Henry Bonner caught up to Brent Johnson of Santiago Capital after his recent appearance on CNBC, where he famously said “If you believe in math, buy gold.” Bonner asked Johnson to elaborate a little more on the subject of gold.
On the current bear market, he says “I think there were a number of people in gold who did not really understand the metal; gold has been moving up for a number of years, which probably drew more people in and pushed it up higher.”
In answer to why we didn’t see the inflation anticipated from flooding the market with easy money, Johnson said “I think we have seen inflation. It’s just in places that the pubic does not recognize as inflation. Today, inflation refers to an increase in prices. We have had asset price inflation – real estate in big cities, farmland in the Midwest, and stocks. This inflation has not been reported in the CPI, but the true asset price inflation is high.”
Johnson points out the same fact that I have mentioned, that we did not see the usual velocity of money from quantitative easing, because the banks receiving the funds did not lend it back out. He notes “In my view, the fact that they do not want to lend out that money indicates that they do not believe the counterparties are really worthwhile or that the economy is that strong. They keep that money at the Fed – so they get a guaranteed return.”
What is worthwhile is reading the entire interview, which can be found at mining.com.