Introduction: Jay Taylor is the editor of J Taylor's Gold, Energy & Technology Stocks newsletter. Throughout his career, Mr. Taylor worked as first a commercial and then as an investment banker. Most recently, he worked in the mining and metals group of ING Barings in New York. Prior to that he was involved in the first gold loan made in modern times in the U.S. to Amax Minerals, a 250,000 oz. loan facility led by Citicorp. In 1997 he resigned from ING Barings to devote himself full time to researching mining and technology stocks, writing about them in his newsletter, and assisting companies in raising venture capital. Jay Taylor's web-based radio show, "Turning Hard Times into Good Times," can be heard live on the Voice America Business channel Tuesdays between 3:00 and 4:00 PM and can be downloaded the following day at JayTaylorMedia.com. Jay's guests have included, for instance, Jimmy Rogers, David Stockman, Ron Paul, Marc Faber, Doug Casey, Eric Sprott, John Hathaway, Edward Griffin, Howard Davidowitz, Ian McAvity, James Turk, Mish Shedlock, Richard Maybury, Rick Rule, Robert Prechter and Lewis Lehrman, to name a few. He is joined weekly on podcast discussion with Daniel McAdams of the Ron Paul Institute for Peace and Prosperity in "A Foreign Policy Week in Review with Daniel McAdams" and also weekly with David Jensen on "A Fundamental Look at the Gold Markets with David Jensen."
Anthony Wile: Hi, Jay. Thanks for sitting down with us. Let's jump in with the big news. What do you think of Ms. Yellen's rate hike? Good idea? Why now?
Jay Taylor: Any move by the Fed toward free market rates are a good idea. Of course, the Fed should never have hindered the market from price discovery for capital in the first place. In my view, they have created so much economic damage by nine years of interest rate manipulation that it will take generations to overcome. And even then, recovery would occur only under the assumption that free markets would be allowed to exist.
I wished I could believe the hike was a move toward free markets. But, in fact, I believe the Fed has raised rates only so it has some wiggle room to manipulate them downward again, if and when in its self-proclaimed omniscience it deems it prudent to do so. But I think the Fed is also facing the risk of losing its credibility, even to gullible Wall Street sheeple who tend to believe everything they are told by elite financiers whose role is mostly to appear as constant propaganda props on CNBC and Bloomberg.
Anthony Wile: Is the U.S. economy really improving? Is it in recovery?
Jay Taylor: I see few signs of recovery in the real U.S. economy or in the global economy, for that matter. The number of employed people in the U.S. continues to drop. Even Larry Summers is concerned that the employment rate not only for black males but also white males between the ages of 25 and 54 continues to decline while it continues to rise for retirees because they can't afford to quit working. If the number of employed workers were related to demographics, you would think men would not be extending their working days. A glut of commodities on the world markets suggests we are in a depression, as do various shipping indexes, which are at historical lows.
Oil supplies are building up to the extent that according to a Zero Hedge report, three oil tankers heading from Houston to Europe have made a U-turn in the middle of the Atlantic Ocean and are heading back to the U.S. simply because there is no storage space for oil in Europe. That's how pitifully weak demand is for oil in Europe as prices continue to plummet downward. I look at a picture of monetary velocity as measured by M2 Money supply. It continues to plummet as Americans struggle to pay for the basic essentials of life, namely food and shelter.
Now, if the U.S. is such a beacon of economic health, why are our two largest trading partners unable to sell their products to the US? The Fed and the Obama administration can find a statistic here and there to try to spin a lie. But there is no reason to believe their propaganda. Also, I would like to mention my Inflation/Deflation Watch (IDW), which represents a wide range of the most important commodities and a broad representation of the global equity markets and major sectors like the auto and home building sectors. What is astounding is that despite trillions of dollars of money printing, my IDW, which was started on Jan. 31, 2005, has now plunged below the 3-year and 5-year average. This suggests to me that the next leg of the global depression that stated with the 2008-09 collapse is now underway. This is downright frightening to me.
Anthony Wile: Is recovery just another term for broad-based asset bubble?
Jay Taylor: Yes. That is all there is to our so-called recovery. Asset bubbles are being blown for the bank shareholders of the Federal Reserve Bank and the Wall Street elite. Money is pumped into the banking system and is thus available for hedge funds and quants to use it like gambling chips that they pay nothing for.
Interestingly, last week I spoke to a trader at a New York Hedge fund who shall go unnamed. He said their average hold period was approximately two hours. The hedge fund manager is extremely well known and he no doubt can be counted within the top 1/10th of 1% of the American population. For this elite group of people, times have never been better. But for the vast majority of Americans we are being relegated to serfdom.
For a brief period of our history we escaped that, while a great amount of free markets were permitted, thanks to our Founding Fathers who understood that we are endowed by our Creator with unalienable rights, not by government. Unfortunately, the U.S. is giving all that was gained in 1776 back to the descendents of some of the same ruling elite who were the powers behind the British throne in 1776.
Anthony Wile: Would you buy stocks right now? Where is the market headed?
Jay Taylor: I have never been so frightened as I am now about the stock market in general because prices have so little to do with real earnings. A major amount of strength in the equity markets has resulted from debt funded stock buy-backs, thus levitating stock indexes. Even so, as we end 2015 the vast majority of stocks are down for the year with just a handful of issues like Google, Amazon, Facebook and Netflix holding up the averages. Michael Oliver, a seasoned technical analyst who I frequently have on my radio show, says his momentum structural models are showing these stocks as measured in an ETF group, namely PNQI, are starting to break down. He believes that when/if this sector breaks down it will set off a major bear market in the equity markets.
Anthony Wile: Is the Fed really worried about price inflation?
Jay Taylor: They are worried about inflation not being high enough, which is ridiculous. What I think they are missing is that the more money they create the more they destroy capitalism by sending false signals to the market about where capital should be allocated. And so every incremental dollar printed results in less income even as total debt is now growing exponentially. The result is that this Keynesian false theory is leading into a deeper and deeper global insolvency. It's a little like someone struggling in quicksand. The more they struggle the faster they sink.
Anthony Wile: Should they be worried about a deflationary depression?
Jay Taylor: They definitely should be worried about deflation because that is exactly what they have. But as I just noted, they think creating more debt based money will bail them out of this deflationary funk. In fact, just the opposite is true.
Anthony Wile: Are there other reasons for this hike now that we are not hearing about?
Jay Taylor: Yes, I think so. In addition to having some firepower for future rate decreases and to try to maintain some credibility, I think the preservation of the petrodollar is a main concern. Both China and Russia have not tried to hide their hatred for the petrodollar, which has enabled the U.S. to engage in systematic theft of global resources. The Chinese and Russians have been dis-hoarders of the dollar and have been piling into gold. Reportedly, the Russians have been building their gold stockpile as they sell their oil to China not for dollars but for gold. The BRICS are systematically setting up their own banking system to compete with the petrodollar system that has been the heart of the Anglo-American and NATO world post World War II. So raising rates has the effect of making the dollar somewhat more desirable vis-a-vis the even more pathetic global currencies.
Anthony Wile: Overall, has the Fed been doing a good job managing the economy? Can the Fed manage the economy?
Jay Taylor: The idea that a group of people can better manage markets than the collective and spontaneous wisdom of millions of market participants is as ridiculous as believing in the tooth fairy. Why in the world have we not learned anything from the experience of the Soviet Union? Not only has the Fed not been doing a good job, they have been systematically destroying capitalism by disallowing price discovery of capital. Not only that but they have been involved in bailing out criminal banks that lied and stole during the housing bubble. Not only is the Fed a complete failure in terms of doing what it is supposed to do, it is also a criminal organization made legal by criminal politicians.
Anthony Wile: What's your impression of Janet Yellen? Is she in charge? Are others?
Jay Taylor: The shareholders of the Fed – the money center banks are in charge. She, like the president of the U.S., is merely a well-indoctrinated puppet.
Anthony Wile: What's your impression of the Fed these days? Is it losing credibility? Is it damaged in the eyes of the public?
Jay Taylor: Of course, in my eyes and in the eyes of most Austrian economic thinkers, the Fed has been losing its credibility for years. It was created supposedly to reduce the business cycle. But history shows, starting with the Great Depression, that they have only served to exacerbate the business cycle by creating endless bubbles. Not only that; they have destroyed the purchasing power of the U.S. dollar by something like 97% since the Fed's birth in 1913. The only question remaining is how long will it take before Pinocchio's nose is so long that the whole world sees it as the fraud that it is?
Anthony Wile: Do you think the Fed ought to be audited? Why?
Jay Taylor: Of course it should be audited or, better yet, done away with completely and let the markets decide what real money is. The Fed should be audited so that people can see the criminal games it is playing and in the process redistributing wealth from those that produce it to those that control it, namely the Fed's shareholders and the politicians in bed with them.
Anthony Wile: Is there gold in Fort Knox? Where did it go?
Jay Taylor: I doubt it. But the real answer is that only those who have the keys to Ft. Knox know for sure. Even if there is gold there, who owns it is another question that is not being answered. I think many more people began to ask that question when the U.S. was unable to deliver gold to Germany upon that ally's request.
Anthony Wile: Is the Fed in an end game? Is it going to turn into something else? Or is the government going to run it?
Jay Taylor: The fed owns and runs the government, not the other way around. We should know that from what happened to John Kennedy who shortly after issuing Executive Order 11110 was murdered. F. William Engdahl, whom I frequently have on my radio show, has provided powerful evidence that Kennedy as well as Lincoln challenged the model of a privately owned central bank – and that ended their lives prematurely.
For those who may not be aware, in the case of Kennedy, Executive Order 11110 gave the right to create money backed by silver to the U.S. Congress, as the Constitution requires. In the case of Lincoln, his lack of cooperation in allowing a private central bank to control the monetary system by backing the Greenback with gold as the London and New York Bankers wished proved a fatal problem. The bankers seek to rule the world and the growing geopolitical fight now between the NATO countries and the BRICS is, in my view, a grand final battle to see who rules the world.
Anthony Wile: Is it always necessary that someone rule the world?
Jay Taylor: It's a horrible idea, if you believe what the Declaration of Independence proclaimed, namely that we (each of us) are endowed by our Creator with certain inalienable rights to life, liberty and happiness. In fact, the more power that is granted to these elite dictators, the more chaos, dangers and poverty the world faces. Unless you are some sort of satanic madman, you have to think Fed control is a horrible idea.
Anthony Wile: What do you think of a guaranteed national income?
Jay Taylor: It's a pretentious lie. Income can't even be measured, let along guaranteed.
Anthony Wile: The Swiss are considering one. Is it the wave of the future?
Jay Taylor: It wouldn't surprise me if it is. The more intervention that occurs, the more chaos and poverty that result and the more intervention we get because there is a complete ignorance of the relationship between freedom, prosperity and happiness.
Anthony Wile: What's wrong with the Swiss? Is Swiss confidentiality over? Is the Swiss private banking system finished?
Jay Taylor: Most of the older Swiss have died off. The younger ones have been drinking the Kool-Aid of a western godless propaganda.
Anthony Wile: What's going on with the EU? They are printing while the Fed is tightening. Why?
Jay Taylor: For a while, the Germans, who fear hyperinflation for historical reasons, prevailed in their understanding you can't print your way out of trouble. But, of course, Europe has engaged in all sorts of socialist interventions over the years. The Europeans are, in fact, controlled still by the victors of WWII – and thus Germany is controlled by the Anglosphere. They have no choice but to buy the propaganda of the U.S. and the Fabian socialists out of London, of which Keynes was a prized member. They believe in the same lies. They do the same things to the economy and the markets.
Anthony Wile: The Fed is out of step with other central banks. Why?
Jay Taylor: As noted above, I think in part it is to keep the dollar as the largest and most dominant world's reserve currency. A "strong" dollar makes it more difficult to opt for alternatives. So raising rates while Europe continues to debase the euro helps keep the dollar relatively strong and the petrodollar system in place. This may, in fact, be especially important given weak oil prices. With Russia picking up more of the global market share for oil, and with the price of oil 1/3 of where it had been, the demand for dollars is significantly less than it otherwise would be. Rising rates would help keep demand for the dollar and thus the current dollar regime in place.
Anthony Wile: Where does Asia fit into the world's economy? Are Asian economies getting better or worse?
Jay Taylor: They are all getting worse because they are all more or less destroying capitalism by controlling markets starting with the most important of all, the market for money.
Anthony Wile: How about China? Where do you stand on China?
Jay Taylor: I have never believed in the view that China is turning capitalist, though out of necessity, it has had to loosen the reins of dictatorial control over the economy or else the whole country would become one pathetic, poverty-stricken hellhole. But their leaders are no different than those at the Federal Reserve and most of our elected officials. They are dictators who, like our own ruling elite, do not believe in the values of the sanctity of the individual, as the American Founding Fathers did. So while China may have made some modest moves toward economic liberty, the direction is not toward the kind of free-market libertarian environment that would make me optimistic about that country's future.
Anthony Wile: Let's talk about commodities. They seem to be in retreat, especially oil.
Jay Taylor: We had a bubble in commodities that was created by massive money creation following the 2008-09 disaster. The air was let out of that bubble I believe when the major money center banks decided to trash gold and strengthen the dollar in 2011.
I do not think it is a coincidence that the price of gold peaked just about the same time that Standard and Poor's downgraded U.S. Treasury debt in 2011. By slamming gold down in the paper markets, it created the big lie that the dollar was better than gold and that set the stage for pricking the commodity bubble. At this point in time, the risk, in my view, is not so much in commodities because the air has been largely if not entirely let out of the commodity bubble. But we have massive amounts of air in the debt and equity markets. These will have to deflate. The canary in the coalmine is the junk bond markets that now has interest rates close to their heights at the time of the 2008-09 financial crisis.
Anthony Wile: What about gold and silver – a positive story here?
Jay Taylor: Gold and silver represent pure wealth that cannot be destroyed by market manipulation. The paper price for these metals can be manipulated downward but the value itself cannot be destroyed in the long term.
Anthony Wile: Give us a sense of the war on terror? Can we expect more attacks? What about on the U.S. homeland?
Jay Taylor: As Ron Paul said quite correctly with regard to 9/11, "The reason they came over here is because we are over there!" So as long as the American empire continues killing foreigners with our bombs and as long as our NGOs involve themselves in the covert overthrowing of elected governments, as they are trying to do even now in Syria and did in the Ukraine, we will be open to more attacks. As the global economy continues to weaken, causing the U.S. government to become ever more aggressive overseas, I think we can expect an escalation of terror in America itself.
Anthony Wile: What will be the result?
Jay Taylor: Only God knows. I take comfort as a Christian in leaving it in His hands with the knowledge that beyond our comprehension, there is something much better than the best of America's history to look forward to.
Anthony Wile: Any political predictions?
Jay Taylor: As long as our leaders look to the brilliance of men instead of God as our Founding Fathers did, things will continue to spiral downward. Never has it been more timely than now to love those close to you and to make peace with your neighbors as well as learn life saving skills that provide for the most basic of human needs because when our very complex global system breaks down, going back to the basics may be all that will preserve us.
Anthony Wile: We face a troubled world. What advice do you have for those of us who wish to survive it with our families?
Jay Taylor: I think I answered it in the previous two questions. Start with the basic questions asked by humans since the beginning of time. Why am I here? What is life all about? How can I best take care of myself and my loved ones?
Anthony Wile: Would you emigrate? Buy a farm? Give us a survival recipe.
Jay Taylor: I don't know of any country into which I would want to emigrate so I'm staying in America for better or worse. Buying a farm or at least a property in a more rural setting where a garden could be raised would be a good idea, except in my case, my wife is a city person. In general, build some basic life-sustaining skill that can be bartered for your own basic needs.
Anthony Wile: Any other thoughts?
Jay Taylor: I think I have covered most of them. Thank you for the interview.
Thanks to Jay for doing this interview. He hits many high points that we often emphasize in our articles and where we might diverge from his perspective has to do with globalist competition. Jay believes there is a divide between East and West but we are not so sure. After all, we recall the acronym BRICs was coined by a Goldman Sachs banker and much of the financial infrastructure of the BRICs is derived from Western models.
Brazil has always been in the US's backyard and we have a hard time believing that the U.S. does not exercise considerable sway over the topmost Brazilian establishment. The Chinese "miracle" has been built to a great degree with Western funds. Western powers traded debt for Japanese goods in the '80s before utilizing the same paradigm with China. Doesn't seem to be much difference between the two countries in terms of how the West relates financially.
Even when it comes to Russia, we would tend to believe that Western and near-Asian power structures were aligned. Putin's rise to power came during a time when the U.S. exercised tremendous influence over Russia and Putin rose from an obscure post to his current position in only two years' time.
We are more inclined to believe that there are powerful influencers around the world who seek ever-closer global coordination. In other words, we would tend to believe goals are aligned. A single currency, a world government, a judiciary system that sorts out the privileges of the corporate world and "national" governments – all of this is part of what is emerging in the 21st century via such protocols as the Trans Pacific Partnership "trade treaty" that apparently elevates multinationals to the status of nation-states.
Jay touches on solutions that we often suggest such as gold and silver, farmland and even modest elements of self-sufficiency such as a truck garden. We often overlook spiritual aspects but the ability to be at peace with oneself and others is certainly a vital part of creating and retaining the energy necessary to confront the emerging challenges of the 21st century.