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Alasdair Macleod: If Interest Rates Go Up, the Bubble Pops

Tom welcomes back Alasdair Macleod, Head of Research For GoldMoney. Alasdair discusses the Fed’s levels of reverse repos and quantitative easing of 120 billion a month. Since the banks can’t absorb all the extra liquidity-seeking returns, the Fed must step into the market.

Basel III’s net stable funding ratio requirement purpose is to reduce short-term deposits. These regulations exist to minimize risk with the banking system’s liabilities. The ratio takes the available stable funding, which is a liability and ranks them according to stability. Anything unstable is prohibited from being used against the asset side. These rules encourage banks to increase their reserves because more are required to cover their operations.

Basel III will increase volatility in the metal markets and should result in less manipulation. Governments should have a more difficult time directly interfering in the markets. Overall these regulations should be good for the gold market.

Alasdair says, “They know damn well inflation is not transitory, they are just hoping something will turn up. They will have to increase interest rates probably this summer and then the bubbles will pop. If they want to keep the bubble going they will have to do more QE. We are stuck in the situation where there will be only one outcome.”

The FINRA indicators for equities show a complete lack of fear in the equity markets. These figures are four times higher today than during the Lehmann crisis. He compares today’s markets with the middle of 1929 before the collapse.

If the dollar fails, everything fails on a global level, and it won’t matter what the local policies are doing. The way out is for countries to back their fiat currencies with gold. This won’t happen until there is no other alternative available, and that is why people need to own physical metal because the alternatives for a time will be useless. This will be a problematic situation within individual governments, let alone on a global scale.

Keep watching interest rates and try to be ahead of the crowd. When the bubbles burst, the fall of fiat currencies can’t be far behind.

Time Stamp References:
0:00 – Introduction
0:34 – US Treasury Flows
4:55 – Basel III’s Purpose
15:10 – Volatility in Metals?
16:46 – Rule Enforcement
18:23 – End of Manipulation?
20:22 – COT Report Accuracy
23:05 – Gold & De-dollarization
28:30 – Inflation Developments
34:10 – FINRA Investor Borrowing
38:02 – Global Bubbles
40:40 – CPI vs. PPI
42:25 – Dollar Printing Risks
46:37 – Concluding Thoughts

Talking Points From This Episode

  • Breakdown of the effects of Basel III on gold markets.
  • COT thoughts and accuracy of the CPI.
  • Global equity bubble and FINRA borrowing stats.

Guest Links:

Alasdair Macleod is Head of Research for GoldMoney. He is an educator and advocates for sound money thru demystifying finance and economics. His background includes being a stockbroker, banker, and economist.

Alasdair started his career as a stockbroker in 1970 on the London Stock Exchange. Within nine years, he had risen to become senior partner of his firm.

Subsequently, he held positions at the director level in investment management and worked as a mutual fund manager. Mr. Macleod also worked at a bank in Guernsey as an executive director.

For most of his 40 years in the finance industry, he has been demystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public in layman’s terms what governments do with money and how to protect themselves from the consequences.

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