Thomas D. Conrad, Ph.D. is a highly ranked hedge fund manager with World Opportunity Master Fund and president of Financial Management Corporation. His flagship World Opportunity Master Fund, LP, is an international hedge fund that operates globally as a fund-of-hedge-funds. Fund managers hold in aggregate well over US$2 billion in managed investments. The fund has been ranked number nine in the world in certain categories by BarklayHedge and recently reached a number three ranking. Dr. Conrad has held a seat on the Philadelphia-Baltimore-Washington Stock Exchange, and was Deputy Assistant Secretary of the United States Air Force for the Reagan Administration. Website: www.worldfund.net.TDV: Hello, Tom, thanks for sitting down with us once again. We last talked to you more than a year ago. At the time you predicted a significant stock market crash and only a month later the Dow reflected your position with a huge intra-day crash. There was huge volatility throughout the fall.
Tom Conrad: Yes, and then again in at the beginning of January of 2016.
TDV: It's not over yet, of course.
Tom Conrad: Eventually, we're going to see a crash of stupendous proportions. I’ve been at this 50 years and after a while you can get a sense of the market even above and beyond the statistics and what you read. It's been bad and is getting worse despite the market averages.
TDV: We agree. That’s why we were interested when we got your note regarding the prediction of “helicopter money.”
Tom Conrad: I sent that out to all my clients.
TDV: Let me read it out loud.
I am predicting and expecting the United States will soon print and distribute $100 billion of free money to inhabitants of the United States (helicopter money). This is intended to create greater inflation. [ Our fund] will therefore be increasing our percentage of gold ownership as insurance in the fund.Tom Conrad: I wanted to provide a rationale for what we intend to do, which is substantially add to our portfolio of physical gold.
TDV: For anyone who might not know, why don't you explain helicopter money in a little more detail
Tom Conrad: It's simple enough concept, and one I think was developed by Ben Bernanke. It's the idea of getting massive sums of currency into the hands of the larger population so it can circulate throughout the economy.
TDV: Which was the point of QE -
Tom Conrad: But as it turned out, as usual when the Fed is involved, the money enriched only the upper few percentiles of the population ...
TDV: - Yes, as we've pointed out.
Tom Conrad: In this case by some means, money is to be dropped to people via helicopter figuratively speaking. One they have money, they will presumably spend it. And that will increase inflation as well.
TDV: Do you have a sense of the timing?
Tom Conrad: I've been asked that and also how it's going to be done. I don't think anyone knows. Maybe some insiders planning it but no one else.
TDV: It's a controversial subject. Not everyone is predicting helicopter money in the US. In fact, there’s been more significant discussion about QE and negative interest rates than helicopter money – which has been discounted so far in the mainstream media.
Tom Conrad: That may be another reason to watch out for it. You’ll never get a sense of the real options in the mainstream these days. They spent most of 2015 talking up a non-existent recovery and by my count, we’re supposed to have seen several Fed hikes by now.
TDV: Yes at least two or three as the recovery gathers force.
Tom Conrad: But there is no recovery. There’s only debt, which is why the Fed is so desperate for inflation. And why these other strategies don’t really make sense.
TDV: You mean helicopter money is the most logical strategy.
Tom Conrad: I’m not alone in seeing this. It’s been suggested by various newsletters.
TDV: It doesn’t seem to have been the subject of a lot of attention at the recent Jackson Hole Fed meeting.
Tom Conrad: It was mentioned as an alternative. Janet Yellen referred to it as well in her speech. She indicated an exploration of "a broader range of assets." And then there was that fellow [Professor Christopher] Sims of Princeton University who talked about a massive new program that would "shock" investors into a different mindset.
The US is deeply in debt, historically deep. The kind of debt you never get out of. There are really two choices the Fed faces at this point: Default or significant inflation verging on hyperinflation.
TDV: The debt is disaster. And, as we’ve pointed out many times, only a few basis points upwards would make it impossible to service.
Tom Conrad: And yet Congress keeps adding to the debt. The country is out of control. They need to cut the debt by half and the only way to do that is by printing money day and night.
TDV: Of course there’s been talk of negative rates as well.
Tom Conrad: Negative rates make no sense. These bankers pretend it’s stimulative, that it will impel people to borrow but the economic distortion is huge. Where does the bank make any money? You’re entirely destroying the time-value of money. The bank is now totally dependent on its central bank to provide the cash it used to receive from the borrower.
TDV: It’s basically just a Ponzi Scheme.
Tom Conrad: It’s completely irresponsible like the rest of monetary policy. Twenty years ago you had well defined middle classes. Now everyone is lower middle class and living paycheck to paycheck. People have given up on the hope of retirement. No one trusts the markets anymore because they are so obviously controlled and manipulated.
TDV: And Deutsche Bank has actually admitted to manipulation.
Tom Conrad: Yes, gold manipulation but that’s the tip of the iceberg. Anyway, over time, as markets become more unstable, metals manipulations will become less effective. That’s another reason to add to our physical gold position.
TDV: How high do you think gold can go – or to put it another way, how low can the dollar go against gold?
Tom Conrad: I’d say optimistically it might hit $3,000 an ounce. But you have a lot of late buyers who would probably sell as the dollar falls, so that would act as a cap. That’s why I say “optimistically.”
TDV: Anyone who can buy metals probably should be adding.
Tom Conrad: The trouble is probably few can afford significant amounts at any price.
TDV: What about mining shares?
Tom Conrad: You can make a lot of money in mining, but you have to be very, very careful. Nine out of ten will go bust. It’s not a game you probably want to play on your own. [Editor's Note: To get the best information and advice on mining stocks, check out TDV Premium with world famous analyst Ed Bugos' mining picks]
TDV: You told us once you believe a return to a gold standard is possible.
Tom Conrad: It is possible, as the US dollar economy continues to unravel. The real problem is that the decision makers are currently part of the problem. That may change with this election. Trump has some good people on his team – Steve Moore from The Club for Growth, Art Laffer, Larry Kudlow – fundamentally market oriented.
TDV: Presumably, they wouldn’t find much that’s worthwhile in the Fed’s current activism.
Tom Conrad: Trump doesn’t intend to rehire Yellen if he gets in. And he recently pointed out that our entire economy these days is “phony” because of these unnaturally low rates.
TDV: And of course helicopter money would make it even worse.
Tom Conrad: Well, you also have to consider they want to make it worse, as you’ve often pointed out in your articles.
TDV: Good point. As a prelude to global government.
Tom Conrad: They have to collapse national and regional central banks. So the Fed is not really after a “healthier economy.”
TDV: Tell us how it would work.
Tom Conrad: Such a massive cash injection would unbalance markets in two ways. First, sooner or later it would probably bring the level of price inflation well past two percent, triggering further hikes. And it is these hikes, conceivably, that would set off the crash.
And here's another point. The reason that the Fed distributed money via commercial banks and banks generally was to ensure that people didn’t realize it was simply green-colored paper being printed by the Fed. But if the Fed hands out money directly, the knowledge of how money is made – out of thin air – would gradually become common knowledge.
TDV: So they’re playing a dangerous game.
Tom Conrad: If they want to destroy the credibility of the dollar, there’s probably no better way.
TDV: And we should keep in mind that’s actually the ultimate goal.
Tom Conrad: After World War II, elites updated the Bank for International Settlements and created the International Monetary Fund and The World Bank. This time around, after wars and the ongoing economic depression make it feasible, the global consolidation will probably set up a formal international government.
TDV: So helicopter money could be the tipping point.
Tom Conrad: It's one way. The bottom line here is that as the current collapse continues, we'll continue to seek ways to protect our investments and our clients. We're up again this year but we intend to prepare for any eventualities.
TDV: Obviously you're putting a lot of thought into alternatives. Thanks for sitting down with us.
Tom Conrad: My pleasure. Thanks for the invite.
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