Rosen explained that when President Clinton left office and President Bush took over, "We had a surplus. Then we spent all this money on war, and that debt has continued, and no one seems too concerned about it ... The whole world has decided that the way to deal with economic slow-downs is to just print more money or borrow more money--pay it forward."
As I have argued before, supported by Sprott's John Embry and Rick Rule, among others, Rosen argued that "Most economists agree that when you do that kind of activity, you're going to have wild inflation. It hasn't happened yet," because, he said, the government appears to have a "handle on it." However, it cannot last forever. He characterized government actions as "Plugging their fingers in the dyke." It is not just an American problem, since every major economy, Europe, Japan, and China has taken to printing money to monetize debt.
How long can it last? Rosen said, "The scheme will continue another six months." He forecast that the stock market would continue to rise with the S&P reaching 2050 and the Dow to 18100. For precious metals, he said that "Gold could go to $1,025 or something like that." However, he warned that "commodities are in a little bit of a deflationary cycle." There may be some rallies here and there, such as in the meats where there is high demand, but for the most part, commodities will deflate.
When I asked him about gold and silver, which Sprott, Rule and I believe will move up soon, Rosen said, "It seems like from the middle of 2015 into 2016, we could get some very strong movement up, much like 1979-1980." He thought silver might bottom at $15, with gold at about $1,025, which is not that far away. Rosen said, "As long as stock market is going up, playing the current game, the trend will continue ... Central banks have a vested interest in keeping precious metals lower, so people will buy their bonds, which aren't backed by anything, and will buy their currencies."
For his own trading, he said he is not in long silver and is "not in a rush to get back in...until the loose money stops."
In terms of interest rates, Rosen said, "We are at multi-century lows. We are at a place where we haven't been. Even Europe is talking about negative rates ... Low can go lower." He did not think there would be "a rapid rise of interest rates over the coming years." However, he warned, "Inevitably something dramatic will happen. For the moment, the government appears to have control of this ... What will shift it out of their control? ... Those with money are buying stocks and are making money. The rest of the populace with its money in the bank is not making anything."
As I have highlighted before, especially with the growing divergence between the paper and physical markets, Rosen argued that, "Gold and silver are no longer logical." He suggested, "Maybe we can't any longer count on gold and silver going up with inflation." Even so, he said that "gold could go to $3,000 or $5,000 and silver could go back up to $100." The key question, is "How much control will the government still have on depressing prices?" Rosen outlined the possibility that since China has a lot of gold, they may try to move world back to a gold economy. Therefore, he predicts, "At some point we will see a rise in prices in metals."
As Dr. Paul Craig Roberts, former director of the OMB argued recently, Rosen said, "I don't think they're [the Fed] going to start tapering until March, if at all." Yellen, Rosen said, "is quite dovish. The people on Wall Street are very happy about that ... the latest run up in the stock market" shows that support for her. However, Rosen warned, "Yellen is not as diplomatic with her word choices as her predecessors ... She used the word worry instead of concern. At some point, she'll open her mouth and use the wrong word, it's been evident up to now." Such unfortunate choices of words can have devastating impacts on the stock market.
When I asked Rosen about the next few months, he said that in November and December, volume starts to go down a little bit, as the markets start waiting until January when the big bucks start coming back in. Therefore, he warned, you "have to trade carefully … In the end, everyone starts waiting for January. It's time to start getting ready for another exciting year."
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PSLV, PHYS, AGQ, GLD, SLV, SPY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.