Meeting with Axel Merk, World Economic Update

As mentioned earlier, Axel Merk, founder of the Merk Funds, a huge complex of currency Mutual funds, was in Dallas last week, and took time to come by the office and catch up.

A Few Interesting Items from Our Conversation

While our visit was brief (thanks again for the time), we were able to catch up on the World Economic situation in great detail.

Let’s start with our back yard, as Axel had recently co-chaired an event with Alan Greenspan in which Greenspan had some rather candid comments.

Greenspan, Federal Reserve, Inflation

• Federal reserve does what congress asks (this may seem obvious, but recall they are supposedly “independent” …maybe not)
• Question spawned from the above point, “Does this jeopardize the FED’s independence?” “I never said the Federal Reserve was independent” was Greenspan’s response (hmmm)
• According to Axel, Greenspan stated inflation will HAVE to rise in the future and Gold will be much higher (our thoughts, bring it on!)

Moving On to Japan; Going all in

• Axel believes Haruhiko Kuroda went all in recently in announcing huge purchases of securities to lower interest rates, of which we took note here, will be a failure (we are not so sure)
• Japan will continue to debase its currency as long as possible, according to Merk
• Interestingly, Sinzo Abe, Japan’s version of the president, if unsuccessful will fade into the sunset leaving very little dust if Axel’s vision come true

European Union; better late than never

•  Mario Draghi (president of European Union) and company are on more on the right track according to Axel
• They were very late in this economic cycle of getting started
• Draghi’s attempt to do an American/Japan version of QE (purchase of assets to lower interest rates) is very difficult because of so many fragmented countries
• France and Spain, according to Merk are not so good

What does it all mean?

Most interesting for me was the firm conviction of eventual inflation. We have been watching for it for some time and think a sip would be nice.

Time will tell.

Oh…here is a pretty cool chart from Axel’s group. This should make 2015 more interesting as the blue line will no longer be rising.

Have a Great Day!