QUESTION: Hi,
I have two questions:
a) do you believe US dollar has been kept artificially lower than it should be (or at least in long range trading range) by at least two central banks lately? if so how long you think it would last, years?
b) you remind many times gold does not yield so investors should avoid it at any cost – as the most investors have done. benefits of stocks are clear but why many investors still buy / have bought bonds even with negative interests or buy fiat currencies with very low interest levels.
BR, J

ANSWER: Yes. The central banks have been trying to keep the dollar down because a rising dollar will undermine Europe exposing the ECB total failure, and then there is the risk of major sovereign defaults among emerging markets who issued their debt in dollars. The IMF has lobbied hard with the Fed pleading not to raise rates for this fear of capital pouring into the dollar. They do not appear to be able to sustain this policy beyond January.

Gold is not something to avoid. True, institutions cannot buy gold for they earn no income. Gold is really for the individual and it will eventually be the hedge against government and the change in the monetary system which could come as early as 2018 but by 2020 if on schedule.

Institutions buy bond because they simply go by the book. Then pension funds often have restraints requiring various portions MUST be in government debt to varying degrees. Social Security is only in US debt. Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity according to most people. The value of fiat money is supposed to be derived from the relationship between supply and demand rather than the value of the material that the money is made of. But throughout history, ALL money has always been fiat. Bretton Woods collapsed because they continued to print money and the claimed backing was not there. So even the pretend gold standard was fiat. When money was gold coins during the 19th century, it was legal tender, not backed but anything else, and yet it still rose and fell in purchasing power. There is no such period in monetary history of such a Utopia or money remaining steady and a constant purchasing power. It has never existed.

The Organization of Petroleum Exporting Countries’ (OPEC) agreement to cut production is supposed to end Saudi Arabia’s policy of the last to years to pump-at-will. This has sent Middle Eastern economies into a tail-spin and the glut of oil has meant rising taxes and selling bonds to raise capital. With this new claimed reversal of that pump-at-will policy, there are of course the optimists who say oil should now soar, yet they overlook some very critical points. OPEC deals have routinely failed, and there is a real glut of oil in inventories, not to mention the reduction in oil demand rising from electric cars.

The EU first introduced mandatory 2015 CO₂ standards for new passenger cars way back in 2009. Mandatory targets for light-commercial vehicles come into play in 2017, which was passed back in 2011. Then by the end of 2013, the EU reached an agreement that will implement mandatory 2020 CO₂ emission targets for new passenger cars and light-commercial vehicles. Europe is applying these standards for 95% of vehicles in 2020 with 100% compliance in 2021 and the light-commercial vehicle standards are are required for 2020. Electric cars are becoming commonplace in Europe. Charging stations are seen just about everywhere including in London. This is not the case in the United States. Clearly, demand will decline for oil moving forward.

The optimists also overlook the reality of the oil production countries. OPEC cannot control the 60% of world production outside its membership. The United States is the largest oil producer. In the top five oil producing countries, only Saudi Arabia makes that list as number two. Of the top 10 producing countries, only four are OPEC members. The bottom line; OPEC can not manipulate oil prices any more.
2014 Country Production (bbl/day)

1 United States 11,973,000
2 Saudi Arabia (OPEC) 11,624,000
3 Russia 10,853,000
4 China, People’s Republic of 4,572,000
5 Canada 4,383,000
6 United Arab Emirates (OPEC) 3,471,000
7 Iran (OPEC) 3,375,000
8 Iraq (OPEC) 3,371,000
9 Brazil 2,950,000
10 Mexico 2,812,000
11 Kuwait (OPEC) 2,767,000
12 Venezuela (OPEC) 2,689,000
13 Nigeria (OPEC) 2,427,000
14 Qatar (OPEC) 2,055,000
15 Norway 1,904,000
16 Angola (OPEC) 1,756,000
17 Algeria (OPEC) 1,721,000
18 Kazakhstan 1,719,000
19 Colombia 1,016,000
20 India 978,000
21 Oman 951,000
22 Indonesia (OPEC) 911,000
23 United Kingdom 906,000
24 Azerbaijan 856,000
25 Argentina 715,000
26 Malaysia 697,000
27 Egypt 667,000
29 Libya (OPEC) 516,000
30 Australia 478,000
31 Thailand 422,000
32 Vietnam 316,000
33 Turkmenistan 276,000
34 Equatorial Guinea 269,000
35 Sudan and South Sudan 262,000
36 Congo, Republic of the 259,000
37 Gabon 240,000
38 Peru 180,000
39 Denmark 171,000
40 Italy 169,000
41 Germany 160,000
41 South Africa, Republic of 160,000
43 Japan 137,000
44 Yemen 127,000
45 Brunei 124,000
46 Trinidad and Tobago 116,000
47 Ghana 106,000
48 Romania 104,000
49 Chad 103,000
50 Pakistan 98,000
51 Uzbekistan 85,000
52 Cameroon 81,000
53 South Korea 79,000
54 Timor-Leste 76,000
55 Bolivia 67,000
56 Ukraine 66,000
57 Bahrain 64,000
57 Netherlands 64,000
59 France 61,000
59 Turkey 61,000
61 Tunisia 59,000
62 New Zealand 50,000
63 Cuba 49,000
64 Spain 40,000
65 Poland 39,000
66 Ivory Coast 37,000
67 Papua New Guinea 34,000
68 Syria 33,000
69 Belarus 32,000
70 Austria 27,000
71 Philippines 26,000
72 Hungary 25,000
73 Taiwan 22,000
74 Albania 21,000
74 Myanmar 21,000
78 Congo, Democratic Republic of the 20,000
78 Niger 20,000
78 Singapore 20,000
81 Croatia 18,000
82 Chile 15,000
82 Virgin Islands, U.S. 15,000
84 Guatemala 14,000
84 Suriname 14,000
86 Belgium 13,000
86 Estonia 13,000
88 Sweden 12,000
89 Czech Republic 11,000
90 Finland 10,000
91 Lithuania 9,100
91 Slovakia 9,100
93 Greece 8,700
94 Portugal 7,100
95 Mauritania 6,000
96 Palestine 5,800
97 Morocco 5,100
98 Bangladesh 4,800
99 Switzerland 3,900
100 Bulgaria 3,400
101 Aruba 2,800
102 Jamaica 2,100
103 Paraguay 2,000
104 Belize 1,800
105 Netherlands Antilles 1,500
106 Uruguay 1,200
107 Barbados 1,000
107 Georgia 1,000
107 Latvia 1,000
110 Ireland, Republic of 900
111 Puerto Rico 700
112 Costa Rica 300
112 Slovenia 300
114 Jordan 200
114 Malawi 200
114 Tajikistan 200
114 Zambia 200
118 Ethiopia 100
118 Hong Kong 100
118 Zimbabwe 100