“Typical politician. All talk no action. Sounds good. Doesn't work. Never going to happen. Our country is suffering because people like Secretary Clinton have made such bad decisions in terms of our jobs and in terms of what is going on.

Now look, we have the worst revival of an economy since the Great Depression. And believe me, we are in a bubble right now. And the other leaving that looks good is the stock market. But if you raise interest rates even a little bit that is going to come crashing down.

We are in a big fat ugly bubble. And we better be awfully careful. And we had a Fed that is doing political things. This Janet Yellen of the Fed, the Fed is doing political by keeping interest rates at this level. And believe me the day Obama goes off and he leaves and he goes out to the golf course for the rest of his life to play golf, when they raise interest rates, you are going to see some very bad things happen because the Fed is not doing their job. The Fed is being more political than Secretary Clinton.”

What else do you want to hear during a presidential debate with over 72 million viewers?

The fact that Donald Trump is willing to mention the problem, while nobody gives a damn about them, is very telling about the era in which we are living.

Many people, unfortunately, go through life like sheep. Sheep in the sense that, even if you are willing to discuss the problems at length, they care nothing about tomorrow, but only about today. And in the sense that as long as today everything is all right, there is nothing wrong at all. And tomorrow? “In the long run we’re all dead,” as the late economist Johan Maynard Keynes would say. It is perhaps the cultural heritage in modern times of this charismatic thinker.

Election Promise Number One of Donald Trump

By now, it should surprise nobody that Donald Trump is a big critic of Fed-chairman Janet Yellen. And not only of Yellen, but of the zero interest rate policy that central banks hold dear.

What Hillary Clinton looks for, in contrast to Trump, is an extension of the (temporary) economic illusion which zero interest rates create, and she is consequently on the lookout for a central banker that is willing to give in to her wish for reckless monetary policy, whereas Trump is eager to return to normality. Whereas Janet Yellen seems to be willing to put into practice the wishes of Hillary Clinton, this might not be the case with Donald Trump.

That the plans of Donald Trump haven’t been thought through very well, is proven by the fact that he is willing to create a gigantic budget deficit by lowering the tax burden. While lowering the tax burden is admirable, it is of course impossible to maintain the current public debt and at the same time an enormous budget deficit while interest rates return to historically normal levels. It would lead to an unprecedented bankruptcy of the government of a developed country.

And What about the Stock Market That Trump Mentions?

The stock market is nothing more than a bunch of investors trying to estimate the present value of the future cash flows of a collection of production goods (in other words, a company) and act accordingly. A share is a claim on those future cash flows.

However, to discount future cash flows back to the present, we need an interest rate to reduce those future cash flows to what they are worth today.

In other words, the lower interest rates, the more those future cash flows are worth today.

The comment made by Trump that the stock market, far from indicating an impressive economic recovery, is merely a pie in the sky based on artificially low interest rates, is spot on. Whoever thinks the stock market is undervalued, has no understanding of what underlies stock prices.

Trump and the Gold Standard

Donald Trump is not only a big critic of Janet Yellen and the zero interest rate policy of the Fed, and will he remove Janet Yellen as soon as he wins the election, but Trump has also expressed some appreciation for the gold standard.

Was the fact that Trump reached out to the gold standard a way to win votes from the American “gold bugs”? Unlikely, because of the size of this tiny group that cares anything about a gold standard.

According to Trump, he will form a commission that will investigate the merits of a possible return to a gold standard or a similar monetary anchor. This is perhaps the most interesting I have heard since a very long time from one of both candidates for president.

What many do not know about Trump, is the fact that he actually owns a quarter million dollars in physical gold. Not much given his alleged fortune, but still.

And What about the Gold Price?

If Trump gets his way and normalizes Fed-policy by appointing a chairman that has the courage to normalize interest rates, while at the same time creating a huge budget deficit, then the biggest bubble in bonds in history will burst very soon. Gold prices will go through the roof, but after a short but exciting ride to new record highs, it will mean the end of the secular bull market in gold.

Of course, an election will not to the trick. Donald Trump must actually turn his words into actions.

And if Hillary gets elected? Then the bull market in gold will gain gradually in strength but suffer from a false start because the Federal Reserve will finally, finally raise interest rates a quarter percentage point in December. I have never declared an end to the correction in gold prices, and despite the rally to above $1,300.- per troy ounce I can very well imagine that in the most likely scenario (Hillary Clinton winning the election) the gold price has to endure some more pain with prices that might even drop to below the $1,100.- per troy ounce.

Kicking the can further down the road, the objective of Hillary Clinton, will make the problems in the future only more painful. That the gold price might reach more extreme record highs with Clinton as president, is a scant consolation of the four years of mismanagement it appears we are heading for.