Andy Hoffman on Gold, Silver, Fiat Money and the End of the Dollar Reserve
The Daily Bell is pleased to present this exclusive interview with Andy Hoffman.
Introduction: Andrew ("Andy") Hoffman, CFA joined Miles Franklin as marketing director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics under the moniker "Ranting Andy." Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies. An archive of Andy's "RANTS" can be found on the Miles Franklin Blog.
Daily Bell: Please reintroduce yourself. Tell our readers how you ended up at Miles Franklin and what you do for them.
Andy Hoffman: While still working on Wall Street, I learned of precious metals in 2002. I then went "all in" to the sector, and diligently taught myself about it in preparation to "change careers" from energy to precious metals. I proceeded to work five years as an investor relations officer and consultant to dozens of junior mining companies but in the free missives I published, I became less and less enamored with "PAPER PM Investments" like mining stocks, and more in the REAL THING. Thus, when I got the opportunity to join Miles Franklin – one of the nation's largest, most respected bullion dealers – as Marketing Director, I pounced.
Daily Bell: We'll retrace some ground before looking ahead. Last time, you told us that bankers have used their "leverage" in the economy for thousands of years, negotiating positions of power in government as we have today. Is this trend getting worse or better?
Andy Hoffman: Sadly, it's as bad as it's ever been. Not so much because of the influence bankers have but because they've created the gargantuan "Too Big To Fail" banking structure that is nearly impossible to break up. Actually, the banksters made a great error of judgment in pulling their lobbying funds from Obama this time around, and giving essentially ALL of it to Romney. Obama is surely not happy about this; but as I said, if he tries to prosecute or injure these insolvent zombies, the economy will collapse immediately.
Daily Bell: Remind us what a negative interest rate is and where we're seeing them.
Andy Hoffman: It's just as it sounds. People have been so SCARED of losing money, they have been actually PAYING so-called "conservative" governments like Switzerland and Germany to store funds, in perhaps the dumbest "investment strategy" imaginable. Heck, anti-gold PROPAGANDISTS have been telling us for years that gold is not a good investment because it pays no interest; yet in this case, it pays more interest than some bonds!
Daily Bell: Do you still think the world will run out of gold?
Andy Hoffman: Just like "peak oil" and other "peak" commodity analyses, the "peak gold" theory is likely false. That said, as in oil, "peak cheap gold" has clearly been passed. Big discoveries are non-existent, and average ore grades plunging. Not to mention, to find sizable deposits, miners are exploring deeper, and in more dangerous (logistically and politically) jurisdictions. Exploration, Development, and Production costs are literally exploding; and thus, only at MUCH higher prices is there any chance of material production increases. Remember, industry production peaked nearly a decade ago, when gold prices were a third the current level.
Daily Bell: Updated timeline on a global crash, please ...
Andy Hoffman: I have no specific timeline other than to note that the TRENDS that have been in place since the "fiat era peak" around the turn of the century have worsened with each passing year. It all comes down to CONFIDENCE that the worthless dollar, Euros, and Yen will maintain their purchasing power amidst an environment of accelerating economic weakness, debt accumulation, and inflation growth. It could very well be in 2013 – or TPTB could somehow "kick the can" another few years. But even if they do, ALL said issues will continue to dramatically worsen.
Daily Bell: You told us that banks and sovereign bonds are collapsing and all global economies are in recession. Update us, please. Do you include China and Asia?
Andy Hoffman: The banks are still ZOMBIES, in that they are heavily insolvent but propped up by unlimited "QE" injections (such as the Fed's current policy of "ZIRP" until at least late 2015) and fraudulent accounting, such as the FASB rule changes in 2009 that allow them to value their dying mortgage and derivative assets at whatever values they'd like. As for sovereigns, their bonds have rebounded care of draconian MONEY PRINTING schemes such as the ECB's "OMT" – Outright Monetary Transaction – plan, announced this summer, to purchase unlimited quantities of European sovereign bonds with printed money. This has stabilized the markets for a time, but ALL of the world's economies are in dramatically worse shape than a year ago. Thus, at some point, something's got to give. Regarding China, it's nearly impossible to gauge their economy's "strength," as the numbers published by its government make the US's fudged economic data look credible.
Daily Bell: The Fed has printed trillions, and we asked this before: Why haven't US banks issued the money that has been printed for them by the Fed? Are they afraid to lend?
Andy Hoffman: YES, they are afraid to lend, as they are INSOLVENT. That is why they take the free "ZIRP" money and invest in Treasuries for risk-free profits instead. Moreover, the average consumer and business is doing so poorly, they don't want to borrow. And remember, only the banks get the zero interest rates. For everyone else, usury is the norm.
Daily Bell: What are details of economic "truths" not published in US "Ministry of Truth" textbooks?
Andy Hoffman: EVERYTHING. They want you to believe "Keynesianism" is the way to prosper; i.e., the government should control monetary and fiscal policy. History shows us governments ALWAYS screw up both the public and private sectors when given too much control. However, as they write the textbooks, they'll continue to tell us otherwise.
Daily Bell: You told us to "just wait until the Saudi revolution occurs" if you really want to see war and inflation. Update?
Andy Hoffman: I haven't seen any specific actions in Saudi Arabia since last summer but certainly neighboring Syria could be a major 2013 hotspot. And don't forget Israel's Netanyahu is up for re-election this year – with a main platform of "doing something about Iran." Much of the Middle East hates America and the petro-dollar, and it's only a matter of time before the House of Saud is overthrown. Incidentally, I believe King Abdullah is very old and sick so who knows how volatile the next succession will be?
Daily Bell: Your primary area of focus is spreading word of the suppression of PMs via PAPER naked shorting by the government and its henchman banks, such as Goldman Sachs and JP Morgan. Can you update us?
Andy Hoffman: Worse than ever, and I do mean the worst I've ever seen. Seemingly, every second of the 24-hour global trading day features PAPER PM suppression, which I document in my blog each day. As the URGENCY of the world's ills – and central bank money printing – has increased, they have had to work more aggressively to keep prices down. This has particularly been the case since dollar-priced gold hit an all-time high in September 2011; but still, both metals keep rising, and in some currencies (like the Yen), gold is at an all-time high as we speak. Of course, the problem with PAPER suppression is that it doesn't stop PHYSICAL demand – and in fact, increases it due to the lower prices. Actually, just yesterday [January 17, 2013] the US Mint suspended sales of Silver Eagle coins because it RAN OUT OF SILVER.
Daily Bell: Are you more or less encouraged regarding the euro?
Andy Hoffman: The Euro is as flawed as the dollar and right now, both are bobbing up and down against each other, meaninglessly. Actually, after the Euro's recent infinitesimal move up, the Euro Group's president already has said he is alarmed! Ultimately, I expect the Euro to be dissolved, or at least reconfigured without weak links like the PIIGS.
Daily Bell: Is the EU still headed for breakup?
Andy Hoffman: Per above, ABSOLUTELY. It's only a matter of when the aforementioned "confidence" in its cohesion dies. Aside from the OMT, nothing has been done to fix Europe, which continues to spiral deeper into recession. And not just the PIIGS, but England, France and Germany as well.
Daily Bell: Russia?
Andy Hoffman: I don't have a good read on Russia; however, given its huge dependence on oil exports, I'm guessing it's doing better than most. At least the government is but I'd bet the oppressed citizens would say otherwise. More importantly, its West-hating government is allying with its Asian neighbors and buying ENORMOUS quantities of gold; so it can be a major power once the current fiat regime dies.
Daily Bell: The BRIC economies? Isn't inflation taking its toll in India and Brazil?
Andy Hoffman: India's inflation has been so bad the Rupee has plunged to all-time lows in recent months. The moronic, desperate government is actually trying to discourage India's gold-loving population from owning gold – which they not only think, but know is the only reliable currency. Their efforts will fail, as the population will not allow their savings to be destroyed by inflation. As for Brazil, just like everyone else, their "emerging market miracle" has had some of the shine taken off, which is why their central bank just lowered interest rates.
Daily Bell: Is China headed for a hard landing?
Andy Hoffman: As I said before, it's impossible to tell. Moreover, they have literally TRILLIONS of currency reserves from two decades of huge trade surpluses. They are putting that capital to work in infrastructure projects that don't necessarily make profits but certainly keep people busy and allow the nation to report "strong GDP growth."
Daily Bell: Argentina and South America?
Andy Hoffman: I have no good intel on these areas but I'd doubt they are doing dramatically better than the rest of the world. Actually, Argentina has had major issues with currency controls in the past year, which typically are associated with very weak economic activity.
Daily Bell: Some questions that have occurred since last time we spoke ... Has the US averted its fiscal cliff?
Andy Hoffman: Ha ha ha. That's a good one. The "fiscal cliff deal" simply raised payroll taxes on all, and put off the deadly spending "sequester" by two months. The EXACT same horrors will play out in February, only this time they MUST be resolved or a number of terrible things will play out – such as US credit rating downgrades, interest rate increases, exploding gold prices and reduced confidence in the dollar. And oh, yeah, we've already breached the debt ceiling – which MUST be raised lest the US default.
Daily Bell: Is it just a made-up crisis and why?
Andy Hoffman: Not at all. It couldn't be more real. It's in focus now because Congress purposefully "kicked the can" past the 2012 elections but it was a long time coming – 42 years, to be exact. In 1971, the nation had essentially ZERO debt but when we dropped the gold standard, it enabled us to "charge up our credit card" for four decades. Now it's FULL and thus, must be addressed NOW.
Daily Bell: What's going on with the debt ceiling? How can that issue be put aside once and for all?
Andy Hoffman: It can't. Fiat currency is a PONZI SCHEME by definition; thus, debt MUST grow exponentially to keep it going. The US MUST raise the debt ceiling infinitely (which will eventually yield the collapse in CONFIDENCE noted above). "Tax cheat Timmy" Geithner advised us to get rid of the debt ceiling completely, which, if announced, could commence the process of hyperinflation immediately. It would be one of the most suicidal political decisions in US history.
Daily Bell: The Bundesbank is involved in a repatriation of gold. Don't they trust the US?
Andy Hoffman: That's another good one. They – and the other dozen or so countries in the process of repatriating gold from the financial CRIME CENTERS of New York and London – are terrified that when their worthless countries finally collapse, they won't have any REAL MONEY to fall back on. NO ONE trusts the Fed; and frankly, I doubt the German gold is all still there, which is probably why they promised to send the Bundesbank a measly 300 tonnes over a period of – wait for it – seven years.
Daily Bell: The US Mint is running out of silver, we hear. Is this true? What will that do for the price of silver?
Andy Hoffman: It sure is, which is why yesterday they indefinitely suspended all sales of Silver Eagles. Silver prices should go significantly higher as a result, although, as I said, the Cartel will fight it "tooth and nail" with PAPER naked shorting. That said, the PHYSICAL shortage will make such fraudulent shorting very difficult to gain any traction from.
Daily Bell: Is Japan hyperinflating? Is that why they seem to want to go to war with China?
Andy Hoffman: Yes. What they are doing right now under their "former" and "current" prime minister, Shinzo Abe, is putting their previous 20+ years of money printing to shame. The currency has collapsed 15% in just the past four months, and Yen-priced gold is exploding to new all-time highs each day. Gasoline prices just hit a 12-month high and the "Land of the Setting Sun" is in serious danger of igniting hyperinflation. As for their dispute with China, they would have to be insane to start a war with their much larger and stronger neighbor.
Daily Bell: Let's take a look at the US. Still headed down?
Andy Hoffman: Just look at the pace of US debt growth – which has gone from arithmetic, to geometic, to parabolic – to gauge its health. Money printing, poor policy and the migration of manufacturing jobs overseas have gutted America. Its currency is the world's most overvalued, as are its bonds. Because of the dollar's (heavily abused) "reserve currency status," the US's standard of living will fall harder than any other nation.
Daily Bell: What about the dollar?
Andy Hoffman: The dollar is the "stock of the U.S.A.," as Jim Sinclair says. And it's going DOWN.
Daily Bell: How high will gold and silver go? And when will this bull market in commodities end?
Andy Hoffman: In today's dollars, gold would have to rise to $15,000-$20,000/oz to balance the amount of money printed with the US government gold reserves. Unfortunately, the TRUE money supply is much higher than published, and the TRUE gold reserves are much lower. And, of course, the MONEY PRINTING is only accelerating. As for silver, these gold values equate to $1,000-$4,000/oz, depending on what gold/silver ratio you assume. The "end" of the PM bull should better be phrased as the end of the fiat currency bear, which will only occur after the dollar and other major fiat currencies inevitably collapse (as the 600+ before them ALL did).
Daily Bell: Do you expect the return of a gold standard? State mandated or market run?
Andy Hoffman: The ONLY way order will be restored is with REAL MONEY, as has been the lesson of history, including in America. The authorities will eventually institutionalize it but I'd guess its emergence is catalyzed by the markets rejecting FAKE currency in lieu of REAL money.
Daily Bell: What should people be doing now to protect their wealth?
Andy Hoffman: Buy PHYSICAL gold and silver. Not "PAPER PM Investments" like mining shares and ETFs, but the REAL STUFF.
Daily Bell: You predicted Obama would lose. You were wrong. Why?
Andy Hoffman: Funny, I don't remember making such a prediction. That said, in the weeks leading up to the election I was very vocal about my belief he would win. My reasoning was that "it's the economy, stupid" no longer implies voting out incumbents. Instead, in a nation with near record unemployment, a weak outlook and record numbers of citizens on the dole, there was little doubt the majority would simply vote for whoever promised more entitlements.
Daily Bell: What can we expect in a second term?
Andy Hoffman: Increase CONTROL over the citizenry with draconian actions. Remember his comment to Russia's Medvedev, about having more "flexibility" after the election? Well, he's got it now, and plans to turn us into the Socialist/Fascist States of America by the time he leaves.
Daily Bell: Are you at all optimistic about US prospects? Should people move elsewhere?
Andy Hoffman: I am not optimistic AT ALL about the US's economic prospects. I believe things will get much worse, particularly if fiscal cliff spending cuts are enacted (although don't be surprised if they are not). However, moving is a major step to take – particularly as so many other nations are struggling as well, many of whom HATE Americans. Sometimes, the "devil you know" is better than the "devil you don't know," so be very careful about considering such a step.
Daily Bell: Will the employment picture pick up?
Andy Hoffman: Hard to see that happening, given the raging headwinds of recession let alone if said fiscal cliff spending cuts occur, which would dramatically reduce employment. The government will continue to fudge the NFP numbers but won't be able to hide the underlying trends. Most new jobs are in the 55+ age group, and many are either temporary or minimum wage. The manufacturing jobs are gone for good – end of story.
Daily Bell: Is the US getting less free generally?
Andy Hoffman: More so each day. George Bush issued more Executive Orders than the previous 15 presidents combined, and Obama reached Bush's level in just four years, before the 23 gun control related orders this week. Some are extremely dangerous, like the National Defense Resources Preparedness EO issued in March 2012, and I fear things will get much worse, in parallel with the weakening economy and dollar.
Daily Bell: Should people stop arming themselves?
Andy Hoffman: Absolutely not. The second amendment was created to protect citizens against tyrannical governments, which is exactly what we are seeing here. Moreover, as inflation, unemployment and poverty worsen you can count on increased crime as well.
Daily Bell: Does the Internet continue to progress?
Andy Hoffman: The Internet is the greatest invention of the past century, and in an increasingly corrupt world represents our only means of spreading the truth.
Daily Bell: Any other comments you want to make?
Andy Hoffman: Only to PROTECT YOURSELF, and do it now!
Daily Bell: Literature you want to recommend?
Andy Hoffman: The Miles Franklin blog, of course. I write FREE missives five days a week, as does our firm's founder, David Schectman, and our associate writer, Bill Holter. Just go to www.milesfranklin.com where you can read them in our archive or enter your email address to have them sent automatically.
Daily Bell: Thanks again.
Our thanks to "Ranting Andy" Hoffman for sitting down with us again and providing us another thought-provoking interview. He makes a number of interesting points, among which perhaps the most important is the impending fall of the House of Saud. Our paradigm is that the top elites that have organized the current money system could be purposefully destabilizing it in order to create a larger, global currency.
For several years we have focused on the idea that Money Power has decided to create a larger "shooting war" in the Middle East and Africa. Step by step, we've seen this accomplished. Using the resources of AYM, al Qaeda and various Intel efforts, Western powers have managed to destabilize Tunisia, Libya, Egypt and now Syria.
Other countries that are undergoing a shift from secular to Islamic, politically speaking, include the Ivory Coast, the Sudan and now Mali, where the French have suddenly discovered they have no choice but to "intervene."
It could well be that the House of Saud is scheduled for regime change as well. Without the active cooperation of Saudi Arabia, the current dollar reserve system would not exist. It is only the continued "cooperation" of the current Saudi regime in mandating the exchange of dollars for oil that sustains "King Dollar."
It may sound far-fetched to suggest that the US would willingly destabilize the Saudi regime, but who would have thought the West would have methodically begun to place the Muslim Brotherhood in power throughout the Middle East and upper Africa? Around the world, there is aggressive economic and socio-political change taking place. None of it seems to be occurring by accident.
Mr. Hoffman gives us a good summary of what is currently occurring, especially as regards gold and the current fiat money system. If Western powers-that-be really want to create a closer global order, the way to do it is to destroy the dollar reserve system and substitute something like the International Monetary Fund's SDRs. The West – in particular the US – retains control of the IMF despite the protests of other countries. This is surely no accident.
Posted by timoore on 01/25/13 09:40 AM
How do I convince my wife and widowed sister-in-law to invest their inheritance monies into gold and silver?
Reply from The Daily Bell
Try to make sure they read the Daily Bell regularly.
Posted by voluntaryist on 01/21/13 09:01 PM
I used to wonder why more German Jews in the '30s did not escape (25% did). Two identical twins said they knew what was happening and discussed leaving but decided, "better the devil we know". Of course that was a big mistake and almost cost them their lives, but it was informative. If you live in a country you love and do not travel much you might be more afraid of moving to a strange country than you are of a slowly expanding police state. Can we stop the trend here? I doubt it. But are you going to stay and hope you survive? Or expatriate? Either way, your life as a sovereign individual is the most important asset you have, even more important than your identification as an American.
Posted by 1776 on 01/21/13 03:19 PM
In february 1965, former French President, General DE GAULLE, predicted, during a press conference, the monetary crisis, the USA have brought the world in today.
Click to view link
Posted by floyd on 01/21/13 09:00 AM
Hoffman states that Japan would be a fool to go to war with China. However, the U.S has already reminded everyone that they are tied by treaty to defend Japan. Sounds like a way to get the U.S. in a war with China before their military power gets bigger (as it is daily so we are told). SCARY STUFF!!!
Posted by Abu Aardvark on 01/21/13 06:35 AM
Off topic, again: "Kim Dotcom on Mega, Hollywood, the internet and copyright enforcement - video"
Click to view link
Posted by Abu Aardvark on 01/21/13 06:13 AM
Andy Hoffman: "NO ONE trusts the Fed; and frankly, I doubt the German gold is all still there"
AND NOW FOR A MESSAGE TO THE BUNDESBANK FROM BENDITO BEN
Click to view link
Posted by Agent Revolver on 01/20/13 09:47 PM
Is it possible to bring gold out of a country with malicious intent? 3, 5 years on - will it hurt the households?
Posted by kriswiner on 01/20/13 08:47 PM
PM usually means precious metals.
Posted by Danny B on 01/20/13 08:41 PM
Speaking of peaks, here's one great graph.
Click to view link
Posted by kelvin on 01/20/13 08:35 PM
The acronym PM is used several times but is not defined. What is it?
Posted by scarlett on 01/20/13 08:15 PM
Posters vs. voters? Not going to make it.
Click to view link
Can't use my leftover characters, I submit!
Posted by kriswiner on 01/20/13 06:43 PM
It is true that the ore grade of current gold deposits has declined and that costs to extract (mostly dominated by energy) have increased; this fits with the peak cheap gold paradigm. But annual production does not determine the gold price. Gold is unique in that nearly all the historic stock of gold still exists and is owned by someone. This stock is many times annual production. It is the gold bid for dollars by these owners that determines the marginal price. Unfortunately, market participants are currently fooled into believing that paper gold also adds to the flow. When enough people realize that the physical stock to flow ratio is multiples higher than the apparent stock to flow, the gold bid for dollars will be removed. Thus we will see the paper price plummet with no physical offered. Most will not understand this. In this sense, we are currently enjoying peak flow to stock; this peak will not last much longer and will soon reach zero. Prepare accordingly.
Posted by rossbcan on 01/20/13 06:20 PM
"Gold, Silver, Fiat Money and the End of the Dollar Reserve"
Is just the cumulative free choice (unseen hand) of people / investors choosing to "not associate" with frauds writ large.
In general, when unproductivity (force / fraud) overtakes productivity (peaceful, honest trade), civilization COLLAPSES:
Click to view link
... hence, the "rule of law", guardian of civilization:
Click to view link
... use it, OR, LOSE IT.
Posted by Bischoff on 01/20/13 05:02 PM
HOFFMAN: "That is why they take the free "ZIRP" money and invest in Treasuries for risk-free profits instead."
BISCHOFF: Yes, it's commonly known as "front-running" the FED. However, this is only possible, if the FED constantly lowers the FED interest rate.
The interest rate is not ZERO, and it will never be ZERO. Since 1979, the FED's interest rate curve has been in one direction only, SOUTH. Everytime the FED cuts the interest rate by 50%, the value of the assets on the books of the banks double.
To save the banks, the FED has no choice, but to lower the interest rate again, and again. The banks knowing this, use the near ZERO money to invest in Treasuries, only to sell the Treasuries back to the FED for "capital appreciation" after the next lowering of the FED interest rate. They then use the nearer to ZERO interest rate money to do it all over again.
Even, if the present interest rate is 1/128% by reducing it to 1/254%, the value of the assets on the books of the banks double. At the same time, the Treasuries bought with 1/128% FRNs will gain "capital appreciation", without exposure to risk.
The FED interest rate may go to 1/4064%, 1/8128%, 1/16256%... ..very close to ZERO, but it will never actually go to ZERO. ZIRP, "Zero Interest Rate Policy" is a misleading term. It masks what the FED is doing to shore up the asset value of banks, while the rest of us are stuck.
Posted by Abu Aardvark on 01/20/13 03:55 PM
The Lancet: "Efficacy and effectiveness of influenza vaccines: a systematic review and meta-analysis"
Click to view link
Posted by NotPorC on 01/20/13 03:52 PM
Absolutely no way there is 'peak gold' - that is DEFINITELY FALSE. There is so many gold mines that haven't been 'tapped' because that would just lower the value of the gold already above ground. It's definlitey suppression by those with large holdings (banksters) to inflate their values - period.
Posted by dave jr on 01/20/13 03:42 PM
nailheadtom, right on.
Or maybe we would prefer a handshake from a greaser, so we can run home, scape it off and burn it.
Posted by nailheadtom on 01/20/13 03:32 PM
Peak gold? Maybe if there was no element Au we wouldn't be able to trade at all, right? Since it's in short supply, as it's always been, it only makes sense to print pictures of politicians on high quality paper instead, so everybody can feel wealthy, or better yet, load up magnetic strips on plastic tickets with evidence of previous transactions. No chance of anybody diluting the value of a positive or negative charge, an electron is what it is. And we'll never run out of them. Or have to dig them up. Or pollute mother earth with their extraction. I feel better already.
Posted by dave jr on 01/20/13 03:24 PM
"peak oil? I'm in the abiotic camp. But peak gold? I don't know of any abiotic gold theory. ;-)"
Surely you must know gold come from the great distillation process in the bowels of the earth. Just wait a couple of billion years and there will be plenty more.
Posted by dave jr on 01/20/13 03:19 PM
"Ha ha ha. That's a good one. The "fiscal cliff deal" simply raised payroll taxes on all, and put off the deadly spending "sequester" by two months."
Why is there austerity in Europe and there will be sequester in the US? I predict "sequester" will pertain to a military that can no longer be afforded. Who will manage it?