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-- Posted Tuesday, 15 March 2011 | | Source: GoldSeek.com
Well, you can't eat gold either. But at least gold is easier to carry around, says precious metals pundit Bob Moriarty. In this exclusive interview with The Gold Report, Moriarty lays out his forecast for the U.S. government (ousted), banks (collapsed) and why he still has significant stakes in precious metal equities despite his doomsday predictions.
The Gold Report: When we last spoke in October, our conversation focused on quantitative easing in the U.S. Since then, there's been a lot of news focused on the Middle East and North Africa. The people of Tunisia and Egypt have successfully overturned their governments. Now there are significant civil uprisings in Libya, Bahrain and Yemen.
Bob Moriarty: The cause of all the turmoil in the Middle East—and what's going on in Wisconsin for that matter—has nothing to do with religion. It has nothing to do with democracy. It has everything to do with the cost of food.
Either Ben Bernanke is the dumbest guy in the known universe or the biggest liar—and perhaps both. He says that the Federal Reserve's second round of quantitative easing, QE2, has nothing to do with the cost of fuel and food. Of course it does. He has been wrong about every single thing he's said since he took office.
When people are hungry, they start riots. The riots in Egypt were directly related to the cost of food. The riots in Wisconsin are being framed as union versus anti-union. But it is really about people being afraid they won't be able to feed their families.
In the U.S., the problem is that the government can't afford the outrageous sums that it's paying union members for retirements. As many as 90% of members are retiring on permanent disability in some unions. California couldn't balance its budget even if it fired every state employee. We have too much government.
TGR: To what extent do you think Wisconsin is a harbinger of government cutbacks to follow in other states?
BM: Wisconsin is the canary in the coal mine. The funny thing is that Wisconsin isn't the state that is in the worst shape. California, Michigan or maybe New York, is in the worst shape.
Do you know how long it will take for the U.S. government to fail? Nineteen days.
TGR: How do you arrive at 19 days?
BM: Because that's how long it took in Egypt.
TGR: Do you think this unrest is going to overflow into the oil-rich countries, like Saudi Arabia?
BM: Absolutely. The media is highlighting the Middle East, but unrest has occurred in Croatia, Albania, France, England and Greece as well. The breadth of these uprisings is connected to the power of the Internet. These crowds can communicate because of Twitter, Facebook, Google, instant messaging and e-mail. People have the ability, on an individual basis, to take command of the situation. This has never before occurred, and it's a very important concept.
If the U.S. has riots and we overthrow the government, which I absolutely believe is going to happen, we're no better off. The debt still exists.
The entire world needs to go back to real-world economics—supply and demand. The economy needs to start producing things of value. This is literally a worldwide revolution.
TGR: So, if it's 19 days to overthrow a figurehead government, how much time does it take until some regulatory body is able to create food, jobs or a middle class?
BM: If there isn't any real money, which is gold and silver, probably 20 years.
TGR: What if you're Saudi Arabia and you have oil?
BM: Have you ever tried to eat oil?
TGR: You can't eat gold or silver either.
BM: You could trade it for food. There are no individual companies in Saudi Arabia running the oil business; rather, it's the government of Saudi Arabia. If the government fails, then oil refining and oil shipping stops immediately. It's already happened in Libya, but Libya's only 1.2% of world oil production, and Saudi Arabia is about 14%.
After the Yom Kippur War in 1973, Saudi Arabia was very upset with the U.S. for supporting Israel and declared an oil embargo. But what really happened was that the Organization of the Petroleum Exporting Countries (OPEC) started raising the price of oil across the board. Oil went from about $0.15 in 1969 to several dollars a barrel. There was another crisis in 1979, when the Shah of Iran was overthrown. Oil shot up to $12 or $15 a barrel, which was enormous.
TGR: Shouldn't we be getting out of equities, and getting into precious metals, at this time?
BM: I define investing in gold and silver primarily as being an insurance policy. I believe that everybody should own some gold and silver. I had a meeting with a billionaire yesterday and I told him exactly the same thing. You could have hundreds of billions of dollars and not have the ability to buy gasoline. Owning gold and silver is something that prudent people should do. I'm not saying that people need to go buy silver at $34/oz. because it's going to $500/oz. I'm saying people need to own some silver, and I don't give a damn what the price is today because they may want to buy some food and gasoline down the road.
TGR: Let's assume our readers own physical gold and silver. Should they be pulling out of equities?
BM: You always need a spectrum of investments. Once they get past physical gold and silver as an insurance policy and investment, investors have got to put money into something. I keep most of my liquid assets in equities, even though I believe that we're on the verge of a major collapse in the stock market, and gold and silver shares could absolutely get whacked.
TGR: Currently, gold is doing quite well and silver is doing even better. Are there certain types of mining or junior equities that investors should be looking at?
BM: I avoid the popular areas in investment. Investors should want to get into investments when nobody wants them. That's when they're cheap.
TGR: Do you believe that metal juniors are popular now, or that they are yet to become popular? A lot of the mainstream investment shows and media really aren't talking about gold yet.
BM: I think we are in phase two of three. But I'm seeing a lot of scary things—like "market experts" forecasting that silver could go to $500/oz. I could see silver at $40/oz. in the short term, but I could see it at $20/oz. in six months. Silver at $34/oz. is pretty expensive.
TGR: A lot of people are speculating that silver will go higher. I haven't heard $500/oz., but we're looking at that gold:silver ratio.
BM: They're wrong about the gold:silver ratio. Historically in the U.S., it was 17:1, but we were using silver for coins. Nobody in the world uses silver for coins now, so most of the demand is as a commodity. Unless we go back to silver coins, I don't see the ratio going to 17:1.
TGR: No one really uses gold coins now either.
BM: True, but almost all the gold ever produced is still above ground. Gold gets recycled. Silver gets used. It's a commodity. At today's prices, there is something like $8 trillion worth of gold in the world. I doubt very seriously that there's $500 billion worth of silver.
TGR: Any other thoughts you'd like to leave with our readers?
BM: Investors should be looking at graphite companies. Graphite is a metal that's been ignored. There's big potential there. There are just a few juniors that have started mining graphite.
I believe there is going to be a correction in gold and silver. It's not something that panics me, but people are making too much money and are getting too bullish.
TGR: Do you think the correction will be more than 10%?
BM: Absolutely. Silver can correct 10% in one day.
TGR: What about in gold?
BM: I'm a contrarian. I would rather see gold go down to $900. That wouldn't hurt my feelings at all.
TGR: It's a privilege, Bob. Thanks for being so forthright.
Convinced that gold and silver were at a bottom, and wanting to give others a foundation for investing in resource stocks, Bob and Barb Moriarty brought 321gold.com to the Internet almost 10 years ago, and later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on the current events affecting both sectors. Before his Internet career, Moriarty was a Marine F-4B and O-1 pilot with more than 820 missions in Vietnam. A captain at age 22, he was one of the most highly decorated pilots in the war and the youngest naval aviator in Vietnam. He holds 14 international aviation records, and once flew an airplane through the Eiffel Tower's pillars "just for fun." Streetwise - The Gold Report is Copyright © 2011 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part. The GOLD Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report. From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported. Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734. Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.
-- Posted Tuesday, 15 March 2011 | Digg This Article | Source: GoldSeek.com
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