James Grant of Grant's Interest Rate Observer and James Turk of the GoldMoney Foundation discuss the history and mission of the Fed, how mission creep has taken it wildly beyond its initial purpose into the territory of QE, ZIRP and other fiat currency experiments.
They talk about who benefit from zero interest rates and how savers are penalized by this easy money policy. They explain that the US have been off the gold standard since 1913, Bretton Woods being only a shadow of the classical gold standard. In the last 40 years low interest rates have encouraged leverage and speculation, which have reached incredible levels.
They discuss the fiscal profligacy of the US government. A solution to debt levels could still be found if the political will existed. US strengths and positive momentum could still be harnessed to save the dollar if people's eyes could be opened. However they conclude that every paper currency in history has eventually gone to zero.
James and Jim also talk about ZIRP and the absence of the bond vigilantes after over 30 years of bull market in bonds. How traders no longer care about fundamentals, like balance sheets, but rather focus on very short time horizons and the spreads between funding costs and yields. How this situation is unsustainable.
They see gold still as a very under-owned, misunderstood and marginal asset still shunned by institutional investors, with a few notable exceptions which indicate that the tide could be turning. They see a gold standard in the future, although timing is always uncertain.
At the end they talk about the history of US post civil war specie resumption and parallels to a return to the gold standard in the future. Private alternatives and competing currencies are a possibility; if politicians are too slow to provide solutions the market could do it for them.
Embedded video below, and also available on YouTube: