sales growth in your business, why would invest in productive capacity?
2- The US Tax Code is anti-growth. Depreciation schedules are much more investor friendly even in socialist countries today that in the US.
"I don't know what is going to happen with gold short term". "What will move Gold, Silver, Platinum and Palladium are first and foremost is a reduction in confidence in the US dollar and the US 10 Year Treasury. It important to understand that gold doesn't need to win the war. It just needs to lose the war less badly!"
"Gold has performed admirably outside the US over the last year."
Gold can be seen to be already in a Bull Market globally - except in the US, as a result of a 25% rise in the US dollar.