Byron King: At Some Point Economic Reality Will Set In
James Howard Kunstler’s podcast featured Daily Reckoning contributor Byron King for a conversation about money, metals and the economic reality in America. They start out conversation covering what is going on in gold markets and what is ahead following the patterns in 2016 and going forward in 2017. Byron King has been engulfed in research and extensive international travel, so having access to this exclusive podcast conversation is particularly insightful.
Byron King is a senior geologist at Rickards’ Gold Speculator. Mr. King is a Harvard-trained geologist who has been featured in a wide range of media outlets including The Guardian, Fox Business News and The Financial Times. He has worked in the oil industry and has a rolodex of experience in the natural resource sector.
When asked by Kunstler about the activity of gold over the past year and allegations of price manipulation King responded, “You are absolutely correct that the price of gold is being manipulated. I am not about to say that there are little gnomes in Zurich who sit around at 3AM and dumb futures contracts into the market to kill any rise in metals.”
“There is an awful lot of very bad groupthink going on. The world of economics is dominated by a groupthink type of academic concepts… that have this sort of monetary theory that we can do everything monetarily. They all think the same way. There is very little difference at the very margins in terms of how do we tweak the economy for equilibrium purposes. They even think you can have an equilibrium economy.”
When asked who has the ability to dump so much gold at one time he responded, “First of all, they are not really dumping the gold. They are dumping the contracts. There is a hundred ounces of contracts for every physical ounce.”
Kunstler then pressed King on the International Monetary Fund and its application of the special drawing rights (SDR), or world money. The geologist and finance expert noted, “It is central bank money. It is intended to back up central banks in terms of national currency. Let’s back up over 18 years and look at the failure of Long Term Capital Management (LTCM). One great big hedge fund took too much risk and failed. The rest of Wall Street stepped up and bailed out LTCM. Then in 2008, 10 years later, Wall Street failed and the U.S Federal Reserve stepped in and bailed out Wall Street.”
“Now here we are, 10 years later, when the central banks of the world are going to fail in what looks like the next year or two. The only thing left is the International Monetary Fund with the SDRs. They are going to back everything up with this world money. It is magic money. That is truly the last step, and we might not even take that last step. The SDRs could be something that people are not quite ready to accept.”
When asked about the Trump impact on the U.S economy he responded, “The idea that somehow we are going to change over forty years of history in the matter of weeks is misguided.” He then referred back to energy and the economy he noted, “I begin with the concept that everything within the economy, whether you subscribe to the PhD opinions or otherwise, everything is energy drive. If you take away energy, the economy goes away.”
The interview then shifted to a political tone and the idea that the Fed has an adversarial position against the incoming Trump administration King remarked, “The Fed has been extremely accommodating to the Obama administration. Although I think they would have been accommodating to anybody who was in office because the conventional republicans and democrats are slight variations of the same species.”
“I don’t the the Fed and its DNA of monetary policy is looking forward to having to deal with Trump. It would not surprise me at all if they decided to raise interest rates a couple of times in the years to come. They are going to leave him holding the fire and all of the bad policies. It is a disaster waiting to happen whether it happens under Trump or not.”