With continued volatility in key markets, including currencies, today King World News interviewed acclaimed money manager Stephen Leeb, Chairman & Chief Investment Officer of Leeb Capital Management, to get his take on what is happening. Leeb spoke with KWN about the level of fear and concern that is being expressed from older market veterans that are extremely well connected. Here is what Leeb had to say about what is taking place: “Byron Wien is really one of the deans of Wall Street analysts. He’s been at this for over 40 years, and he has a superb record. One of the features of his work each year is that he interviews a man each year, who he refers to as, ‘The smartest man in Europe.’”
Stephen Leeb continues:
“This man (Byron speaks with) is now in his eighties, and he has an amazing track record. This man has made a fortune. I paid very close attention to what this man’s comments were. He believes the debt levels of governments, in the developed world, we’re talking Europe and the US, means either depression or extreme stimulation, culminating in a lot of inflation.
I’m summarizing, but basically that’s his bottom line. As evidence that this is his bottom line, he goes on to say that he really doesn’t own any stocks. But what he does own here are real things because real things are obviously what benefit when you have a lot of monetary stimulation.
When you have dollars being printed, euros being printed, the only thing that can withstand the debasing of these currencies are real things (hard assets). The two commodities that he’s singled out were gold, which he said is going much higher, and oil.
I would have to agree with that, Eric. At least that’s how I see the world. His basic premise is that debt levels of consumers in the developed world are so high, that there is no way out. You are not going to be able to grow your way out without inflation.
What I would add to that is that the cause of this debt has been the frantic need for consumers to try to keep up in the face of sharply rising taxes. Now by sharply rising taxes, I don’t mean sharply rising taxes instituted by governments. What I mean is sharply rising taxes that have been instituted by rising commodity prices since the beginning of this century.
What you’ve seen that has forced me to change my view are these rising resource prices. When resource prices rise, that constitutes a tax on the developed world. As we do get defaults in the system (going forward) and things do get disorderly, that’s when you really have to step on the monetary accelerator.
I think 1930 would be the excellent example. If you look at a chart (from that time period) of debt to GDP, you see it rising and reaching incredible heights, and then falling up a cliff. Why did it fall off a cliff? Because you had massive defaults.
In today’s world, you can’t afford a lot of defaults. I think that’s why he owns gold and that’s why he owns oil because we will do anything we can to avoid the kind of defaults that could send our economies into a depression.”
Original Source: King World News