I was back on CNN radio last Friday for another segment with Dan Cofall. We discussed the current action in the silver markets, the balance sheet recession and possible solutions.
Regarding silver – I was asked if I think there is manipulation in the markets. I said we didn’t need to find a boogeyman for the cause of the recent declines in silver prices. The market experienced a big boom based on solid fundamentals and then experienced a blow-off top based on misconceptions regarding QE2 and “money printing”. A bubble resulted and now the markets are responding as they always do following a bubble by reverting back to the mean.
With regards to the balance sheet recession I tried to explain that the current environment is an unusual one where the private sector has just experienced a debt bubble and is currently in the midst of a balance sheet rebalancing. That means that households are saving rather than spending as they attempt to service this debt in the post debt bubble world. The result is sluggish economic growth and an environment in which growth can only be sustained via higher than normal budget deficits. My solution in a messy and misguided political debate – cut taxes….
I didn’t get to conclude my thoughts as we ran out of time, but Mr. Cofall was kind enough to invite me back some time in the future in which I will be able to “play President for the day”. A dangerous thought….
You can hear the whole segment here.
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.