Gold as a Leading Indicator for Inflation and Recession (w/ Grant Williams and Ronald Stoeferle)
Grant Williams: Ronnie Stoeferle, fund manager and partner of Incrementum and perhaps most widely known as the author of the In Gold We Trust report, which is must reading for everyone in the gold industry. Welcome. Ronnie Stoeferle: Hi, Grant, good being here. Yeah, you and I keep meeting in London in the freezing cold in December. We need to do something about that. And every time I tell you I almost got killed. I know, right? In a car accident, because Brits are driving on the wrong side of the street. We've been doing it for a long time. You just need to start looking the other way. This is your problem, not ours, OK? Look, there's so much going on, but I want to kick things off and talk to you about inflation, because you tweeted out a chart recently, which I saw-- and went wow, that's a really cool chart. And then I saw this thing spreading like wildfire. It was just a chart of inflation and what happens immediately after rising inflation. It shows basically that before every recession, we had a surge in inflation. And my call is that we will see a recession coming pretty soon. Perhaps we're already in recession. Now, we were talking the US here, right Yeah, US recession, yeah, actually, I've been to the US. I'm presenting in a conference in September. And I came back, and I tweeted say Trump will become president. He will get elected. And of course, then was the sex scandal and everything. Yeah, I saw that. No, that's not going to happen. I was sure, because it actually felt not like in a recession, but in a depression in the US. Well, it's interesting to say, because I was saying the same thing and got the same kind of pushback. So what was it for you that kind of gave you that sense? Well, I'm talking to quite a lot of people, not just businessmen, but also taxi drivers, bartenders, people that are working at the hotel, and it just was the general feeling that the economy is not doing well. And I mean Donald Trump-- he had the great slogan, make America Great Again. So people-- they were openly saying, I'm voting for Trump. Or perhaps they were saying I'm voting-- I don't want to vote for Hillary Clinton. But I think that they needed this is real change that Obama predicted and really didn't happen. So I think every time the economy suffers, people want to vote against the status quo, and that was happening in the US. Now, I think that inflation, of course, is picking up at the moment. Actually, gold is, from my point of view, the best forward-looking indicator for rising inflation. It started rising the beginning of 2016 already. Now, copper was breaking out-- zinc, coal, and so on-- they're showing clearly that inflation might become a topic. In fact, I think it's funny that Donald Trump achieved what the Federal Reserve didn't achieve for years, meaning raising inflation expectations. Yeah? So if you have a look at the inflows into inflation-protected bonds, for example, TIPS, it was huge the last couple of weeks. I like the fact that you're using the word uuge rather than huge, which I think Trump has taken from the German, but apropos. But the interesting thing is that our inflation indicator that is crucial in our investment process just recently flipped to disinflation. And I think it's some sort of a contrarian signal at the moment while everybody is talking about inflation, but the fact that gold and silver are suffering bigtime at the moment, and the gold/silver ratio is actually rising, which is a very strong for deflation. The fact that oil is basically going sideways and doing nothing-- agriculture-- I don't see too much inflationary developments there. So I think that due to the enormous strength in the dollar recently-- that was a huge breakout. And this acts very, very much deflationary. We shouldn't forget that on the bond markets-- I don't know the exact number. Somebody wrote on Bloomberg it was $1.8 trillion that got just wiped out. It's paper losses, but it's still acting very, very much deflationary. So I think that we perhaps we'll see a final move in inflation. But for the mid to longer term, deflation might be the name of the game. And perhaps this inflationary development recently will be a sign for a recession. And I think that people underestimate the base effect. Like one year ago, oil was collapsing. It was down at $25. And now we're trading at $45, between $45 and $50. So you've got this base effect into the next couple of months. So inflation rates in the US year on year will be, depending on the oil price, between 2.5% and 3%. And then the Fed will probably be out of the comfort zone. So I would say for the shorter term, inflation, but longer term, I think deflationary pressure is just enormous. Let's talk about your indicator, because it's something-- it did flip to inflationary a while ago. Now, we've seen the inflation. Now, it's flipped to disinflated. Talk a lot about how it's constructed and how it works, because I think people will be fascinated by it. We wanted to keep it simple. I'm not only from Austria, but I'm also a follower of the Austrian School of Economics. Yeah, and we'll talk about that in due course. And based on the Austrian School, first of all, there's monetary inflation, then there's asset price inflation, and then there's consumer price inflation, which is measured by all those weird calculations in government statistics. From our point of view, we have seen a monetary inflation. We have seen asset price inflation-- big-time real estate, art markets, stocks of course. At the next stage is consumer price inflation. And what we did with this indicator is we said, OK, we have to keep it simple. We are looking at historic inflation episodes. And actually, what worked really well was gold itself. Gold is a brilliant discounter of future inflation. And also the gold/silver ratio is great. So silver outperforming gold means rising inflation rates. So the gold/silver ratio has to fall if you want to see rising inflation rates. And it's also a great confirmation for the price of gold itself. So every time the gold/silver ratio is going up, you should become a bit cautious regarding gold. So that's what we did for the inflation signal. I can't give you the exact recipe. I understand that. But for example, it's that the gold/silver ratio. We focus on relative prices, of course, because in this world, I think relative prices are much more important than nominal prices. We've got, for example, mining stocks versus the S&P. We've got the gold price itself. We've got commodities. Without a big bull market in commodities, especially oil, we won't see any bigger inflation. So that's basically it. And then it's showing us only three stages, which is rising inflation, falling inflation, or neutral inflation. And in March, it gave us a signal for strongly rising inflation. And now, in mid-November, it gave us the disinflationary signal. How far ahead does it tend to be? Because the inflation call at the time-- it's only now when you look back on that and go, wow, those guys called that, and that's what we've seen, whether it's not gotten out of control But there's certainly inflationary pressure. And it's being acknowledged now. Just as people start to acknowledge that, your signal is flipping to disinflation. Is it three, six months lead time generally? It is. And we're seeing that the inflation signal works extremely well. Perhaps we should have focused only on the inflation signal, because there is some tactical trading that we're doing around the signal. But the inflation signal was brilliant. And normally, the lead time is between, as you say, three to six months. Let's get to gold, because this is something that you and I have spent a lot of time talking about in the past, something that we both watch very closely. Talk about how gold performs in each of these scenarios, because there's a lot of debate about its veracity as an inflation hedge. Some people say it's a terrible inflation hedge. Some of them think it's the perfect one. Not a lot is said about how it performs in deflation, which is arguably even better. But just talk a little about how you see gold performing in those environments. I think there's one big point that one has to make. It's not about the absolute level of inflation. It's about the direction. Do we see rising or falling inflation? If we see inflation rates at 7% like in 1974, and it's going down to 3%, that's disinflation. And that's a horrible environment for gold. And we have seen in the '70s this big mid-cycle correction. And it was due to the disinflation. So we wrote more than 1,000 pages of research about gold. And we kept it simple, and we said the direction of inflation is really important. And the second most important thing, which is kind of related to that-- the direction of real rates. And in the last couple of weeks actually real rates were rising. So we have seen opportunity cost for holding gold were rising. Of course, Grant, we can talk about the calculation of inflation for hours. And we know that it's rubbish, and that your inflation basket is different to mine, and those of my parents, and so on. But still, this is what 99% of the people in this industry focus on. So it's not irrelevant, I would say. I think that's the direction of inflation is crucial. We have seen rising inflation rates going forward. I think there's just so much deflationary pressure, as I've said, the US dollar. People underestimate that most of the liquidity in the market is not controlled by the central banks. We often saw those charts-- central bank balance sheets going exponential. But central banks only control a very minor part of the whole money out there. So the banking system is having, as we know, huge troubles, and it's kind of acting deflationary. And of course, we draw this picture of monetary tectonics-- inflation and deflation pushing against each other. On the inflationary side, there's politics-- there's central banks, of course. And on the deflationary side is the market-- the banking system. So that's a huge fight going on. I think above the surface, it looks kind of calm. But below the surface, it's boiling. And there's quite a lot going on. And I think the mess that we have seen in the bond markets the couple of-- a couple of days-- might be the trigger for real troubles in the equity markets going forward. I think the whole Trump mania is kind of fading out now. People realize that he's not the savior, that he cannot change everything within weeks or months. So I think there's way too much confidence in Donald Trump. Yeah, it's been an interesting one. How have you navigated this year as a fund manager in the precious metals space? When you and I sat down here and talked last year, the precious metals markets were at the very depths. Sentiment was awful. You and I were both positive. But the sentiment was undoubtedly really, really poor. And almost to the day, it turned around, and we had this crazy bull market of eight months where the gold price went up by 25% or 30%, and the equities were up 150%. How have you managed that process? Because I think it's important for people at home that invest in precious metals themselves to understand how a fund manager handles this, because it's a tough thing to do. It is an interesting year, I would say, because as you said, last year at this time at the Minds and Money Conference in London, I arrived, and I thought is it the wrong day? Did I mix up something? Because there was basically nobody there. And it was really close-- That was probably the day I was speaking. That's why there was nobody there. It was really close to the capitulation. And in fact, one day after the Fed hiked rates, gold made its low at $1,046 or something like that. And then we have seen a really rough start into the year. And then equities were selling off, and this was the time when gold kind of decoupled from equity markets. And this is the beauty of gold. It's negatively correlated to equities. It's very low correlation to bonds. So from a portfolio perspective, it just makes sense. So navigating through this year, it was an interesting year. I think we got this inflation signal in March. As you know, Charles Dow, the godfather of technical analysis, the founder of the Wall Street Journal, he said, in every trend, there are basically three stages. And I always compare it to parties. The first stage is the accumulation phase when really big contrarian macro guys start piling into gold against the media, against the forecasts by analysts-- so when the sentiment is extremely negative. And we have seen the Stanley Druckenmiller, Soros, Singer-- all those really big macro guys started piling into gold last summer and last fall. This is like the stage at the party when it didn't officially start yet. But there are sometimes people coming at 6:00 or 7:00 when it officially starts only at 9:00. So there's not too much going on. Then you've got this public participation phase, which is the longest and most interesting phase of a bull market. And this is when the media becomes interested-- when analysts say, OK, perhaps we should add some gold to our recommendations between 5% or 7% when analysts raised the forecasts when the media starts writing in a positive way about gold again. And this is, I would say, at the time at the party-- I'd say between 10:00 and 2:00 where really people start drinking. I'm home and in bed and asleep at 10:00. Me too. And we have seen the Commitment of Traders report improved. Sentiment is extremely negative. So I think that's a positive set up. And then, as we know, the third stage is the distribution phase when you should start thinking about getting out when the media sentiment gets extremely positive. I'm showing one headline by JP Morgan published in 2011 in August saying JP Morgan wants that gold might go parabolic rising to $2,500. And it was pretty much nailed. Yeah, that was $1,900. Yeah. I just want to know what's happening at the party now, because like I say, I'm always asleep, so what the hell's going on in the party in this phase? I don't know. I think I'm the one-- I'm usually go a bit earlier. So perhaps it makes sense to have to leave at like, I don't know, at 1:00 or 2:00. Perhaps we're missing out the best part, but it's safer for the long-term health, I would say. Right. And it's funny. You mentioned back then Stan Druckenmiller and his very public disclosure that he's divested himself of all his gold, which amazingly just catches so much more-- it's amazing to watch the media make so much more of that than they ever made about the fact that he bought it and said, I need to own gold now. It's a really risky environment. One thing that I find interesting was that he owned the ETF. He didn't own gold. So I don't think this was a trade for him. This wasn't necessarily something that he was going to have long term. But what have you made of that? I haven't seen anything from Singer. I haven't seen anything from some of the other high-profile guys. But Druckenmiller does move markets. Yeah, it also concerned me, I would say. We basically predicted that Trump will win. And we thought that gold would go much stronger and that equities would be selling off, and we positioned ourselves for that. Well, and you were right for about three hours. Yeah. Yeah. And there was a huge reversal. I think I will never forget that reversal was brutal. And I think, for the time being, Druckenmiller made the right trade. But I think when it comes to gold, it's really important to ask what is the motivation? Why am I buying gold? Do I want to buy performance gold? Or do I want to buy gold as, let's say, safety or security gold? That's very different, because if you want to make performance, and we say, OK, gold might go to, I don't know, $1,400 in the next couple of months, you can buy the ETF. You can buy futures-- whatever you can buy-- certificates. You don't care about counterparty risk. But I think people like us, we're seeing the optionality in gold. I think that gold could go to $2,300, $5,000, whatever. Further down the road, there will be high inflation. There will be a monetary reform. And for those environments, you want to have gold. But if that's your motivation, you want to avoid counterparty risk. So you want to have physical gold, of course. You want to have stored it safely. You can buy mining equities for leverage, of course. But I think it's really important to make this distinction. And what I'm showing, and we also wrote that in the last report, I'm probably not traveling as much as you do, but we're traveling quite a lot. We're talking to all sorts of people, to pension fund managers, wealth managers, retail people, cab drivers or nowadays it's Uber drivers. Soon, it will be robots. Yeah. But when it comes to gold and the whole post-Lehman economy, we said there are basically three camps. There are the believers is the first camp. They think know we're in a longer cyclical crisis. But low rates and quantitative easing, it's done its job. Politicians did a great job for them. Gold this is a pet rock. It's useless. Then there's the second camp, and those are the skeptics. And the skeptics, they've got some serious doubts. They know that treating a problem that was caused by interest rates that were way too low and basically too much debt, treating debt with even more of that doesn't really make sense. So the gut feeling is perhaps we should have some holdings in gold. And those are, from my point of view, the marginal buyers. Those are perhaps the Western financial investors buying gold in a very pro-cyclical way, because having a look at the ETF inflows, it always follows prices. And as we know the last couple of years, Indians, and Chinese, and people in emerging markets-- they didn't stop buying gold. They were buying like crazy central banks were buying like crazy. Only Western financial investors didn't invest in gold. So this skeptics group is really important at the moment. I think those are the marginal buyers. And then the third camp, those are the critics, probably people like us understanding the monetary system, understanding the Austrian School of Economics. We know that we're not in a cyclical crisis, but in a systemic crisis. And for this camp, counterparty risk is essential. And we are buying gold because of this optionality. So I think that it makes sense to differentiate into this broadly-spoken three camps. And the interesting thing is it's a one-way street. We will probably never go back and say, what Janet Yellen is doing, I think it makes sense. I think what Mr. Kuroda is doing-- I think he's doing a good job. Negative rates will make it better. It's a one-way street. And that makes me really confident for gold. Probably in the next crisis, whenever it starts, this camp of the critics will get bigger and bigger. And the skeptics, they will start piling into gold again. Yeah, it's a really good-- I've never heard anyone talk about it like that. It's a really great point. I can envisage a point in the future where I don't feel the need to own gold. Right now, I wouldn't be happy without it. And I never think about it in terms of price. I always think to myself if I can swap those gold bars for that house on the water in Sydney, I'll do that trade. I don't need the gold anymore. But it's a great point that once you get there-- I'll never not be skeptical. I can't go back to not being skeptical. So you're right. It is a one-way street. I want to talk about Austrian economics a little bit, because it's something that really doesn't get its fair share of exposure. We live in a neo-Keynesian world essentially. And that's really the only school in town. But just for the people who are unfamiliar with Austrian economics, perhaps you could just talk about some of the founding principles of it just to give people a sense of where it comes from, because a lot of people talk about Jim Walker is a great Austrian economist, and he's been on air talking about it. And we haven't really had a chance to kind of explore that in any depth. I know it's an enormously broad question, but just the basics would be-- Sure. In two words, it would be common sense. I thought they would be bugger off. But carry on. I like yours better. Common sense is not so common these days. Yes, that's right, true. And the second brief description would be the no-free-lunch school of economics. Did you say that? No, there's a T-shirt business in that. That's great. So basically, the Austrian School of Economics is very modest. It says you can't predict the future. And like one year ago, who would have expected the Brexit, and Trump, and financial markets acting that way. So the Austrian School says we shouldn't try to predict the future, and we shouldn't do that by modeling it with very, very complex models with so many contributing statistics and so on. So we should think in scenarios. What's really crucial for me as a participant in financial markets is the view of the Austrian School when it comes to interventionism. It just makes it worse. So an Austrian approach to the whole economic situation would be a laissez faire approach-- just let it clean out. We will have a hard time. But afterwards, it will get better. But intervening every time you are seeing this marginal utility. So you need more and more QE to have an effect. You need more debts to have an effect. That's a really important insight I would say. The Austrian business cycle theory is crucial basically saying that central banks distort the business cycle. And we've got those boom and bust cycles, as we all know. And the amplitude is getting bigger and bigger. That's really important. And I think why we wrote the book about Austrian investing-- we call it Austrian investing between inflation and deflation. I think it's crucial to understand money creation these days, and it's crucial to study monetary history, to study history in general, and most of the charts that we are presenting go back to August 1971. We all know what happened then. I think that the monetary system that we are in, Keynesian and monetarist, they don't care about it. It's a given. We've got fiat money. And it just works that way. Let's discuss GDP. GDP-- it's just a number. It doesn't say anything about the quality. I can crash my car seven times a week, and it will actually improve GDP. But will it make our economy more prosperous, more healthy, I don't think so. So also the capital structure is really important for Austrians. And for them, capital is not the number. It's also in here. Human resources are a capital. The entrepreneur is really important and really crucial to Austrian economists. But coming back to the monetary system, I think that as an investor, you should care mostly about our monetary system at the moment. And you can kind of anticipate what will come next. So unfortunately, nowadays I don't hear anybody talking about business models, about valuations. It's just basically anticipating what the Fed will do next and what will, I don't know, this governor say next. It's all about that. And knowing the history of our monetary system and Austrian economics, you can say that this probably won't end very well. But it's interesting, because when I first discovered the Austrian School, it just made so much sense to me, right? And it's one of those things you just get drawn to. You go, OK, I understand this. And Keynesianism has had its day in the sun now. And when you look at the cyclicality inherent within the Austrian School, it seems as though we're getting to that point where Keynesian economics will be discredited, and the cycle will shift. And the saying-- we're all Austrians now-- it feels like we're going to be forced into the Austrian School simply because Keynesian theory is exhausted. They can't do any more of it. And we are going to have the reset that is fundamental to Austrian economics-- this idea of sound money of some form or another. It almost feels like the world's going to be forced into that, which is why I'm keen for people to understand the principle of things, because I think that's where the cycle takes us next. First of all, the Austrian School, it doesn't make any forecasts. No. And that's really crucial. So we all know that there is a huge bubble in the bond market. But has it already burst? Or will it burst in a couple of years? I don't know. And from my point of view, there are often comparisons made between Ronald Reagan and Donald Trump. And I don't know. Actually, my first name is Ronald, because my dad actually really liked Ronald Reagan also as an actor, yeah. So my dad wanted to call me Sven, which is a Northern German or Scandinavian name. And my mom wanted Wolfgang, which is a typical Austrian name. So for some reason, they came up with Ronald. So I liked Reagan quite a lot. But some of his policy was really Keynesian. And I think what we have seen from Trump so far with these huge infrastructure programs is very Keynesian policies. So I would really hope that somebody like Ron Paul would become president. But you know, those Austrian approaches are-- I think that the media and the mainstream doesn't really like it, because we have a basically anticipated or we consumed so much capital from the future that at some point, somebody has to pay the bill. And it's the same Austrian schools as there's basic fundamental economic laws. And those are the same for a family, for one community, for one person, but also for the government. Of course, the government has got different opportunities to delay the effects. But the laws are totally, totally right. And coming back to Donald Trump, I think it's really fascinating. I don't know what you're thinking about it. But I think that the confidence by the market that is put into Donald Trump-- everybody thinks the economy will turn around immediately. And I just said, you can't treat the disease by just changing the doctor. He cannot change the country or the world itself within weeks or months. So all those stimulus programs that are Keynesian that are debt financed, they will have an effect sooner or later, but we all know that this marginal utility of new debt-- that it's decreasing very, very quickly. So making the comparison between Trump and Reagan from my point of view really doesn't add up, because Reagan-- he got voted into a recession basically. Then there was a couple of months-- I think in 1981 the economy did a bit better. And then there was a big recession again. And he acted on falling interest rates. But debt levels were much lower. And Reagan raised debt levels, I think, by 189%. Well, as luck would have it for my presentation, I've got all the numbers. So I can tell you. When he took office, the CPI was 14.7%. It went down to 4% during his time. The 10-year yield was 10.5%. It spiked to 15%. It came down to 8.75%, I think. The S&P was trading at seven times earnings, and it expanded to 22 times. And that from a debt point of view, debt-to-GDP was 30% when he took office. It went up to 49%. And the national debt was $863 billion. He was the guy who took it over a trillion to $2.68 trillion-- so all tailwinds, which all helped him. But the fascinating thing is the first two years of his office, even with all those tailwinds, the S&P fell by a quarter. This Is how it goes. I completely agree with you that this euphoria post Trump is-- I mean, it's beyond ludicrous to me. I just look at what's happened. Clearly, Japan is the model once again. We are back in that situation-- stimulus, infrastructure spending. Japan has done 26 infrastructure budgets since 1990-- one a year. And there was a Goldman study published that said the effect of this, the sugar rush, generally lasted less than a month. And yet we really think that when Trump does it, it's going to change things. It's not. I think to your point, what people are looking through is the fact that they're not assuming there's going to be a recession. They're assuming he's going to get to these infrastructure projects next week, next month. Chances are it won't be till the end of next year. And I think the odds on there not being a recession between now and then are tiny. I think your partner and your friend Raoul wrote a brilliant piece about recessions. And he said I think that the statistics was that every time there was a two-term presidency, the newly elected president started in a recession or next year after-- --since 1910, something like that. Of course a recession is a extremely contrarian call at the moment. But I've read an interview with the CEO of Caterpillar. And he basically said, you know, it's going to take time. And there will be two or three quarters when all those stimulus projects will be implemented. And then there will be kind of a lag until it really shows an effect. But as we know, the marginal utility is crucial. We're seeing it-- and if it would work in Japan, there would be no need for 12 rounds of quantitative easing. So I think at the moment, the market is all about greed and not about fear. And I think it will be a rough beginning into the new year-- perhaps a bit similar like last year. And actually, I am making 10 forecasts. I'm doing that every year at the Munich Precious Metals Conference and last year had 9 out of 10 right, which I was excited. What did you get wrong there, just out of interest. I said that Angela Merkel will step down. I think that's a fairly decent one to get wrong if you're going to get one wrong. But for the next year, I said that Trump will win. OK, that is already right. And I said that the Fed will actually not hike rates in 2017, but will go back-- will lower again or perhaps implement some … In 2017? '17, yeah. And one more thing about Reagan that I wanted to say-- I forgot that before. You know what happened in 1985 when the dollar was really, really strong? That was the Plaza Accord. And Raoul and also you made a great call on the dollar. I was a bit more bearish on the dollar, but it's just broke out of this huge triangle. And probably the dollar is the most important number to focus on at the moment. If the dollar continues to go through the roof, there will be major consequences for the bond market and for the equity markets. And I don't know who's the weakest link, if it's going to be emerging markets. Perhaps it's the eurozone. We've got so many elections coming up in the next year. It's a mess basically. But if the dollar really goes through the roof, it's going to be quite a ride. It's going to be really volatile on the markets. Raoul and I have debated this back and forth, and everyone has to have on the dollar right now. I don't think you can say it is irrelevant, because it clearly isn't. You bring up the Plaza Accord. My sense is it wants to go where Raoul thinks it's going to go. But I can't see how we don't get to the Plaza Accord much sooner than we did in '85. They let it go a long way before they stepped up and did something about it. I just think now the damage would be so widespread and so bad, not just for emerging markets, but for the US too. The irony of Trump is that he's going to bring all this stuff back and strengthen the dollar and make everything more expensive again. I just don't see how they can allow it to go that far without everybody stepping in saying enough now. We need to cap this. So I don't know how that ends up, but sooner rather than later, I would think. I think that I'm bringing up in my presentation a couple of quotes from Donald Trump. And he's talking about the dollar quite often. And he wants a weak dollar, not the king dollar. Everyone does, yeah. And we shouldn't forget he is a real estate guy. So he needs low interest rates. He needs cheap leverage. But I don't know if the Fed or politicians are really in control of the dollar. On the surface, it's not a mandate of the Federal Reserve. They're mentioning the dollar's strength quite often. But I think that the topics behind this-- behind the obvious things like this funding markets that you are talking about quite a lot, the euro dollar market that Paul Mylchreest is doing a tremendous job on, which is really complicated stuff. Absolutely. It's not easy to grasp. But I think they are huge imbalances in the dollar market. I'm not sure if they really can orchestrate some sort of next Plaza Accord. What's also interesting is that Trump is talking about the gold standard quite often. There are great quotes about the gold standard, and we all know that Julie Shelton is some sort of economic adviser. And she's a sound money advocate. So I once said in an interview I don't know if Trump is going to be the best or the worst president of the last couple of decades, but he won't be average. Right. Yeah. It's really going to be interesting. For example, the way he talks with media is so different to the presidents before. He's twittering so much. So I think it's really interesting. But I don't think that he's going to introduce some sort of a gold standard. It's just so far away. No, I agree. These changes don't happen. No one chooses them. And that to me is why Austrian School isn't in the mainstream, because the guys in power will do anything to extend the cycle, and that's not what Austrian economics is about. You don't choose to take that. But you don't choose the reset. The reset happens. And when it does, conditions change. So just looking forward as an Austrian who doesn't make predictions, but you make 10, let's talk a little about what you see happening in 2017. You don't have to give away your 10 predictions. But just talk a little about some of the things that you think are going to be important and people should be focused on. Some of my predictions are, first of all, that there will be slow growth in the US or even a recession. But inflation my hit 3.5% to 4%. And we have had that in 2011 actually. And it's no coincidence that gold was on its all-time high, at least in nominal terms in 2011 when inflation rates hit at 4%. I think that there will be some sort of eurobonds being introduced. They are talking about European defense bonds. Now, is this a bailout of the banking system in Italy, for example? Or is this just more QE by a different name? No, it's just that European defense bonds-- I think they would just try out if there's going to be- - If people would care about it. It would be the first stage leading to eurobonds. And of course, with all those elections coming up, it's going to be an interesting year in the US, in the eurozone. We all know that the European banking system is a mess, and there's no easy way out of that. What are the other calls? I'm saying that commodities make their lows, although they're diverging quite a lot, I'm pretty confident on oil. I think people-- they overestimate the elasiticity on the supply side. It's not like that oil is at $50 again and supply rises significantly. So I can imagine oil going to $60, $70 easily without any political events. But in the face of a strong dollar, which obviously the charts going back as far as you want would say would be almost impossible. Yeah, but you know, those correlations change. We've got a strong negative correlation between gold and the US dollar, of course. But there were quite a lot of times when gold and the US dollar were actually rising. And I think that might be in the cards going forward as well. So I don't remember the other main calls that I'm making. I think that gold made its lows. I think that silver will perform more than 50% next year. In fact, I'm the most bullish forecaster on silver. The guy at Bloomberg called me and said Mr. Stoerfele. It's probably a typo. You said your long-term forecast for silver is $42. And I said, no, that's not a typo. It's not $4.2. It's really $42. And he said, oh, that's outrageous. It's crazy. But that's where it was four years ago. That's not a bold-- Exactly, yeah. --call in the scheme of things. It seems one now. Exactly. It's interesting how quickly the previous high becomes an outrageous forecast. Yeah. The same with $1,900 gold. We were there four years ago. I think the structural case-- the fundamental case for gold is much better than ever. And we all know that central banks-- the interesting thing is, Grant, we are sitting in the same boat like central bankers, because they desperately want to create inflation. And that's when you hold gold, you want rising inflation rates. The thing that I criticize is, and I'm showing a quote from Peter Praet, who is the chief economist of the European Central Bank. And he openly says in an interview, we're printing money. Whatever it takes, we will get inflation rates up. But we will get them up to slightly below 2%. And this is this hubris. We all know. And that's also my Austrian view. The economy and the financial system-- the society. It's not a machine. You cannot work on it like on a thermostat. OK, we're at 2% inflation. Now, we go back and raise interest rates. It won't happen that way. So I think an inflation overshoot can happen. The odds are much higher than discounted at the moment. So yeah-- I was lucky enough to see a preview of your slides, and that slide really stood out to me, this slide here, showing exactly how fast inflation gets out of control. And it always happens, because ultimately, it's human spirits right that drive that. It's this expectation idea. And so I think that that's a really important chart for people to look at and understand that-- I mean Peter Praet is right, they will not stop until they get inflation. It just probably won't be the inflation they want, because it never is. Exactly. Exactly. And on this chart, people were criticizing me, because I said, this one is the First World War. The second one is after or like Second World War, and the third one is 1972 to 1974. Those were really historic times-- big times. And I say, just open the newspaper. You are exactly right. Exactly right. I think that the world is basically more fragile than ever probably. There's so many conflicts unfortunately all over the globe. The financial system is stressed. There is huge political change going on in every country. So those are truly historic times. And oftentimes, sharply rising inflation leads to people not being able to feed themselves. It leads to chaos. We saw this in the Arab Spring. So look, it's been a fun conversation, as it always is. I hope we get to do this again next year, but perhaps a little bit warmer weather. But for now, Ronnie, thanks so much for joining me. Thank you very much, Grant.