With gold and silver consolidating recent gains and concerns over the US debt ceiling, today King World News interviewed acclaimed money manager Stephen Leeb to get his thoughts on where things stand. When asked about the debt ceiling Leeb had this to say, “We will agree to get some sort of compromise and raise the debt ceiling. I think it’s basically meaningless in terms of the problems that the country faces, I don’t think it will change a thing. We are on a treadmill heading backwards. The one word that I haven’t heard in any of these discussions is growth. The statistics that stand out are recent GDP numbers, no growth and without any growth you are not going to have any credible way of reducing debt.”
Stephen Leeb continues:
“The taxes that we have seen on resource appreciation over the last ten or twelve years continues to damage the economy and basically assures that we are going to have to continue to print money, more and more of it to stay in place. I think that gold and silver and other precious metals are going to continue to go higher.
Right now we are trying to decide how much we should reduce funding for energy. China right now is planning to spend, this comes from sources that are unimpeachable, but they are planning to spend in the neighborhood of one trillion dollars per year on industries that will be related to alternative energies and development of these energies.
They (the Chinese) dominate solar, they basically dominate wind and we are just sitting here with no talk of it, figuring out how much we should cut from our spending on research and development of renewables. It’s not a very good situation, it’s frankly a very frightening one.”
When asked about government cuts in spending being deflationary Leeb responded, “It is, it’s deflationary and inflationary at the same time. It’s inflationary because it’s going to assure that the Fed engages in some form of quantitive easing again. We cannot afford in this country to see unemployment go up to 20%.
What you saw Eric and this hasn’t gotten a lot of publicity, but when oil prices were going up we released oil reserves, you know our savings of oil, our rainy day savings that George Bush had assured were about as high as they could be. Well we gave some of those savings back and of course we gave it to the Chinese de facto. They were the ones that probably took those extra oil reserves and put them in their own bucket of savings. These are the things we are doing out of desperation.”
“Let me put it this way, you get bubbles in the world when prices get out of line with fundamentals, that’s a bubble. But you really don’t have a bubble in gold if you step back and realize that what has been driving gold up is basically a growth in money supply, growth in monetary base and the falling of the US as a major economic power.
All of the factors that have driven gold up over the past ten, twelves years are if anything accelerating. That means that there is no bubble. If a stock goes up 10 fold, but its earnings go up 15 fold, that’s not a bubble, that’s an undervalued stock. In that sense I think that gold is really undervalued.”
When asked about silver specifically Leeb stated, “Well I think silver obviously is a precious metal. I think it probably has a history as a precious metal almost as long or maybe even longer than gold. Its ratio to gold right now is about forty to one, I think that’s extraordinarily cheap, but what people have to realize about silver and I don’t think it has dawned on people, that not only is it a precious metal, but it’s a critical and I emphasize the word ‘critical’ industrial metal.
The majority of solar panels require silver and I don’t think there is enough of it if we really start building this stuff out. I think the Chinese realize this, they are probably already accumulating silver and will continue to accelerate those efforts.
Incidentally, speaking of the Chinese and gold, Thursday’s report from Goldcorp made interesting reading. The Chairman of Goldcorp said he expected Chinese purchases of gold to exceed those of India this year, which is just extraordinary.
I would expect their purchases of silver will commensurately be even larger because they need it. They are not just buying silver because they want an alternative to the dollar, they are buying silver because they know they are going to need it desperately to build out solar energy.
So silver, yeah, pick a number, but silver is a three digit commodity there’s no doubt about that.”
