The Gold Report: When we last spoke in October, our conversation focused on quantitative easing in the U.S. Since then, there's been a lot of news focused on the Middle East and North Africa. The people of Tunisia and Egypt have successfully overturned their governments. Now there are significant civil uprisings in Libya, Bahrain and Yemen.
Bob Moriarty: The cause of all the turmoil in the Middle East—and what's going on in Wisconsin for that matter—has nothing to do with religion. It has nothing to do with democracy. It has everything to do with the cost of food.
Either Ben Bernanke is the dumbest guy in the known universe or the biggest liar—and perhaps both. He says that the Federal Reserve's second round of quantitative easing, QE2, has nothing to do with the cost of fuel and food. Of course it does. He has been wrong about every single thing he's said since he took office.
When people are hungry, they start riots. The riots in Egypt were directly related to the cost of food. The riots in Wisconsin are being framed as union versus anti-union. But it is really about people being afraid they won't be able to feed their families.
In the U.S., the problem is that the government can't afford the outrageous sums that it's paying union members for retirements. As many as 90% of members are retiring on permanent disability in some unions. California couldn't balance its budget even if it fired every state employee. We have too much government.
TGR: To what extent do you think Wisconsin is a harbinger of government cutbacks to follow in other states?
BM: Wisconsin is the canary in the coal mine. The funny thing is that Wisconsin isn't the state that is in the worst shape. California, Michigan or maybe New York, is in the worst shape.
Do you know how long it will take for the U.S. government to fail? Nineteen days.
TGR: How do you arrive at 19 days?
BM: Because that's how long it took in Egypt.
TGR: Do you think this unrest is going to overflow into the oil-rich countries, like Saudi Arabia?
BM: Absolutely. The media is highlighting the Middle East, but unrest has occurred in Croatia, Albania, France, England and Greece as well. The breadth of these uprisings is connected to the power of the Internet. These crowds can communicate because of Twitter, Facebook, Google, instant messaging and e-mail. People have the ability, on an individual basis, to take command of the situation. This has never before occurred, and it's a very important concept.
If the U.S. has riots and we overthrow the government, which I absolutely believe is going to happen, we're no better off. The debt still exists.
The entire world needs to go back to real-world economics—supply and demand. The economy needs to start producing things of value. This is literally a worldwide revolution.
TGR: So, if it's 19 days to overthrow a figurehead government, how much time does it take until some regulatory body is able to create food, jobs or a middle class?
BM: If there isn't any real money, which is gold and silver, probably 20 years.
TGR: What if you're Saudi Arabia and you have oil?
BM: Have you ever tried to eat oil?
TGR: You can't eat gold or silver either.
BM: You could trade it for food. There are no individual companies in Saudi Arabia running the oil business; rather, it's the government of Saudi Arabia. If the government fails, then oil refining and oil shipping stops immediately. It's already happened in Libya, but Libya's only 1.2% of world oil production, and Saudi Arabia is about 14%.
After the Yom Kippur War in 1973, Saudi Arabia was very upset with the U.S. for supporting Israel and declared an oil embargo. But what really happened was that the Organization of the Petroleum Exporting Countries (OPEC) started raising the price of oil across the board. Oil went from about $0.15 in 1969 to several dollars a barrel. There was another crisis in 1979, when the Shah of Iran was overthrown. Oil shot up to $12 or $15 a barrel, which was enormous.
TGR: Shouldn't we be getting out of equities, and getting into precious metals, at this time?
BM: I define investing in gold and silver primarily as being an insurance policy. I believe that everybody should own some gold and silver. I had a meeting with a billionaire yesterday and I told him exactly the same thing. You could have hundreds of billions of dollars and not have the ability to buy gasoline.
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