openpolitics.com

David Hay: Restarting Quantiative Easing (Grant Williams Transcript)

David Hay:

To your point, that’s a great point, and I didn’t want to forget that, so I’m glad you brought that up, is that you can actually own Newmont Mining, which has been crushed for a variety of reasons. Some companies specific, they’ve shot themselves in the foot a bit, but it’s got a 4% dividend yield. So if you want to get a 4% yield rather than buy a 10-year treasury, which pays barely over that, I think Newmont Gold, Newmont Mining is way more attractive at this point. If you and I are right, and I think we both believe that the only plausible end game for the federal government, the US government is to basically get back to QE. QE six, maybe it would be at this point. Restart their magical money machine. And by the way I don’t think Jay Powell will be there for that.

So I’ve got a few renegade predictions. One is that we’re going to see rising interest rates and a rising oil prices and a recession. But I also think we’re going to see Jay Powell resign before… he just won’t go along with another QE. And I think he will then pass the baton to a more politically compliant individual. And at that point they will get back to doing QE. I just don’t see how they’ll avoid it. Now, they’ll try to delay it, they’ll try all kinds of other tricks before they get there. And if we’re right about that, and maybe I’m putting words in your mouth, you can correct me if you disagree with that. But if that is the ultimate outcome, I don’t see how gold doesn’t just go absolutely ballistic.

Grant Williams:

I’m surprised it hasn’t done that already, as anybody listening to me will probably know by now. Let me dig into that comment about Jay Powell because I find that really interesting. The impetus for QE has always and consistently come from within the Federal Reserve. So I’m curious as to why you think he might resign rather than go along with it. Where is the call going to come from for QE? Is it going to become a political issue rather than a central banking issue? And so, how does that transmission mechanism work?

David Hay:

Yes, I think there’s going to be tremendous pressure from say Congress and maybe even within the Fed itself to monetize. And I do have to give Jay Powell credit and my book Bubble 3.0, I wish actually was published in very early 2022. I was very critical of Jay Powell Powell and I think deservedly so. I think when he publishes his memoirs, he’d probably admit that one of his greatest mistakes was to assume that inflation was transitory in 2021. But I have to give him credit that I would’ve assumed under the severe market stress that we saw last year, which was the worst year for balanced portfolios since 1871. So you got killed in stocks, you got killed in bonds, at least longer term bonds. You would’ve thought that the old Jay Powell would’ve folded like cheap lawn furniture, and gotten back into his easy money mode, the big easy, but he didn’t.

He stuck to his guns. He’s continued to stick to his guns and found out that unlike 2018, that if he did that the world wouldn’t shake apart. So you got to give him credit. But I think he’s much more concerned about his legacy at this point than he is about being politically popular. But there’s sure a whole lot of people at the Fed that want to be politically popular. And I do think that’s one of the reasons why we are in a structural inflationary period is the politicization of the Fed that’s gone on. And he’s at this point kind of the lone opposer of that trend. But that’s why I think that he’s not long for this world, but I think it’ll be his choice. I don’t think he’ll be forced out, but I could be wrong about that. That’s a really extreme prediction, but I think it’s a different Jay Powell than we’ve had up until this time.

 

Read Original