Today legendary value investor Jean-Marie Eveillard told KWN, “If you look at China’s view of the West, they think we are decadent. They think we are Rome, towards the end.” Eveillard, who oversees $50 billion at First Eagle Funds, also said, “At the same time, they are beginning to worry about China itself.”
He also discussed the gold market, but first, here is what Eveillard had to say about Europe and the US: “One can have confidence that if the economy does not start doing somewhat better, at some point Bernanke will use some tools to try to stimulate things. I think he’s mistaken. The fact that the short-term interest rates have been taken to zero over the past several years, and kept there, I mean money is not supposed to be free.”
Jean-Marie Eveillard continues:
“So there will be all sorts of negative unintended consequences of having interest rates at practically zip for an extended period of years. If you turn to Europe, a solution is unavailable. Nevertheless, they manage to gain a few months through various manipulations and concessions being made by the Germans. But the Germans, who are being pushed around, are already on the hook for much more than the German public understands.
If you look at China’s view of the West, they think we are decadent. They think we are Rome, towards the end.
So their view is that we are the Roman Empire towards the end. At the same time, they are beginning to worry about China itself. With China there has been various scandals with some corporations because of fancy accounting, etc..
Well, there is also a very strong suspicion that the economic statistics are manipulated as well. Some believe that they are manufactured at the government level, and they do not reflect reality. I suspect the Chinese economy is in much worse shape than the statistics are showing.
I think it is the case that, yes, from a long-term standpoint the East is rising and the West is declining. In the West there is simply too much debt. But saying the East is rising, for China, for India and for others, every now and then there will be bumps along the road.
In China and India we are probably about to hit one of those bumps in the road. It will be serious in China because the Chinese government, this is what they call a ‘command economy.’ In other words the government decides. They give instruction to the banks and oversee the economy.
But if the economy is in as bad a shape as I suspect it is, and if it doesn’t get better in the foreseeable future, there will be all sorts of problems for the government. The people will rise up and it will be semi-chaotic. This is what the government of China is worried about and that is why they would like to get the economy to do better soon.
To their benefit the Chinese are sitting on extraordinarily large foreign exchange reserves. The last time they had a problem with their banking system, the already enormous amount of foreign exchange reserves helped to act as a cushion.
Those foreign exchange reserves, they include gold, but to a level that nobody knows. Again, nobody knows how much gold China has because the statistics are probably lying. And we all know they can still turn quite a few Treasury Bills into gold.
Frankly I don’t think the accumulation of gold by mainland China, as a state, is absolutely necessary for the price of gold to continue to go higher. There are other buyers such as India, which bought 200 tons a couple of years ago. So there are other central banks, in various countries, that will buy gold.
The reality is that gold has been up for eleven straight years, so it was entitled to a major correction. And maybe that’s what we’ve had over the past nine months or so. There is so much money, including some leveraged money, which is playing in the short-term. This could overwhelm things for a little while, but my suspicion is that we are not far from the end of this correction in gold.”
Original Source: King World News