Introduction: Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media 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. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies. Andy's articles can be found on the Miles Franklin Blog, at www.milesfranklin.com.
Daily Bell: Hi, Andy. Good to speak with you again. Let's discuss some top-of-the news issues. Give us your perspective on Janet Yellen and what she intends to do. Her first FOMC meeting is coming up.
Andy Hoffman: "Whirlybird Janet," as she is already being referred to, will ultimately put "Helicopter Ben" to shame, by the time she's through. Frankly, who knows if the Fed will even survive the inflationary carnage of her four-year term? In 2013, TPTB used an unprecedented level of money printing, market manipulation and propaganda to attack precious metals, support financial markets and promote a false perception of "recovery." Unfortunately, five years after the financial crisis, the global economy is worse off than ever, replete with dramatically higher debt levels, plunging currencies, surging social unrest and rapidly deteriorating capital expenditures and consumer demand. Thus, the whole "tapering" charade is nearing its end.
Will this Wednesday's FOMC meeting – Yellen's first as Fed Chairman – be the one where she signals the coming end of tapering, or will she hold off on such uber-dovishness for one more month? Honestly, if global financial markets start the weak off as weakly as they ended this week – especially if the Ukrainian situation flares up following this weekend's Crimean referendum – I'd guess the former outcome is more likely.
Daily Bell: What's going on with her counterpart, Mark Carney? He's a very squishy dove, isn't he?
Andy Hoffman: Yet another former Goldman Sachs alumni leading a major investment bank, Mark Carney recently took over the ultra-shady Bank of England – which is currently embroiled in a major foreign exchange trading scandal; and, believe it or not, we just learned this week that it shredded the minutes of all its meetings amidst the 2008 and 2009 global financial crisis! The BOE just announced that while the economy is "recovering" – there's that propaganda buzzword again – they are leaving rates at 0.5% for the sixth straight year, claiming they are in "no hurry" to raise them, which in central banker-speak, means they will never do so. The UK has perhaps the worst inflation in Europe – because it has its own printing presses – but, like the rest of the major central banks – will continue to speak of "deflation" fears, thus justifying its current QE program indefinitely.
Daily Bell: How about Europe? Are they in a position to tighten? We tend to doubt it.
Andy Hoffman: Tighten? LOL. They are on the verge of activating the long-threatened OMT, or "Outright Monetary Transaction" QE program. Mario Draghi, yet another Goldman Sachs alum, and other ECB governors have for months noted how they are ready, willing and able to utilize "all available tools" to rescue a continent mired in a miserable, expanding recession – particularly now that the aforementioned "deflation" propaganda has reached a fever pitch. Heck, the IMF is practically begging the ECB to institute negative interest rates and the OMT; and rest assured, "Goldman Mario" will oblige – perhaps as soon as this spring.
Daily Bell: Let's take a look at Asia. How are Abenomics working out for Japan?
Andy Hoffman: Japan is the poster child for government engendered self-destruction. It's horrific demographics, collapsing economy and rampant inflation (contrary to the comical "deflation" mantra professed for years) have caused the BOJ to continually ramp up the printing presses since Japan's equity and real estate markets crashed 25 years ago. The "Land of the Setting Sun" is in a vicious death spiral, and next month's increase of the national sales tax from 5% to 8% (and then, to 10% next year) will be the final nail in its coffin. Thus, once "Abenomics" is completed a year from now – doubling the money supply in a two-year period and accelerating the rapidly expanding global currency war – I'd be shocked if the process isn't "re-upped," and then some. In my view, Japan is likely to be the first "first world" nation to experience hyperinflation in the 21st century. Of course, by then, many other second and "third world" nations will have already gone down that route.
Daily Bell: And China – so much money has been printed. Give us an overview of the Chinese economy now.
Andy Hoffman: It's funny how people believe China is a brilliantly run capitalist economy when, in fact, the handful of communists making the decisions have pushed it to the brink of implosion; an implosion, I might add, that will be remembered for generations. Sure, when the dust settles from the nuclear economic crash that awaits the end of the global fiat currency regime, China will emerge as the world's new superpower; as not only has it acquired an enormous share of the global manufacturing industry, but used the resulting profits to acquire items of real value like gold and other commodities.
However, its neglectful government has also fostered history's largest real estate and construction bubble – including a staggering $14 trillion of new debt creation in the past five years alone; and by pegging the Yuan to the dollar for two decades has printed as much, or more, money than even the Fed. This bubble is starting to collapse as we speak, yielding plunging copper and iron ore prices, declining real estate prices, "shadow banking" defaults and now – as we discussed in "Chinese Financial Torture," – a new commitment to accelerating the "final currency war" by further devaluing the Yuan.
Daily Bell: Give us some insights on the Ukraine. War? Economic stand-off?
Andy Hoffman: Who knows if this will be the "black swan" that catalyzes the aforementioned collapse of the dying global fiat currency regime? It may well be, and hopefully not the epicenter of World War III, which is certainly a possibility if Putin insists on "annexing" the Crimea (or all of the Ukraine, for that matter), and the West doesn't back down. Sevastopol is the only warm-weather port accessible to the Western part of Russia; and thus, Putin will likely never back down. Ukraine's problems were likely catalyzed by the inflation created by Western central bank money printing, which is coming back to haunt them in a potentially cataclysmic way. There is simply no way to exaggerate the danger here, particularly as Europe receives more than a quarter of its natural gas from Russian pipelines – a good portion of which pass through the Ukraine.
Daily Bell: Okay, now let's add this all up for gold. Where is the dollar headed relative to gold?
Andy Hoffman: ALL fiat currencies will ultimately crash against items of real value, as they always do; and given that the dollar is the world's most overvalued currency to start with – care of it holding the "reserve currency" status for seven decades – it will have the farthest to fall.
Daily Bell: What's your take on the talk about investing gold suppression in London – and the London Fix, in particular?
Andy Hoffman: Those who read me know I have been writing of gold manipulation for the past 12 years; and in fact, am one of the world's leading experts on the topic. The fact that such manipulation is finally going mainstream will only accelerate "the Cartel's" demise – particularly as global demand is at record high levels, whilst global supply is headed for a significant plunge given that prices have been artificially pushed well below the cost of production.
Daily Bell: Should people be buying physical gold or paper gold or both?
Andy Hoffman: Only PHYSICAL gold (and silver) are real, while "Paper PM Investments" not only aren't, but are the best possible way to lose your shirt. For many years, I owned "paper gold" and mining shares – and worked for miners as well; but now, as I realized the end game is nigh, I play 100% "financial defense," holding PHYSICAL gold and silver only. When all is said and done, physical metal will outperform 99% of all investments throughout history, with none of the risks associated with paper assets.
Daily Bell: Has the "hate" for gold dried up on Wall Street? Doesn't seem so.
Andy Hoffman: LOL. It never will – as gold is the enemy of the paper-loving, Fed-supported banks. However, they are also smart enough to discuss it when it's rising; so don't be surprised if a lot more bullish commentary starts emerging as prices rise.
Daily Bell: We've asked this before: Are gold and silver still in a bull market long-term?
Andy Hoffman: NEVER have fundamentals been better, NEVER have prices been more undervalued and NEVER have more potential catalysts been on the horizon. 'Nuff said!
Daily Bell: Who's buying gold? China? India? Russia?
Andy Hoffman: All of the above, in record amounts. Even the silly Indian tariffs instituted last year to slow record demand backfired, as the PM "black market" exploded. And now, such tariffs are likely to be cut or repealed, which will only fuel demand further. As for China, it had record demand in 2013, and 2014 has started even stronger. Russia continues to steadily buy, and will probably accelerate that pace of tensions with the U.S. increase, which they most likely will.
Daily Bell: Are we headed for a new gold standard? What kind of standard?
Andy Hoffman: Ultimately, we must go back to a gold standard; after the upcoming fiat crash, no one will accept anything else but REAL MONEY. Of course, there is no way of knowing when and how this will come about. Those who believe such a system is currently being "planned" will likely be proven sorely wrong, as more likely, the markets will force such a situation when government manipulation can no longer prevent confidence from being lost in fraudulent fiat currencies. Ultimately, as noted above, I believe the Chinese (and Russians) will be major players in managing the new gold-backed currency(ies), but who knows when that will be?
Daily Bell: How about silver? Does silver have a role in a new monetary economy?
Andy Hoffman: Absolutely, but there's no telling exactly how. Frankly, it doesn't matter either way, as the one thing that's certain is its value will increase exponentially once "fiat fear" sets in – no doubt, by a far greater percentage than gold given its relative scarcity and long-held role as "poor man's gold. Likely, there's not enough physical silver to utilize in an official post-fiat role; but that doesn't mean it won't be treated like money by the masses – which I assure you, it will.
Daily Bell: Where is the stock market headed, do you think, in the long term? We think it may rise higher because there are certain powers that want it to.
Andy Hoffman: Frankly, I don't care. It may well hyper-inflate – a la Weimar Germany, 2000s Zimbabwe, or even modern Venezuela. Or perhaps it will crash, a la 2000 or 2008 – although I'd guess the former. Either way, it will result in dramatic losses in real terms once all is said and done. Hyperinflation is deadly for essentially all assets but gold and silver; and the stock market is no different.
Daily Bell: Should people just invest in stocks now? Or bonds? What should investors do right now?
Andy Hoffman: I think my views on stocks above are crystal clear; and as for bonds, trading at record low yields amidst a highly inflationary environment – ultimately, destined for hyper-inflation – they may be one of history's most overvalued asset classes. In most cases, bonds are only higher because central banks are "QEing" them; but such a process can't last forever – and when it ends, bonds will horrifically crash.
Daily Bell: Should people be more outspoken about market manipulation?
Andy Hoffman: More and more are each day. However, when the manipulation finally ends, 99% will still be in the dark. The more one reads about it, the more one learns that PM manipulation is one of the most important aspects of TPTB's destruction of the global economy; and thus, that the only way to protect oneself from the ultimate "financial Armageddon" is to own gold and silver before the system comes crashing down.
Daily Bell: Is market manipulation coming under attack? Is modern manipulation going to be exposed or at least damped?
Andy Hoffman: It is being exposed more than ever; particularly when you see the head of Germany's top securities regulatory agency calling gold manipulation "worse than LIBOR." GATA – as well as myself and others – have been exposing it for years, but finally others, including the mainstream media, are starting to listen.
Daily Bell: Let's discuss currencies, in particular. Where is the dollar headed, long-term?
Andy Hoffman: To ZERO, as have the previous 599 fiat currencies; and that goes for the other, nearly 200 fiat currencies worldwide.
Daily Bell: The euro?
Andy Hoffman: ZERO; or perhaps it will disintegrate first, as stronger nations like Germany abandon it and/or weaker nations like Greece are expelled. The euro has only been around for 15 years, and Europe, consequently, is on the edge of ruin.
Daily Bell: The yen?
Andy Hoffman: ZERO; and I am on the record as saying Japan is likely to be the first of the major economic powers to experience hyperinflation.
Daily Bell: The yuan?
Andy Hoffman: In its present form, it must collapse, as it is entirely fiat and, worse yet, pegged to the dollar. Ultimately, when the entire global fiat currency system collapses, some type of "new yuan" will emerge, backed by the enormous gold reserves the Chinese have been acquiring for the past decade.
Daily Bell: Is the EU on its last legs? Can it last?
Andy Hoffman: Per above, it is a mathematical certainty that the euro currency will collapse. With it, the EU will likely collapse, too. Get ready for May's European Parliamentary elections, which could provide a hint at just how much discontent is already in the system.
Daily Bell: Are BRICS currencies a challenge to the dollar?
Andy Hoffman: No, as these currencies are still just emerging market fiat trash – which have been imploding for years, many to record lows that will get much lower before the entire system crashes. Per "the most important article I've ever written," emerging market currencies have literally collapsed against the dollar since the Fed commenced its maniacal QE schemes in 2011 and likely will continue to do so for the foreseeable future.
Daily Bell: What's the IMF doing these days?
Andy Hoffman: It is just a vicious, evil organization of Western bankers and politicians, who simply make matters worse by advising more money printing and austerity. The world would be better off without it; but unfortunately, it will be with us until the current monetary system dies, fostering the maelstrom with horrific policies.
Daily Bell: How about the Bank for International Settlements?
Andy Hoffman: This is an even more evil organization than the IMF, as it is, essentially, the "central bankers' bank." Their job is to covertly lead the global manipulation of financial markets – including gold; and fortunately, they will die when their lifeline – the central banks – are inevitably discredited and abandoned.
Daily Bell: Are central banks on the way out?
Andy Hoffman: Per above, YES! No central bank has ever survived, and this time around, they have caused more economic damage than at any time in history. Ultimately, they will destroy themselves (look at the Fed's balance sheet) or, if not, will be eliminated by popular uprising. After all, they are owned by the banks, who will be vilified like no other sector in history in the coming years.
Daily Bell: Any other points you want to make or references you want to mention?
Andy Hoffman: Yes. If you want to buy, sell, or store Precious Metals, please call an experienced broker like Miles Franklin. Lately, we have seen numerous bankruptcies and scams in the unregulated bullion business, which we have avoided throughout our 25 years of business via honesty. We have an A+ Better Business Bureau rating, and not a single registered complaint since opening our doors in 1990.
Daily Bell: Thank you.
A great interview, as always. The only thing we might quibble with has to do with the immediate future of the stock market. As we've analyzed a good many times, major US stock markets are being forced up by a variety of methods.
Regulations offering more advertising to private companies, an IPO channel filled with "green" ventures, global marts imploding and central banks printing dollars or purchasing dollars by the billions all add up to expanding US markets for the near future at least (unless there's a major war).
Anyway, when it comes to Ukraine, we'll see what the future holds. We've already written that if the "crisis" deepens it could force yet more investors toward US "safe havens," such as they are.
Of course, in the longer term, Andy certainly has it right when it comes to the big picture. This system is not going to last long, not the way it's going. We've speculated that the upshot will be an attempt to implement a global fiat currency of some sort. But perhaps the whole system will simply default back to gold, silver and competitive currencies (both digital and electronic) – which is where it belongs.