In the past I have written a couple of times regarding the delusions of Harry Dent. I have decided once again to write about this as he is now even more outspoken and creating more fear in an already panicked gold community. First, this link is Mr. Dent's latest writing and interview(Listen at the 18:00 minute mark). He believes gold will fall to a minimum $700 and probably to the $250-400 range. I will explain why he is both dangerous (to your financial well being) and delusional.
Before getting into the meat of his half baked logic, I do want to say I agree with much of what he sees coming. He sees financial collapse caused by poor demographics, poor fiscal and monetary policy combined with too much debt. I said "half baked" because he does not follow the logic through to fruition. Dent concludes the global safe haven will be the dollar, and gold will be one of if not the poorest performing asset. It is his stance on gold where he is wrong and doing the greatest disservice any newsletter writer could do. His grand statements I am sure will help him sell newsletters but this will be at the expense of many bankrupted readers.
For brevity I will list his erred points of logic and make short comments pointing out the flaw.
1. "the dollar will be king in the coming deflation as it always has been in history"....WRONG, "history" as he tells it is 2008. Gold and silver dropped in late 2008 and is his "proof" they will again when "the big one" hits. I would suggest looking at the REALLY BIG ONE and ONLY bout of deflation in the last 100 years ...the 1930's! Gold and dollars were interchangeable at the time, right up until FDR's confiscation which was followed by gold being revalued higher from $20.67 per ounce to $35. Any way you slice it, either gold was revalued higher or the dollar was devalued versus gold. THIS is true history!
2. "dollars will be the safest haven on the planet"... Really? Even though they are "issued" by the biggest bankrupt and overlevered entity the planet has ever known? In the 1930's when having dollars was the "second best" place to have money, we did not have a financially broke central bank and Treasury. Nor did the country face $200 trillion+ in unfunded promises and liabilities. How exactly does Harry Dent expect all of the social programs to be paid for as there is NO MONEY already set aside? Will the massive printing of more dollars not further dilute the already grossly inflated cesspool of dollars?
3. "Inflation is good, just look at your standard of living". He even shows the following chart and tells you not to believe your own eyes, it means nothing!
See larger image
He goes on to say "this chart is as meaningful as his left toenail" and inflation in moderation is a good thing... WRONG AGAIN! This chart is VERY important because it shows what has happened to "savers" purchasing power if they saved in dollars. Dent says it is meaningless because our standard of living has improved six or seven fold. Is it possible the standard of living improved along with the increases in the amount of debt taken on ...until there was just too much? Has he considered the advances in the standard of living up until we went off the gold standard? I would ask, has our standard of living really improved over the last 20-30 years? Would it have improved if we had not collectively borrowed from our futures to support it?
4. "The dollar will outperform all other money" ...maybe on the USDX versus other Western currencies but I even doubt this. This matters not because ALL fiat currencies are in the same pool and they are all crappy. Being the cleanest turd does not change the fact that it still smells bad! The USDX index is merely a race between dogs, a race to the bottom I might add! Will the dollar outperform the yuan should China choose to unveil their true gold holdings? Will the dollar strengthen should the U.S. go head to head with a Russian/Chinese alliance? Remember, the dollar (as all other fiat currencies) and its "value" are a function of confidence and nothing more.
5. "the Russians and Chinese are the dumb money" ...does this mean the U.S. is the smart money because we have divested much if not all of our gold? In case he has forgotten, the BRICS are already preparing to trade without the use of dollars, will this loss of demand will be meaningless? Who is going to step in and replace the lost demand for Treasuries and thus dollars? The Fed? Isn't this outright monetization ...doesn't Harry know how this scheme has worked out throughout history? Going a step further, what will happen if foreigners refuse to take dollars and instead tie trade to the yuan or even gold balances? How would the U.S. trade under that scenario? Please don't tell me "it cannot happen" because it already is, and right before your own eyes that Harry is telling you not to believe!
6. I ask, where and in what form should we hold all of these precious dollars? If Dent is correct and the system collapses ...won't that mean banks, brokers and anything else in the financial field will fold? Wouldn't your precious dollars be lost? Remember, we now even have "bail in" legislation stating your "deposit" is no longer a deposit ...you are an unsecured creditor.
Let me finish by saying "the dollar" is no longer your grandfather's dollar. Nixon took us off the gold standard because we did not have enough ounces of gold to exchange for the amount of dollars we over issued to THAT POINT! Now, we may have no gold at all left and have issued the money supply 50 fold from the point we admitted gold was more precious than dollars!
By telling you gold will be the very worst investment, Harry Dent is putting doubt into current and potential owner's minds ...at THE very point in time that your "insurance" (gold) is going to be needed. You the reader must make a decision for yourself, a very important one. You can either believe Harry Dent, with his made up history and very flawed core logic, or you can dig for truth and follow your own logic to the very end of the question. I believe if you do this, you will discover gold is real money ...and real money is truth!