Dundee Wealth Inc. Chief Economist Martin Murenbeeld is long on opinion and the gold market. "Gold bullion is in a long-term bull market. And that's going to go on for a number of years," he predicted during the recent Forbes & Manhattan Resource Summit in West Palm Beach, Fla. Analysts David Keating, Mackie Research Capital Corp., and Paolo Lostritto, Wellington West Capital Markets, also participated in this Gold Report exclusive, giving candid views of the global gold markets and plenty of reasons to be a gold bull.
"Gold bullion is in a long-term bull market. And that's going to go on for a number of years," Martin predicted during a recent presentation at the first annual Forbes & Manhattan Resource Summit in West Palm Beach, Florida. His remark was included as one of a handful of reasons to be bullish about gold and commodities.
Global Fiscal and Monetary Reflation
Martin noted that economists have known for some time that the retirement of baby boomers would create fiscal "stresses" unlike the world had ever seen. It would have been ideal, he said, if the world's developed economies had entered that period with budget surpluses but the onset of the global recession in 2008 made that notion impossible.
"Because of the 'Great Recession' we're going into the baby boom-retirement phase with some of the greatest deficits in peacetime history," Martin said.
Compounding that is something he called "convergence," a phenomenon whereby financial markets are giving poorer European Union countries like Greece and Ireland the same lending terms that such wealthy EU countries as Germany and France receive, sometimes as low as 3%.
He asked rhetorically, "What does a pathological borrower do when interest rates drop from 15% to 3%?"
But before you could dismiss those issues as faraway problems in faraway places, Martin took aim at North American fiscal policy.
He used two charts to aid his point. The first was from the U.S. Congressional Budget Office, the second from the Canadian Parliamentary Budget Officer Office. The message of both charts was identical—that, with current trends, the debt-to-GDP ratio would exceed 200% in both countries by the mid-21st century. A third chart outlining the debt-to-GDP ratio in Greece showed a similar growth curve.
"Debts blow up," he said.
The impact of the great recession was further illustrated by another slide that showed the U.S., Canada, Japan, Germany, France, Italy, UK, Greece, Portugal, Spain, OECD (Organization for Economic Cooperation and Development), China and India had all posted budget deficits in 2009.
Most of these deficits, Martin said, were related to stimulus measures designed to limit unemployment, as high unemployment is bad for "political health."
Yet another slide charted the growth in the U.S. monetary base from 1915 until now. The line was akin to a cobra slithering through the grass, and then rising sharply to strike on Sept. 15, 2008, the day Lehman Brothers went out of business.
According to Martin's chart, from that point until now—about two years—the U.S. monetary base has grown from about $900 billion to about $2 trillion, its steepest rise ever. But, he said, the U.S. Federal Reserve had little choice.
"I'm in full agreement with what the Fed did. The one thing that I have come to know after years of reading and writing about economics is that depressions really get going when you have a totally bankrupt banking system," Martin explained. "If all the banks had failed then, we would be having quite a different conference."
But these borrowing policies have left governments with few ways out. They can renege on promises, cut services, raise taxes or print more money, Martin said.
