Last week, Claudio Grass, Managing Director at Global Gold Switzerland, was interviewed by Bubba over at Libertytalk.fm. The topics in this fascinating interview range from central banking monetary policies, the refugees crisis, libertarian issues, and political trends. In this article, we highlight 8 questions/answers, and we recommend readers to download the interview (bottom of this article) to listen to the full version.
Key insights and quotes from the interview
Bubba: I believe that this huge monetary experiment can only fail. I think the longer they allow it to exist in its current structure, the worse it will be when it finally does fail because this is destined to fail. This is not destined to succeed.
Claudio Grass: I fully agree with you. If the only question we have to ask ourselves: is it possible to create wealth out of nothing and I think that’s exactly what Central Banks are basically telling us, but we all know that this is impossible because otherwise the Central Banks could give us each $1 million on an annual basis and we can all live a happy life. We all know that this is not working. No, really, the bubble gets bigger. We know from history that, the bigger it gets, the deeper the fall. I think we can already see the cracks in the system everywhere.
Bubba: There is a lot of cracks. You are involved in a lot of things. Where are you starting to see some of the cracks?
Claudio Grass: Let’s take for example the refugee crisis we are facing over in Europe driven by huge flows out of the Middle East and Africa. Basically the people are fleeing their regions. They want to come to Europe. That’s one of the cracks. That’s an outcome of a failed policy over the last decades. Then we see all the anti-establishment movements we have in Europe, but also in the United States, on a global scale like AfD in Germany, Britain and U.K. (with the Brexit). We have secession movements in Germany, secession movements in Italy, secession movements in Spain. We have the divide and conquer election campaign in United States, for which we don’t know what the outcome will be and what kind of impact we will have. Moreover, there are the uncertainties when it comes to China, when it comes to Far East. These are all cracks which are visible for everyone who is willing to see. People don’t feel that secure any longer. They are not sure what the future might bring. And slowly, they are standing up against the establishment and fighting off what’s going on right now.
Bubba: It’s a shame because they think that they’re hiding something from us and it’s like they’re a kid trying to get away with something. And look, we’ve watched this in my opinion since Alan Greenspan. Alan Greenspan was the first great bubble creator followed by Ben Bernanke and of course now followed by Janet Yellen. And Janet Yellen seems to have the willingness of all the rest of the Central Banks around the world to play in her arena with her. And it seems to me they are all taking turns at manipulating their own currency and, as you like to say, creating money out of thin air.
Claudio Grass: I think Greenspan has been the guy who injected liquidity like crazy. He used to know exactly what money is and what gold is when he wrote the famous essay back in I think in`67. In it, he basically said that only gold is money, and that it would always stay money. Central Banks are doing what they always have been doing. First of all, they’re trying to keep up the illusion that they will raise interest rates again in the future. I don’t see it will happen with the actual total debt we have in the system. We stood at 140 trillion back in 2008 while today we are standing at 200 trillion. It’s just huge. I basically believe that from now in the near future, we will see much more negative interest rates because that’s the only way how you can punish the savers and favor the debtors to decrease total debt in the system.
Bubba: This whole theory of a Central Banking fiat currency model is ugly. I think that they have gone a little bit too far okay with the ability to print money. I think that they have overstepped the true boundaries of what was designed for a Central Bank.
Claudio Grass: Absolutely. Let’s look at the U.S. as an example. You know that the official debt stands at 20 trillion roughly and the unfounded liability stay standing as per Kotlikoff already. He came up with a study about 2 years ago. In it, he said we are standing at 220 trillion. And when we look at the official debt for example 98.5% has been created since 1971. So basically, when Nixon went off the Gold Standards, he shut it down on the 15th August, we have been witnessing a huge credit orgy up to today.
Bubba: And of course, that means that there can only be a disaster waiting down because eventually your debt gets so big that you can never get enough to get out of that debt. Even the printing has to stop at some point because there will be no support underneath it, whatsoever. We’ve already got enormous problems.
Claudio Grass: At the end of the day, we are living in a centralized system. We have Central Banks, we have centralized governments ruling over the people in most countries on this planet. What we are witnessing right now is that the centralized system is centralizing even further. Marc Faber once said that the Central Banks can buy all the bonds and they can buy all the stocks and the shares. And once the real estate market is going down, they even can buy all the houses and then we are living in a full-scale socialistic world. I don’t see that this is happening because still I believe they are two different interests. And at the same time, I also see the power of the internet, which is from my point of view the kind of good and bad press because it allows every person on this planet to have all the information he is looking for. In the past, you had to go to the library or you had to watch government media or government-controlled media or channels, TV, and radio stations. And today, basically, you have a possibility if you’re really interested that you can look it up, do your own research, create your own opinion. And I think this is really a game changer. At the same time, I believe the internet cannot be censorized because it has been growing in an anachronistical art.
Today, you can do a radio show and you can stream it and put it on YouTube, whatever, and then you can reach out to thousands of people. In the past, that wasn’t possible. So, I think information is key. In the past, we were basically following only the mass media, which, when you look at the United States, you have 6 companies controlling the whole media landscape and they always have been. Mark Twain said once: if you don’t read the newspaper, you’re uninformed, if you read the newspaper, you’re misinformed. And I think people can gain their own or can put together their own opinion by just doing their own research on the internet.
Bubba: We are 80 years into Keynesian economics and I’m not saying that any system is perfect. I think they all have some flaws somewhere and there’s probably a great combination of a better system between them all. But as I have watched the destruction over the last 10 years now, I have become from a fence sitter saying. In fact, they are destroying the capitalistic system of free markets and price discovery with every step that they take.
Claudio Grass: I fully agree with you. I mean, the central banking system. If you know the 10 commandments of communism or of Marx, one of them is basically centralization of credit in the hands of state by means of a national bank with state capital and an exclusive monopoly. Power corrupts and absolute power corrupts absolutely. Therefore, I don’t believe in the centralized monetary system. What we basically will need is a free banking and let the people decide themselves what they want to accept as money. And as soon as we will have competition when it comes to that, the people will realize quite fast what they want to use a medium of engage, what they will want to use as a store of value or a combination of both.
Bubba: One of the big problems obviously is the government itself. They do not have the right to print on their own. They go through the Federal Reserve, but the Fed is so tied in to the big banks and the big banks have an agenda on their own. So, where is it that there becomes the fair and equal for everybody? It really is a one-sided affair for: the Fed is basically to feed the wealthy.
Claudio Grass: Absolutely. When we look at how the banking system came into existence, basically bank was a place where you were able to bring. For example, in the past, it was gold of course or silver. They brought it to a bank because they were looking for a safe place. And in return, they received a paper receipt that they had deposited so and so much ounces of gold for example. And then we have the first case, I think 300 B.C. in Greece where there was one. These old bankers who basically handed out more paper receipts because they realized that not everyone is picking up the gold, so he thought, well, I can fake it a bit and earn an interest on that. That guy was brought to court and he was forbidden to do that. And today, basically, that’s a system. That’s also when we look into fractional reserve banking. When you deposit US$1 million on the bank account and that bank is into fractional reserve banking system, basically if they then have to keep say 1% as a down payment on their stocks, they basically can create 100 million of new credit out of thin air and they can charge an interest rate, decide who is going to receive it. This is really insane. This just gives a lot of power to the financial system, which is not based on real goods. It’s not on hard assets, so they really can create something out of nothing. If we would do it on a personal basis, we would go to jail.
Bubba: Do you see the fiat currency system cracking out, and failing, and going back to some sort of a back system of something?
Claudio Grass: We had in the last century 50 hyperinflations. This is something which can happen on a regular basis. I see that the fiat money is going back to its intrinsic value, which is zero. That’s why at Global Gold, the bullion company I am managing, we are operating very conservatively. I think it’s the purest way to invest in physical precious metals. We do not allow online trading. We don’t pre-finance. We don’t hedge. We are really made to go through and also to perform especially in a harsh crisis scenario when everything is coming down. And so, my personal opinion of course, no one knows the future. We’re not even knowing the truth. We can think for it. But I’m coming from the monetary history side, I’m also looking at the world through the Austrian School of Economics. And then we can see that gold and silver always fulfill those criteria. And that will also perform as an insurance in the next hyperinflation or deflation area or collapse that we are going to witness in the future. No one knows exactly when, but the trends are visible and the trends are extremely negative, especially when you see how civil liberties are under pressure.
As written for and published by Global Gold, September, 2016.