If you missed this segment on CNBC today it’s worth taking a look. Michael Pento, the very vocal gold bug, is debating whether or not the USA is essentially insolvent (we all know my positions here – deflation remains the greater risk and the USA is certainly not bankrupt). He makes all the classic inflationista arguments while always making sure to point out that gold has been rising. What he fails to actually do is exactly what he accuses Erin Burnett of not being able to do – justify his argument. Pento claims that the onus is on Erin Burnett to explain to the guest why she doesn’t believe a particular position. Erin rightly corrects Pento and reminds him that he is the guest and she is merely the moderator. So, of course, the onus is on Pento to prove why the USA is insolvent.
Unfortunately, Pento has been beating this drum for ages. He has been fantastically wrong about the macro picture for various reasons. While he’s nailed the gold trade the constant fear mongering over government insolvency, inflation, crashing treasuries, etc has all been wrong. He’s been correctly pessimistic, but for all the wrong reasons! Nonetheless, he continues to trot out this inflation argument. The onus is on the inflationistas to explain why they have been so wrong for so long. And simply pointing to one assets rise is no longer a reasonable explanation. The macro inflation argument has been so far off the mark (in terms of how all other assets have reacted) that gold’s rise is of little significance to the overall debate. If you’re going to continue arguing that hyperinflation and USA default are right around the corner the onus is on you to first explain why you have been so wrong for so long. Only then can we actually have a constructive debate about these issues.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.