– “I own Krugerrands” says legendary Jim Grant
– He is “very bullish indeed” on gold
– Gold is “investment in financial and monetary disorder” – says Grant
– It thrives in current environment – “uncertainty, turbulence and disorder”
– “One of the most radical periods of monetary experimentation in the annals of money”
– “Gold…is now the conjunction of price, value and sentiment”
– Reminds owners of gold that the original reasons for buying gold have not gone away
– Believes Fed will raise rates despite deflationary environment
– Explains detrimental effect of excessive debt on an economy
– Grant light-heartedly destroys Jason Zweig’s “pet rock” gold jibe
Jim Grant, publisher of Grant’s Interest Rate Observer says that gold is “an investment in financial and monetary disorder.” He believes that today we are experiencing “uncertainty, turbulence and disorder”.
When asked how he liked to own gold he said he owned physical, generic, non-numismatic coins – specifically mentioning South African Gold Krugerrands and also mining shares.
Krugerrands are one of the cheapest and most cost effective ways to buy gold with very low premiums. Clients in Ireland, the UK, the U.S. and internationally are currently buying Krugerrands at extremely low premiums of just 2.5%. They remain some of the most popular bullion coins in the market due to their durability (harder 22-carat gold coin), recognisability, portability and liquidity throughout the world.
He warns:
“You look around the world and you see exchange rates are properly disorderly, when you look around the world of lending and borrowing — we are in a regime of price control by another name, so-called zero percent rates and quantitative easing by the world central banks”.
He adds, “We are in one of the most radical periods of monetary experimentation in the annals of money”, with a “low probability” of a favourable outcome.
Given the disorder he sees in the world due to monetary experimentation and the very low gold price Grant says,
“You want to have exposure to the reciprocal asset of the paper assets that are the most popular – so gold, to me, is now the conjunction of price, value and sentiment, and I am very bullish indeed.”
He describes the recent fall in prices as “terrifically vexing but a wonderful opportunity” and reminds owners of gold that the reasons for owning gold have not gone away. He emphasises that gold thrives in periods of turbulence and disorder and uncertainty adding “I think we have all three of these things.”
On interest rates Grant believes that the Fed – having talked interest rate rises for so long – must soon take action to maintain “institutional pride”. However, it may be economically counterproductive given the deflationary forces still extant.
“The Fed feels it must act just for institutional pride; but, money supply growth is dwindling, the turnover rate of money likewise, the only thing that is dynamic in the world of money and credit is the issuance of more and more dubiously sourced debt, and more and more lenient terms”.
Grant takes a light hearted pop at Jason Zweig’s theory that gold is simply a “pet rock”. He jokes that gold can make people say ridiculous things they may soon regret – pointing out that Zweig had written a piece “within two weeks of the top of the bullion price” in 2011 extolling the virtues of gold mining stocks.
During the course of the interview he also explains how excessive debt can be detrimental to an economy.
“What debt does is two things: it pulls forward consumption and pushes back evidence of business failure”.
Debt allows us to spend more on what we want today at the expense of what we need in the future. Businesses which should fail are kept alive by easy credit leading to a backlog of bankruptcies and more loan defaults in the future.
While optimists in general, we share Jim Grant’s pessimism with regards to the health of the global monetary and economic system. and the usefulness of gold as to protect one’s wealth in the current environment.
We also believe that physical bars and coins including Krugerrands, should form the bedrock of any gold investment strategy. We offer delivery and storage of Krugerrands at the most competitive prices, in the safest vaults in the safest jurisdictions in the world.
Reprinted with permission from GoldCore.
