Why the Predictions of Hyperinflation and Economic Collapse Were Wrong

Doom and gloomers make good money selling fear. That’s something you won’t find here at Buy Gold and Silver Safely, just to get you to buy gold and silver. I am one of the few people who sell gold and silver and don’t scream “the dollar is crashing” or “hyperinflation” or “a crash is coming!” Would I make a lot more money selling gold and silver by using fear? Of course, but I try to write articles that are in line with current price action and decipher from all I read as to what you can expect next. While I am not perfect, and don’t get the recognition as those who use the fear tactics, I do have a nice reputation now and it doesn’t hurt that I have become better in my predictions.

In this article I am going to address some of those who have made predictions since the last financial crisis and who continue to make the same predictions year after year. These are the same type of forecasters that will eventually say “I’m right!” when in fact, they have been wrong for 3 straight years. I remember back in the late 70’s many of the Newsletter writers doing the same thing. Howard Ruff was one of them. He wrote a book in 1978 called How to Prosper During the Coming Bad Years. 2 years later the price of gold and silver crashed. In 1984 he wrote an updated version of the book, keeping the same title. The 80’s and 90’s were some of the best years known to the U.S.  In 2008 at the height of the financial crisis he updated the book, saying “it’s déjà vu all over again.” Well, it was as shortly after that updated version was released, we have seen one of the greatest bull markets in stocks ever. Howard Ruff has since hung up his spikes (retired).

What this shows, if you stick with the same theme, pretty soon you have egg on your face. The economy isn’t always in bad shape and the Federal Reserve can make those who continually call for a crash look a little foolish doing so. But maybe they will be right again? Sure they will. But wake up and see what’s going on in front of your eyes.

There are primarily 3 forecasters who have kept with the same theme of fear that I continually hear touted by the doom and gloom (popular) websites like Zerohedge.com or any gold website. They are; Peter Schiff (Euro Pacific Capital), John Williams (Shadowstats) and Gerald Celente (Trends Research Institute). Two of the 3, Schiff and Celente, are popular because they are great speakers. I enjoy listening to them. Their charisma alone can get you to invest with them or subscribe to their newsletter. But all 3 have been dead wrong of late with their continued mantra of crash, collapse, and hyperinflation.

Here are some quotes and videos as proof;

Gerald Celente – Trends Research Institute

In March of 2010 I wrote an article Is Gerald Celente Right About the “Crash of 2010?”

In that article I said the following;

I agree with Celente and the Austrians on the negative consequences of government spending eventually bringing down the economy, but I don’t see it happening as quickly as Celente does. GDP can’t keep growing fueled by government spending alone, however, Obama has a few more trillion to spend to stimulate the economy in 2010 as his self imposed spending freeze begins in 2011.

This was followed up with an article December 29th, 2010 titled What Happened To Gerald Celente’s Crash Of 2010 Prediction?

We have seen an up year in the stock market and for treasuries overall. Gold has moved higher fueled by additional quantitative easing and an increase by the Obama administration adding over $1 trillion to the budget deficit. Japan and China didn’t sell off their U.S. treasuries and U.S. wages have decreased. Developing nations had a great year seeing their quality of life improve from the “slave labor” levels Celente spoke of. Lastly, the Fed is still relevant.

I further speculated in that article about the stock market saying;

The Fed, with its new found powers given to them by congress mid 2010, has more tools to work with, including supporting the stock market. They also have holding banks like J.P. Morgan and Goldman Sachs to funnel money through. If they can get the stock market above 12,000, just maybe they’ll get America going again right?

Mass psychology is what we are dealing with here. With the CNBC cheerleaders leading the way, can the Fed actually get the economy going by pushing the DOW higher? Won’t Americans feel richer if they see their 401k statements showing more wealth? Won’t they then start spending their income and get businesses moving again? Won’t this then lead to a rebound in real estate?

The question is, will it work? This is what I believe to be the last rabbit the Fed has in its hat. If it fails, look out below. The U.S. consumer is key.

As it turned out, it did work out well for the Fed. What many discounted is the fact that if you throw enough money at something, it can make a difference. The Fed with Congress threw $9 trillion into the economy after the crisis of 2009. This was Bernanke’s plan all along as he outlined in a 2002 speech, Deflation; Making Sure “it” Doesn’t Happen Here.  The Fed literally threw the kitchen sink at the deflationary credit contraction we were going through. However, the effects of this action are still to be determined. My next book, Illusions of Wealth will explain more in a few months. Eventually, Celente will be proven right.

Celente’s latest video has him calling for a crash by the end of June 2014. This as the stock market breaks to new highs. I’ll hold my breath.

John Williams – Shadowstats

John Williams is mostly known for running a statistics company called Shadow Government Statistics. He does a good job of showing how certain government related numbers that come out each year utilize a changed formula for calculating. For example, the CPI has changed many times and most recently the way GDP is calculated differently. Each time these calculations change, they make the government economic data look better. For example, by changing the CPI they can pay less to Social Security recipients who are promised a cost of living increase each year.  These changes are what Williams keeps track of and are not a bad way of showing what the data would show if the old way of calculating. Of course seniors who do receive a paycheck know that what they receive isn’t keeping pace with the higher prices and know the CPI is flawed.

But Williams has been calling for hyperinflation for years, at least since 2008 with his HYPERINFLATION SPECIAL REPORT he sends out to subscribers. Every year he comes out with his hyperinflation calls and it’s like the boy who cried wolf. In his 2011 report he said “I don’t think you have until 2012 before this gets out of control and there’s hyperinflation.”

Peter Schiff – Euro Pacific Capital

Peter Schiff is fantastic to listen to. I first met him in 2006 at FreedomFest where the audience was sparse. It was before his Peter Schiff is Right videos came out with him calling for an economic collapse. He has been on CNBC quite a bit but lately is just brought on to mock as his opinions about gold going to $5,000 all the while it has fallen since the year 2011 have become a chicken little mantra for him. But eventually Schiff will be right and he’ll let you know it. In the meantime, the Peter Schiff is wrong articles and videos are popping up.

Schiff is an Austrian economist from the LewRockwell.com crowd as they continually promote his articles (and that of the aforementioned Celente and Williams).

I’ve sent Lew Rockwell my articles showing my calls in the past. He simply ignores them because I use the word “deflation” in them. The Austrians can’t have anyone talking about deflation as it defeats their “dollar collapse” mantra. But in chapter 4 of my first book, Buy Gold and Silver Safely, I did quote some Austrians who do have a different take on inflation. I could have joined the inflationary “in crowd” and perhaps Rockwell would have posted some of my articles and I’d have a bigger following and sell more gold and silver because of it. But I’ll take solace in putting the pieces together a little better than they have. My clients at least have benefited from it.

That said, I still listen to every Schiff video. As I said, eventually he will be right. But I also watch and read about everything I can. Just want to make sure I don’t miss the various views, including that of Williams and Celente, as they help me form my own. I also realize all of these guys sell investments, newsletters or forecast reports and have an agenda. I have an agenda too. It’s to provide my clients with the best advice possible. Perhaps you see that in what I write. Perhaps you don’t. Most of the time I just write because I enjoy it. Either way, I hope you enjoy it too and share my articles with others.

On To the Gold Market

Today I will reveal how I have a little inside information on how the gold market will perform over the short term. It has allowed me to make some good calls for turning points with the price of gold.

I get a feel from where the price is going based on my sales. But it’s not just my sales but that of my suppliers I get the “feel” from. This week there were more buyers, but the pent up demand for me is not market moving by any means. I have many things I personally look at to make my calls but the phone ringing for me isn’t as big as the phone ringing for my suppliers who are quite large. Of course it doesn’t help the phone ring when my articles tell people to hold off on buying. My list of those who want to buy but have held off is quite large.

Another one of my secret indicators to calling the gold market is how well my book sales do. Right now, they are down based on the Amazon.com ranking. People buy the book when gold is going somewhere. This is just human psychology. The book sales haven’t been great lately, hence my continued negativity. These two things of course are not the only thing I look at.

Whatever the pent up demand is for gold, it is small potatoes in the grand scheme of things when only 1% or so of the people are invested in gold. Financial advisors never recommend it (90% by my calculations). The CFP (Certified Financial Planner) books don’t address the industry well at all. Market makers (big banks) can have their way with it and have. The large ones have increased the size of their position in playing the gold market as they try and look for places other than making loans to make some profit. That’s why I address market makers a lot in my articles and why I am adamant that we have one more move down. 

The size of orders and the demand from larger players (hedge funds looking for opportunities as well as pension funds and endowments) will come in at some point. Hopefully my indicators and suppliers will give me the heads up to write my all-in article then. Just not ready to yet. 

I hope that helps clear things up a bit on my thinking. I want nothing more than to write the bullish case article. In the meantime, to take the guess work out of calling a bottom, my recommendation is still to dollar cost average into one’s allocation and go about your business. Time will take care of the rest. This by no means implies to put all one’s assets in gold like some who read this might speculate. I like a 10% in physical and another 10% into miners, possibly more.

I’ll write more about miners in a future article. I did recommend getting out of miners and into physical gold in September of 2010 when the gold mining index, the HUI, was at 512.56. Today it is at 208.53, a 145.80% decline. Physical gold’s average price was $1,271 in September of 2010 and today is $1,253.30, an $18 difference.

While the 20% allocated to gold and gold miners is something I feel I am qualified to comment on based on my experience as a financial adviser of over 25 years now, I still say I leave 80% to the “professionals.” But even the professionals don’t beat the market too often.  

Conclusion

You will hear the gold dealers that sell you high commission numismatic, rare, semi-rare, collectible coins scream hyperinflation and economic collapse the loudest. These are the ones making $250,000 a year for selling you $2.5 million of gold where I would have to sell $25 million with my commission at 1% to earn the same income. Of course I am being conservative here when I use a 10% commission as many gold dealers charge up to 30%. They simply use fear to rip you off, and that will be the subject of my next article.