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Is a Monetary Crisis Coming Soon? Report from the AEA Meetings in San Diego

Special Note: Today the federal government (the BEA) released third-quarter gross output (GO), the top line in national income accounting, which measures total spending in the economy.

Good news! It showed real GO up 2.5%, growing faster than real GDP (2.1%), a healthy sign. Whenever GO grows faster than GDP, it’s a sign the economy will continue to expanding into the near future. (GO is a leading indicator.)

I’ll have a press release soon at www.grossoutput.com.

At the AEA meetings in San Diego, I met up with Brian Moyer, director of the BEA, and he indicated that the government will release GO and GDP at the same time starting in September 2020. Onward!


“The United States is engaged in a massive, ever-expanding and reckless Ponzi scheme that is dangerous and immoral.”
— Professor Laurence Kotlikoff, Boston University 

“I should have followed your advice!”
— Bunker Hunt, ex-billionaire, to me

I attended the American Economic Association (AEA) meetings in San Diego over the weekend. Top economists, including former Fed Chairs Janet Yellen and Ben Bernanke, were there to discuss the current state of the economy and government policy.

Yellen, the current president of the AEA, approved more than 500 sessions on a wide variety of topics, but thought she went overboard by authorizing 41 — 41!! — sessions and additional papers on gender bias and sex discrimination (see my “You Blew it” column below).

Two Dangers Ahead: Inflation and Deficit Spending

Yellen’s second worry was low inflation, which she labeled “the macroeconomic issue” of our time.

She and Ben Bernanke fear deflation and told the audience that the Fed should raise its inflation target above 2%. The late Paul Volcker must be rolling over in his grave. He thought inflation targeting was “insane.”

So do I. Deflation is actually good for a fully employed economy that we currently enjoy.

The session on “Is U.S. Deficit Policy Playing with Fire?” was packed. Most economists are alarmed. The standard view is that governments run deficits during a recession and surpluses during times of prosperity and full employment. But not this time.

The deficits are getting worse, largely because interest rates are so low. Sound economics is being ignored by the Trump administration. Full spending ahead!

One economist, Laurence Kotlikoff from Boston University, sounded the alarm about the national debt. He warned that the United States was engaged in a “massive, ever-expanding Ponzi scheme that was dangerous and immoral.” He opined it is immoral to transfer huge liabilities from the older generation to the younger one. A runaway deficit is reckless because it could cause another financial collapse when the boom turns into a bust.

Federal spending is out of control and already ignited a brief monetary crisis in money markets last September, when short-term rates in the “repo” market skyrocketed to 10% to fund short-term federal borrowing when a dealer sells government securities to investors. In response, the Fed must intervene and buy $75 billion worth of Treasury securities and cut interest rates to calm the markets.

Could this happen again? Definitely! I suspect gold and silver, and mining stocks, will do well this year (see my newsletter, Forecasts & Strategies, and my trading services for specific recommendations.

Gold and Silver Offer a Good Hedge

Speaking of precious metals, I picked up two new books on the history of gold and silver at the AEA conference. Perfect timing!

“One Nation Under Gold: How One Precious Metal Has Dominated the American Imagination for Four Centuries,” by James Ledbetter (W. W. Norton) includes a whole chapter on the influence of Harry Browne on the hard-money movement.

It also tells how Paul Volcker plays a pivotal role in getting President Nixon to take us off the gold standard in 1971 but redeemed himself under Reagan by crushing inflation in the 1980s through tight money. You can buy the book here: https://www.amazon.com/One-Nation-Under-Gold-Imagination/dp/0871406837.

‘I Should Have Followed Your Advice!’

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“The Story of Silver: How the White Metal Shaped American and the Modern World,” by William L. Silber, a finance professor at New York University. His last name suggests he was destined to write this book!

It has several excellent in-depth chapters on how Bunker Hunt, the Texas billionaire, tried to corner the silver market in the late 1970s, and went bankrupt doing so.

I’ll never forget the time in mid-1980s when I was invited to give a talk at the Council of National Policy in Dallas, Texas. Bunker Hunt, a founding member of the conservative group, was in attendance. In my talk, I told the audience why I had switched out of gold and silver and into stocks and bonds after Reagan was elected in 1980. It turned out to be a good contrarian move — since then stocks and bonds have left gold and silver in the dust.

Afterwards, Bunker Hunt came up to me and said, “I should have followed your advice!” True story!

I loved reading this book. So will you. To buy a copy, click here.

Now, of course, gold and silver look attractive again in the face of another round of loose money policies at the Fed and in Washington. In the New Twenties, precious metals will roar!

Good investing, AEIOU,

Mark Skousen

Upcoming Appearance

Join me for the Orlando MoneyShow, Feb. 6-8 at the Omni Orlando Resort at ChampionsGate. I will be speaking Thursday, Feb. 6, 9:30 a.m. about My Most Important Forecast & Strategy: When Will the Mother of All Bull Markets End? On Feb. 7, I will talk at 5:30 p.m. about The Best Offense Is a Good Defense: How to Beat the Market with My Five Favorite ‘War’ Stocks! Other investment experts who will be speaking include Bob Carlson, Hilary Kramer and Bryan Perry. Register by clicking here or call 1-800-970-4355 and mention my priority code of 049278.

You Blew it!

Is Gender Bias Getting Better or Worse?

By Mark Skousen

Janet Yellen was the first female chair of the Federal Reserve, and is keenly aware of the problems of gender bias and sex discrimination in the workplace and academia.

She made that abundantly clear at this year’s American Economic Association (AEA) meetings, when she authorized 41 sessions and additional papers on gender bias and sex discrimination.

She told of countless cases of sexual harassment and bias against women and complained about how few top CEOs are women.

She selected a feminist economist, Marianne Bertrand, at the University of Chicago, to give the prestigious Richard T. Ely Lecture, but I was pleasantly surprised when Professor Bertrand said that things were looking up. She apparently didn’t share Yellen’s pessimism.

Professor Bertrand showed chart after chart demonstrating more women were entering universities and the work force, that the gender pay gap was improving, and that sexual harassment was on the decline around the world.

Her Attack on Dr. Jordan Peterson

The only negative was her attack on Dr. Jordan Peterson, the Canadian clinical psychologist, who has been an outspoken critic of the extreme feminist and transgender movement. She called him an “intellectual misogymist.”

I respectfully disagree. You can watch dozens of videos on Youtube showing the views of Dr. Peterson. I suggest you come to FreedomFest 2020 and decide for yourself.

Dr. Peterson our keynote speaker. We highlight him at the end of our three-minute video. Dr. Peterson has been called “the most dangerous, polarizing figure since Gandhi”….“the most influential public intellectual in the Western world today”… and “the most important spokesman for liberty and civil justice since Milton Friedman”:

Over 500 people have already signed up due to Dr. Peterson’s special appearance at FreedomFest. I urge you to join us and see what all the buzz is about. Go to www.freedomfest.com.

From the analyst who beat the market over 15 years...
Dr. Mark Skousen's Top 3 Income Investments for the Next 12 Months

Your email is 100% protected. Read our Privacy Policy.
You'll also receive Dr. Mark Skousen's weekly e-letter, Investor CAFE, at no cost, along with other associated financial content and special offers.

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