Podcast

James Turk: Central Banks are Losing the War to Suppress Gold & Silver Prices

And gold could go to $10,000/oz
Saturday, January 26, 2013, 2:08 PM

My guess is that 2013 and 2014 are going to be big up year for the precious metals, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher.

So predicts James Turk, founder and Chairman of GoldMoney.com.

From James’ perspective, gold is not an investment. It’s a sterile asset, meaning it does not generate income. What it is, is money. Its function is to store wealth.

But money, like investments, can be overvalued or undervalued. And what we’re witnessing on the world stage is a gross mispricing of money as central banks engage in depreciation of their fiat currencies via inflation (i.e., money printing).

The process causes a transfer of wealth from those holding overvalued money to those who hold undervalued money. That’s what’s been going on for the past decade as the price of gold has steadily marched upwards versus fiat currencies.

But this process is not efficient. Mass awareness of this wealth transfer is low, so confidence in paper currencies is still high, supporting their perceived value. Market intervention by central banks and other parties conspires to keep the prices of precious metals artificially low and suspect.

This maintains an arbitrage for individuals to buy gold and silver at a discount to true value, which James believes will be slowly realized in full over the next several years as the bull market in precious metals approaches its third and final phase.

A factor in this rise will be the increasing fragmentation of coordination among the central banks. Increasingly, central banks outside the influence of the U.S. Federal Reserve are treating the precious metals as true money, and becoming net buyers of bullion for their reserves.

Ultimately, Turk predicts the price of gold will move to somewhere between $8,000-10,000/oz and that we'll see even higher price appreciation in silver.

The way markets normally work is, after you do have a big move, you get a correction. Even over the past 12 years, if you look at gold, you had big moves in 2005, 2006, and 2007 where you were in some years generating over 20% appreciation in gold. Then you had the correction in 2008. Even though that was a correction, gold was still up that year. Then, in 2009 and 2010 and the earlier part of 2011, you had again big moves. Then you had the correction where basically they moved sideways. My guess is that 2013 and 2014 are going to be big moves on the upside, because what’s important here is not so much the price of gold, but whether it’s a good value.

The proper way to manage a portfolio is, you move assets that are overvalued out of your portfolio and you concentrate on assets that are undervalued. That’s true regardless of whether you’re talking about investments or money. You want undervalued forms of money. You want undervalued investments. I use a couple of mathematical formulas which I’ve written a lot about, one being the Fear index and the other being the Gold money index; by both of those measures, gold is still very, very undervalued, as is silver, for that matter. Silver is even more undervalued than gold. My expectation is that these undervalued assets will continue to rise in price, because the market doesn’t like levels of overvaluation or undervaluation. The market is always constantly changing, moving money out of overvalued assets and moving into undervalued ones. And that’s what we’re basically seeing in the precious metals: people are moving out of overvalued fiat currencies and moving into undervalued gold and silver.

My guess is that 2013 and 2014 are going to be big up years, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher – assuming that governments and central planners and central banks still continue to follow these same policies that they’ve been doing, which is defacing fiat currencies.

An interesting thing is that when we saw the price drop in gold and silver at the end of 2012, the demand for physical metal rose tremendously because people recognized that these assets are undervalued, and if they’re going to be sold down to such cheap prices, they may as well just pick them up and continue to accumulate them. So it certainly has a perverse affect when the central banks intervene. In fact, as we’ve noted, gold has risen 12 years in a row against the U.S. dollar – double-digit rates of appreciation. But I guess the best way is using an analogy. If you've got a pot of water boiling on the stove and it’s bubbling away, every once in a while you have to release or pull off the lid to let a little bit of steam out, and then you put the lid back on.

That’s sort of what the central planners are doing. Every year they release the lid, and gold on average has risen over the last 12 years by 16.8%. Then they put the lid back on. One of these days they're not going to be able to put the lid back on, and you're going to go into the third stage of a bull market where gold just keeps rising and rising and rising because confidence will be lost in the currency. I think that’s what we have to be focusing on.

I can’t say that trust between central banks is waning, but you have to recognize that there are two categories of central banks: There are central banks that are in the U.S. circle of control and dominance, and then there are central banks outside the circle of U.S. control and dominance. The ones that are outside of the U.S. control and dominance are accumulating physical gold. The ones within the U.S. control tend not to do that, although it’s interesting that Germany, Netherlands, and now Austria, too, are talking about bringing their gold back.

It’s quite clear that a lot of promises have been made, particularly by politicians and most governments around the world, and those promises cannot possibly be fulfilled. A lot of those promises are going to be broken. Particularly when it comes to the area of gold, a lot of central banks are relying on the promises of other central banks. Oh, yeah, we’ll be good for the gold if you ever ask for it. Those promises are likely to be broken as well, as the demand for physical metal continues to grow. Whether it’s going to accelerate in 2013, 2014, I don't know. But, my guess is the demand for physical metal is indeed going to accelerate over the next couple of years, because I’m looking for serious financial problems to be hitting. 

[A reminder: if you want to discuss the issues Chris and James discuss here on an ongoing basis with precious metals enthusiasts, consider joining PeakProsperity.com Gold & Silver Group. Simply go here and click the "Join Today" button.]

Click the play button below to listen to Chris' interview with James Turk (34m:47s):

Transcript: 

Chris Martenson:  Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. Today we’re pleased to welcome back to the program James Turk, founder and chairmen of Gold Money, which offers investors an easy and inexpensive online solution for buying precious metals with international storage options.

James is one of the most foremost authorities on precious metals and has long offered market forecast commentary, including coauthoring the Coming Collapse of the Dollar and How to Profit From It, with our good friend John Rubino of dollarcollapse.com. James has built his career on decades of experience in international banking and finance, spending many of those years living outside the U.S., which gives him a critical advantage to look at our economy with outsider’s eyes.

I’m really delighted to have the chance to talk with you again James. And a lot of our readers are wondering when precious metals are going to break out of the trading range they seem to have been stuck in the past year. Are you up for sharing your thoughts today?

James Turk:  Yeah, I definitely am, and it’s good to speak with you Chris.

Chris Martenson:  It’s really great to have you here. You recently wrote that gold delivered a positive return in 2012 and that the ten-year rate of return measured across eight major currencies was double-digit positive in each one of them. That’s across a ten-year time frame. Quoting you directly, you wrote, “Gold is not an investment. It can’t possibly be an investment because it does not generate any cash flow. Gold is a sterile asset. It’s money and money does not generate any return unless you lend, deposit, or invest it. Money does not generate a return when stored in safe keeping.” Well, James, where did those returns come from then?

James Turk:  It basically came from depreciation of the dollar. In other words, the purchasing power of the dollar is being eroded away – month by month, year by year. That’s true for all of the world’s fiat currencies. A good way to measure it is, an ounce of gold still buys the same amount of crude oil it did a year ago, 30 years ago, 50 years ago. You didn’t increase your wealth. You basically just preserved it, which is what money is supposed to do.

Chris Martenson:  Do you see anything, anything at all here in early 2013 to suggest that this erosion of fiat money is going to abate soon? 

James Turk:  No, I don’t think it is. I think the important point – getting back to the quote, you were saying that gold is money and it’s not an investment. Warren Buffett was half-right when he said that gold wasn’t an investment. You can’t apply standard investment techniques to analyze gold, because it doesn’t generate cash flow, as I said in that quote. When the price of gold goes up, you're basically taking wealth that’s already been produced out of the hands of people who own fiat currency and transferring that wealth into the hands of people who own gold. You might become wealthier, but the world as a whole is not becoming wealthier by a rising gold price.

Chris Martenson:  This is a really important point, because for so long the currency itself was the measuring stick, and as long as your measuring stick had a fixed length, it was a useful measuring stick. But in this day and age, with everything going on with the ECB, the Bank of England, the Federal Reserve, Bank of Japan, among others just printing like crazy, the measuring stick is rubber now at best – rubber that stretches one direction, I guess.

James Turk:  If you use fiat currency as a measuring stick, but there’s nothing to stop you from calculating the price of goods and services in terms of gold. I do that regularly on important things like the price of crude oil, what the Dow Jones and other stock markets around the world cost in terms of gold, and commodity prices generally. Once you do that, you get a better idea of what’s truly happening to the world’s fiat currencies. More generally, Chris, when the formal link to gold was broken by President Nixon back in 1971, a whole new set of language had to come in to be politically correct. If gold was supposedly demonetized in 1971, it couldn’t be called money anymore. They had to start calling it something else, so they called it an investment.

There’s an old Chinese saying that wisdom begins by calling things by the right name. If you call gold an investment, you're starting down the wrong street and you're analyzing it the wrong way. What you need to do is recognize that in a portfolio you have two components: You have your investments and then you have your cash or liquidity. What gold is its money? You have to compare gold to the other forms of liquidity – the various paper currencies. You'll see that you're generating double-digit rates of appreciation in gold relative to the fiat currencies because the fiat currencies aren’t be debased by various government and central bank policies around the world.

Chris Martenson:   I think that’s an incredibly good way to frame it. We have investments, and we’ve got liquidity cash, and gold is money. So, in this day and age, one of the things I’ve noticed is – well, let’s talk about this: Both gold and silver experienced really impressive price run-ups in 2011 before experiencing pretty sharp, pretty painful corrections. Silver’s was especially savaged, dropping from $48.70 in April down to $26 bucks roundabout by year-end I think. And 2012 saw a much more muted range for both gold and silver. Can you recap the factors, then, leading up to this extreme volatility seen in 2011, and maybe possibly why the metals have been range-bound since, given all of the printing efforts that have been going on? It’s extraordinary.

James Turk:  The way markets normally work is, after you do have a big move, you get a correction. Even over the past 12 years, if you look at gold, you had big moves in 2005, 6, and 7 where you were in some years generating over 20% appreciation in gold. Then you had the correction in 2008. Even though that was a correction, gold was still up that year. Then, in 2009 and 10 and the earlier part of 2011, you had again big moves. Then you had the correction where basically they moved sideways. My guess is that 2013 and 2014 are going to be big moves on the upside, because what’s important here, Chris, is not so much the price of gold, but whether it’s a good value of that.

The proper way to manage a portfolio is, you move assets that are overvalued out of your portfolio and you concentrate on assets that are undervalued. That’s true regardless of whether you’re talking about investments or money. You want undervalued forms of money. You want undervalued investments. By my measures – I use a couple of mathematical formulas which I’ve written a lot about, one being the fear index and the other being the gold money index – by both of those measures, gold is still very, very undervalued, as is silver, for that matter. Silver is even more undervalued than gold. My expectation is that these undervalued assets will continue to rise in price, because what the market does not like is, it doesn’t like levels of overvaluation and it doesn’t like levels of undervaluation.

The market is always constantly changing, moving money out of overvalued assets and moving into undervalued assets. And that’s what we’re basically seeing in the precious metals. People are moving out of overvalued fiat currencies and moving into undervalued gold and silver.

My guess is that 2013 and 2014 are going to be big up years, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher – assuming that governments and central planners and central banks still continue to follow these same policies that they’ve been doing, which is defacing fiat currencies.

Chris Martenson:  There is so much to talk about in your comment there. I just want to touch on one piece of it because I think you hinted at it here. I’ve often hinted at the broken price discovery process in the precious metals market over the last few years and in particular the recent past. There seemed to be an increasing number of occurrences where a large player or entity sells off a huge future’s position in several minutes, sometimes just a few seconds or even milliseconds. This doesn’t seem to me to be a legitimate method of unwinding a position as the mainstream press usually characterizes it. It’s obviously designed to move the price downward. That’s what you do when you dump 3,000 gold contracts in 80 milliseconds. Such pricing sensitivity is hard to justify any other way than having intent to drive the prices lower. I know our regulatory bodies will never look at this. I’m just wondering, have you seen this behavior and do you have an explanation for it or way that would help us understand it?

James Turk:  I think I have seen it and I think you have done a good job explaining it. It’s not a rational way to operate in the markets, nor was it rational for Gordon Brown to announce in advance that he was going to be selling half of Britain’s gold reserve. I mean, after all, Warren Buffett doesn’t announce in advance when he’s going to be buying something. He does it after the fact.

If you're a normal profit-driven investor, or someone who is managing a portfolio and you're normally driven by profit, you don’t take those types of actions. But, central planners aren’t driven by profit. They’re driven by politics. When they see the price of gold rising they see that as a warning sign, just like the market is a warning sign that central banks are destroying the purchasing power of currency. Rather than go and fix the policies that the central banks are pursuing, they instead intervene in the gold market to try to keep the gold price from rising.

Chris Martenson:  What’s the effect when you take a commodity – because money is a commodity – and you keep its price down? Shouldn’t demand go up?

James Turk:  Yeah, it does. That’s really an interesting thing, because when we saw this price drop in gold and silver at the end of 2012, the demand for physical metal rose tremendously because people recognized that these assets are undervalued, and if they’re going to be sold down to such cheap prices, they may as well just pick them up and continue to accumulate them. So it certainly has a perverse affect when they intervene. In fact, as we’ve noted, gold has risen 12 years in a row against the U.S. dollar – double-digit rates of appreciation. But I guess the best way is using an analogy. If you've got a pot of water boiling on the stove and it’s bubbling away, every once in a while you have to release or pull off the lid to let a little bit of steam out and then you put the lid back on.

That’s sort of what the central planners are doing. Every year they release the lid, and gold on average has risen over the last 12 years by 16.8%. Then they put the lid back on. One of these days they're not going to be able to put the lid back on, and you're going to go into the third stage of a bull market where gold just keeps rising and rising and rising because confidence will be lost in the currency. I think that’s what we have to be focusing on.

John Rubino and I touched upon this in our book, The Coming Collapse of the Dollar, and that some point in time confidence will be lost with the dollar, just like it’s been with every other fiat currency throughout history. You're going to see a flight out of paper and a flight into physical metal. That might happen within the next couple of years. I think we’re getting that close.

Chris Martenson:  I noticed a couple of interesting news articles recently. One was that through November of 2012 – I don’t have December data yet – China had imported or had openly imported 720 tons of gold through the Hong Kong facilities, and India was seeking to put extra curbs on gold imports because they were bleeding out; a lot of their current account reserves were going out because so much gold was being imported. I thought that maybe both of those might have been indications that this is what happens when you keep the price down – demand goes up, possibly.

James Turk:  That’s absolutely right. There are other factors as well. Wealth goes to where the wealth is being created. A lot of wealth is being created in Asia. Consequently a lot of gold is moving in that direction. Just like back in the late 1970s and early 1980s when the price of crude oil was rising, a lot of wealth was going to the Middle East, and a lot of gold was being accumulated there. There are a number of factors that drive the demand for gold.

I suppose another factor that needs to be considered when you talk about Asia is the traditional cultural values. They understand that gold is money and it’s an important part of a portfolio. They tend to save gold or silver rather than paper money, because they recognize that gold and silver preserve purchasing power for long periods of time, which is sort of interesting, really. The Indian farmer understands that but a lot of people in the West don’t. Go figure.

Chris Martenson:  Well then, this “releasing the pressure from the boiling pot,” as it were, has a couple of effects. There’s really two things that the central planners have to sort of manage here. One is, the price can’t be too high because it will send the wrong signals about their policies, but it can’t be too low because otherwise all of it will flow from West to East. How do you think they’re doing it – managing that process here?

James Turk:  They’re probably doing pretty well. To be honest, I didn’t think it would go on as long as it has. I’ve got to give them credit for the fact that they’ve been able to manage it as long as they have. But here’s the key in terms of the end gain: There’s a difference between physical gold and paper gold. Physical gold is the actual, tangible asset. Paper gold is just the financial asset with a promise to pay gold at some point in time in the future, or an asset supposedly backed by gold but not necessarily gold actually sitting in the vault.

What governments and central planners do is they are constantly using anti-gold propaganda. That’s why Gordon Brown announced in advance that he was going to be selling the gold reserve. And there have been other instances since then. You may remember not too many years ago how they always threatened to sell the IMF gold. When they finally sold it, it got snapped up in a heartbeat. So they don’t use that as a threat anymore, but there are other things that they are constantly doing to belittle and discourage gold.

But the reality is that this physical gold is limited. They can’t create it from bookkeeping entries like they can create dollars or pounds or Swiss francs or euros or any other currency. Gold comes from a very difficult process of mining it from the earth, which requires a lot of hard work and a lot of capital. Central banks do have gold in their vaults and occasionally they have to sell some of that gold in order to make good on their promises to deliver in the future.

But given the fact that there’s so much paper gold out there relative to the limited amount of physical, eventually you're going to see the final stage of a monetary collapse or financial collapse, which always happens throughout history. People eventually move out of financial assets and they move into gold because what they want to do is they want to avoid counterparty risk. When you have a financial asset, you’re always depending upon someone’s promise. But when you own physical metal – be it gold or be it silver – you're not dependent on someone’s promise, because you have a tangible asset. There’s isn’t a counterparty risk.

Chris Martenson:  One of the more interesting pieces of news that I heard recently that really supports that view is the idea that some of the larger Japanese pensions were looking into the future and saying maybe we should buy some gold for our portfolio.  They have hundreds of billions of dollars at their disposal, and of course, this is a perfectly logical thing to do, because they're sitting on an extraordinary amount of Japanese government bonds at 0% effective interest rates. The new Prime Minister Abe said well, I’m going to jack up inflation to 2%, and he has the Bank of Japan’s backing on that. What’s the logical pension manager with a fiduciary responsibility supposed to do when you know your currency is going to be debased and you're getting a less than real rate of return on your official safe holdings? What kind of an impact do you think that would have on the gold market if funds of that size started really moving in force into the gold market?

James Turk:  I think it’s going to be big. We’ve already seen it in some ways. I think it was the Texas State Teacher’s Pension fund that put some of their assets into physical precious metals. And then, a couple years ago, a New York hedge fund, a big one called Green Light, actually took its shares of GLD and asked for metal instead of shares. It wanted ounces, not shares.

So we’ve already seen some trends in that direction. This is typically what you see in the second stage of a bull market. Every bull market has three stages. In that first stage you get apathy and neglect. Nobody is paying attention. The asset is really, really undervalued.

In the second stage, that’s where gold is and has been since it took out a thousand dollars an ounce. That was a worldwide media event to see thousand dollar gold. As a consequence, gold has been getting a lot more tension in the media and a lot more people are starting to understand the advantages of owning gold. During the second stage of a bull market, you see tremendous price appreciation as more and more people jump on the train recognizing that there are really advantages to earning gold and it’s undervalued. That’s the second stage.

The third stage is when the speculators are jumping on board and gold starts to become overvalued like it was back in the end of 1979 and January 1980, during the last big price peak in a bull market. That’s still some point in time in the future. We can’t predict when that point will come, but we do know it will come. We’ll just have to wait and see if and when it finally arrives. It could happen in 2013 to 2014 to 2015. But maybe I’m early. Maybe it’s going to take three years. It might take five years.

Chris Martenson:   Let’s talk about this position of where gold is in terms of it being undervalued or overvalued. I know you mentioned that when you're thinking about portfolio balancing, what you really want to do is move out of the overvalued into the undervalued areas.  I’ve seen some charts you've put together where you're measuring the Dow, for instance, or the DAX, or any of the other stock exchanges, in ounces of gold, and it kind of looks – it’s neither super overvalued or undervalued at this point my those measures, historically speaking. Where do you see gold from a portfolio standpoint as measured against equities right now?

James Turk:  It’s about nine or so ounces to purchase the Dow, or thereabouts – maybe a little bit less. I can’t remember the exact number. Back in 2000 it was 40 ounces that was necessary to purchase the Dow. But bear markets end when it’s typically one ounce to purchase the Dow. Bear markets end in economic bust, and bull markets and gold end when it’s one-to-one. So, for example, in the 1930s the Dow Jones Industrial – believe it or not – was 35 and gold was $35. Then, in 1980, gold was $850 and the Dow was 850. My guess has been that it’s going to be 8,000 on the Dow and $8,000 on gold when we get to that one-to-one ratio, which I was expecting between 2013 to 2015.

But because of all of the debasement over the past several years, it’s worse that what I could have foreseen. I think the price is going to be much higher. Presently my GoldMoney execs are saying that the fair value of gold is $11,000 per ounce. So, I think that’s going to be closer to the mark in terms of the price that we see for fair value. Typically, markets go beyond fair value. Who knows what the final price will be on gold? We’ll just have to wait and see how it all unfolds in the years ahead.

Chris Martenson: Certainly we will. Perhaps there are some signs it’s coming forward. Twenty – twenty is a number on my radar screen because Germany shook the markets last week by announcing its intent to repatriate its sovereign gold reserves, 100% of the holdings it had in France, and a portion – I believe close to half – of the holdings it has in New York. And of course they weren’t going to do this all at once, which wouldn’t be that hard to do. It’s not that big of a shipment. They’re going to take till 2020 to do that.

Venezuela has already done this. I just saw a news report a couple days ago that the Netherlands is now showing some signs at least at the popular level of maybe following Germany’s lead. It appears that trust among the central banks is waning. Is that what’s happening here? What do you think the implications are? I know you are going to be writing a piece for us around this. I am just wondering if you have a few things you could share with us.

James Turk: I can’t say that trust between central banks is waning, but you have to recognize that there are two categories of central banks: There are central banks that are in the U.S. circle of control and dominance, and then there are central banks outside the circle of U.S. control and dominance. The ones that are outside of the U.S. control and dominance are accumulating physical gold. The ones within the U.S. control tend not to do that, although it’s interesting that Germany, Netherlands, and now Austria, too, are talking about bringing their gold back.

I think we’re going to see more of this. The interesting thing, though, Chris, is that if central banks are doing this, our institutional investors that own GLD, SLD, and the other big precious metals – ETF – are they going to say we want to own ounces. We don’t want to own shares. We want physical. We don’t want paper. I think this is something that actually started a couple years ago when Green Light did that conversion of its GLD shares into physical metal. It’s starting to pick up momentum. In fact, this is typical of the second stage of a bull market. People want the real thing. They don’t want a substitute.

Chris Martenson: I guess – particularly after personally I’ve had an erosion of my own, which is an erosion of faith that contracts will be honored when push comes to shove – obviously MF Global and Peregrine and some other fairly largish things like that have convinced me that rule of law in one of the most trusted market environments of the world, which is the United States financial markets, is not what it used to be. So, perhaps, is this bird in the hand worth two in the bush, or is this just a common characteristic that happens in any bull market in a commodity?

James Turk: It’s a common characteristic in any bull market and commodities. But the logic is exactly as you say. You know, one in hand is worth two in the bush, or is actually worth more than two in the bush, because they’re entirely different things. Tangible is different than a financial asset. Physical is different than a paper asset. What will be a driving factor in the next few years as this financial bust we’ve been in continues to unwind is the avoidance of counterparty risk.

It’s quite clear that a lot of promises have been made, particularly by politicians and most governments around the world, and those promises cannot possibly be fulfilled. A lot of those promises are going to be broken. Particularly when it comes to the area of gold, a lot of central banks are relying on the promises of other central banks. Oh, yeah, we’ll be good for the gold if you ever ask for it. Those promises are likely to be broken as well, as the demand for physical metal continues to grow. Whether it’s going to accelerate in 2013, 2014, I don't know. But, my guess is the demand for physical metal is indeed going to accelerate over the next couple of years, because I’m really looking for some serious financial problems to be hitting.

The U.S. is not addressing its debt problems. Western Europe is in a mess because the economy is sinking and the euro is being politicized. The UK has got its own worries. Japan is now out to debase the currency, you know, starting various currency wars. It’s a real mess out there. These problems ultimately are going to impact the banking system, because these two interrelated crisis – the sovereign debt crisis and the bank solvency crisis – these crisis are still ongoing. We’re sort of in a quiet period, but the problems are still there and haven’t been solved. I think they’re going to get worse as we go forward into 2013 and 2014.

Chris Martenson: Fascinating. I really like that framing. I hadn’t thought of it this way that there are two spheres of central banks: One under US control and influence if you will, and those that aren’t. Those that aren’t are in the accumulating phase for gold at least as a reserve asset. We see China having an unofficial policy of accumulation by encouraging its citizens in opening up its gold markets for what we call private accumulation. I guess it doesn’t really matter where the gold sits, as long as it’s inside your borders. It can be in a vault. It can be in a drawer in somebody’s house. Both of those are probably good enough, when push comes to shove, I would guess.

James Turk: Yeah, that’s a good point. One of the things I like to stress is that in years gone by – and I’m talking about decades ago, maybe a century ago – you could sort of trust central banks to do the right thing. And, you could sort of rely on them. With the exception of the Bundesbank in the past century, no central bank has really ever done the right thing. Now, they’ve always ultimately bent over to political force, the will of the politicians. The most recent example is the Independent Bank of Japan, now setting at 2% inflation target – which is exactly what the Japanese government wanted.

The Bundesbank is the only one that stood tall as being an independent central bank. But the point I was making is that you can’t really rely on central banks anymore. Everybody has to be their own central bank. You have to own your own gold, own your own silver for the same reason that central banks have that metal. It’s your reserve. If fiat currencies do collapse, that gold and silver will be your reserve that you can use to continue to operate your business, live your life. Obviously it’s going to be difficult environment if currencies collapse, but if you have precious metals in your portfolio, you don’t really have to worry about it, because you’ll know you're protected. I mean, gold has got the 5,000 year track record. It’s been through everything. It continues to do what it’s done for 5,000 years. It’s money. It preserves purchasing power.

Chris Martenson: That’s absolutely fascinating. I think you and I are both on a similar page when it comes to the future of fiat currencies. It seems that the major economies are intent on destroying the purchasing power of their paper, either on purpose or because the central banks – which are supposed to be independent – have become political captives. Where are we on this fiat currency death watch, as it were? I’m really interested in your advice to those who are looking to protect their wealth. What are some practical guidelines for a portfolio allocation? How much? As you mentioned before, you have your investment income and you have your liquidity. Where would you split that balance in a general way at this point in time?

James Turk: First, I’m not an overall specialist in portfolio management. I’m really just a specialist in the precious metals. And I know the precious metals should play a big part in one’s portfolio. Let’s put it this way: If you look over the past century, we can see these booms and busts. In the 20s you had a boom; the 30s you had a bust. The 50s and the 60s you had a boom; the 70s you had a bust. The 80s and 90s you had a boom, and we’ve been in a bust since the stock market peak back in 2000.

When you're in a bust, there’s a general rule of thumb: You want to avoid financial assets. You want to focus on tangible assets. I’m talking about tangible assets of all sorts – not only gold for the money part of your portfolio, but tangible assets for the investment part of your portfolio. You know, own things like farmland, oil wells, gold mines, or commercial office buildings if they make sense. There are a lot of tangible assets out there that don’t make sense – second homes in overbuilt areas don’t make sense. Second homes in the south of Spain don’t make sense, because the values of those tangible assets are going to go down, and you can’t really get enough income from rental to justify it as an undervalued asset. In fact, it’s an overvalued tangible asset.

The mix between investments and cash is really hard to categorize. Generally in a bust, I’d say you want at least 50% of your portfolio in a liquid form. If you're older, you probably want something higher than that. If we look at the cash component of your portfolio, a good rule of thumb is your age. This sort of applies to your overall portfolio. If you're 25 years old, given that gold is undervalued, you might want to have 25% of your portfolio in gold at the moment. If you're 70 years old, you might want to have 70% of your portfolio in gold at the moment because you need that liquidity. You don’t want to take risks. You need the security that gold’s 5,000 year track record provides. I would use that as a rule of thumb in terms of how much precious metals you want to have in your portfolio.

If you want to have some silver as well, typically what I recommend is to have two thirds of your portfolio in gold and one third in silver of your precious metal portfolio – two thirds gold, one third silver. Because even though gold is undervalued, silver is undervalued relative to gold based on the gold/silver ratio – how many ounces of silver it takes to buy an ounce of gold. We’re at 52 ounces right now, and it’s typically 16 ounces of silver historically has equaled the value of one gold.

As 2013 unfolds, with the desire to move away from counterparty risk, people are going to understand that silver is not only an industrial metal. It’s also a monetary metal. And that 52 ounces of silver does for you the same thing that one ounce of gold does. It gives you money and liquidity outside the banking system. I will caution that silver is more volatile than gold and therefore may not be for everyone. If you do feel inclined to accept that volatility and take a long-term view, then I do recommend have a third of your precious metals portfolio in silver.

Chris Martenson: Absolutely; I agree. That was a general ratio I started with. When I first started with gold and silver and really rebalanced my portfolio in a pretty aggressive way was back in 2002. I went 50/50 between gold and silver and my other assets. Since that point in time, it’s grown to a little over 70%, even with some rebalancings along the way, because it keeps climbing so aggressively. I can’t find anything that I’d rather have my money in for the moment. I’m a little ahead of your year-by-year ratio because I’m 50 and I’m sitting at a little over 70%. That feels right to me at this point.

I have an old saying I live by, which is that if you're at a card game in Texas and you don’t know who the sucker is at the table, it’s you. That’s my shorthand way of saying I can’t analyze where the risks really sit in the financial world because everything is so muddy, so opaque. We have these mark-to-myth accountings. We’ve got other sleights of hand. I’m sure there are things that are being underreported or just absolutely not being reported that are material. Given the fact that I can’t assess where the risks are, I just feel it’s safer for me to take my chips off the table and walk away from that particular card game for a while until I gain some clarity into where the world really is. It seems obscure and muddied and unnecessarily opaque at this point.

So, that’s me. It’s just a question of safety. I truly believe in Richard Russell’s maxim that the primary purpose of a bear market is to take the most wealth from the most people. So, flip that around – he who loses least wins most. That’s always been my strategy with precious metals. It’s not a get-rich-quick scheme. It’s really to lose the least in what I see as a really turbulent period of time.

James Turk: I think that’s good advice when you're in a financial bust. The times are definitely tough. There’s one other element to this general advice that I would add. It all comes down to we have to do whatever we need to do to sleep well at night. If we know that ourselves and our families are protected come what may, we can sleep well at night, and basically that’s what it’s all about – planning for a future that nobody knows how it’s going to unfold because we can’t predict what’s going to happen. All we can do is move into undervalued assets and stay out of overvalued assets. That comes back to accumulating gold that’s undervalued and accumulating silver that’s undervalued and getting rid of fiat currencies as much as possible or any exposure to fiat currencies because they are overvalued.

Chris Martenson: Fantastic advice. Well, James, we’ve come to the end of our time. I’m just wondering, if people want to follow you and your work more closely, where would they do that?

James Turk: I’m the founder and chairmen of Gold Money and you can find me and my colleagues and our research team at goldmoney.com. What we do is we buy and sell precious metals for our customers. We’ve got almost 23,000 customers in 100 different countries around the world from our base over here in Europe, and we store gold for you in five different countries around the world – Canada, UK, Switzerland, Hong Kong, and now Singapore. We’re actually having a special promotion because we’re the first company to open up the opportunity for people to store gold and silver at vaults in Singapore. At goldmoney.com that’s all explained.

Chris Martenson: Fantastic, goldmoney.com. We’ve been talking with James Turk, founder and chairmen of Gold Money. James, thank you so much for your time today.

James Turk: Thank you very much, Chris.

About the guest

James Turk

James Turk is the founder and Chairman of GoldMoney, which offers investors an easy and inexpensive online solution for buying precious metals with international storage options.

James is one of the most foremost authorities on precious metals and has long offered market forecast commentary, including coauthoring the The Collapse of the Dollar and How to Profit from Itwith John Rubino of DollarCollapse.com.

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51 Comments

steamengenius's picture
steamengenius
Status: Member (Offline)
Joined: Apr 26 2009
Posts: 7
"About the Guest"

I think you want James Turk in the guest bio!  :)

[D'oh! Fixed. Thanks. -- A]

Grover's picture
Grover
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Joined: Feb 16 2011
Posts: 507
May I have another cup of soup, sir?

James Turk: Yeah, that’s a good point. One of the things I like to stress is that in years gone by – and I’m talking about decades ago, maybe a century ago – you could sort of trust central banks to do the right thing. And, you could sort of rely on them. With the exception of the Bundesbank in the past century, no central bank has really ever done the right thing. Now, they’ve always ultimately bent over to political force, the will of the politicians. The most recent example is the Independent Bank of Japan, now setting at 2% inflation target – which is exactly what the Japanese government wanted.

My grandmother was a young adult in Germany during the Weimar days. Where she worked, she would get paid at the end of the month. Her hourly rate was calculated as if the entire month's hours occurred on the last day of the month. She and her coworkers would get paid at noon and half would spend their lunch shopping for needed goods while the other half minded the office and went shopping at the end of the day. The next month, they switched. The last month that Weimar existed, inflation was ramping up so furiously that her month's earnings at noon were only sufficient to buy a pair of shoe laces a mere 5 hours later.

Don't give the Bundesbank credit for standing up to political force. There are still people alive who lived through the horror and plenty of people who have heard the horror stories. That is where the political will exists and the bank leaders know it. They are bending to political will by repatriating their gold. Do you really think they want to offend their masters at the federal reserve? By giving the federal reserve 7 years to deliver only half of what they claim to store on Germany's behalf, they are placating both sides ... and kicking the can down the road.

Grover

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
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Posts: 2368
Bead on a Wire.

Thank you for the talk. I had to listen to some parts again and again.

The Germans are particularly sensitive to Gold. They got burned badly during the Weimar Republic.

Wiki

I asked my friend Willie Webber what one must hold in such a situation. He said Gold and Land.

(Willies father was a musician in the Wehrmacht. Willie had inherited his musicality. I put Willie in the Casualty Department of the hospital with my violin playing.)

One never shouts loudly that the sun will rise in the morning. In other words, we are most vocal about what we are least certain of. I noticed that James kept reitterating the Historical value of Gold as a monetary metal. Therefore I conclude that he is most uncertain of this fact. It is his underlying assumption upon which he is dependent. If my belief were a bead on a wire I would slide it to 70% of the way towards the end called "True". 

The 30% remaining is due to the fact that Asimov said the the size of an Empire is dependent on its speed of communications. If we get a de-facto world government then the value of gold will be whatever  they say it is.

Pete in Wisconsin's picture
Pete in Wisconsin
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Posts: 5
James Turk's predictions are unreliable

I began following James Turk in about 2006-07. I bought and read his book, "The coming Collapse of the Dollar." I listened to every internet interview I could find (Howe Street, Goldseek, Etc.), and I've read a lot of his writings, especially those posted on the GATA website and Goldseek.

Here are some of his previous predictions:

1) Silver to reach $35 by THE END OF 2008

2) Undeniable signs of Hyperinflation in the US by THE END OF 2010.

3) Gold to $2,000 per ounce by END OF 2012.

Turk has been WRONG, WRONG, WRONG over and over, yet he never admits this or apologizes for it. He keeps on making new perma-bull predictions, and the internet interviewers always give him a free pass and never question his horrible calls from the past. This is possibly because Turk and his "Goldmoney" gold and silver dealership pay a lot of advertising money to websites that focus on precious metals investing.

Over the years, Turk has written numerous articles with log-scale charts that predict a a parabolic (or hyperbolic) increase in the metals prices due to silver backwardation, increased metals demand, uncontrollable chinese buying, and "pure" technical chart analysis. Few of his price calls have come to pass, and NONE of the hockey stick charts he predicted were in any way predictive of reality.

Turk has also been very bullish on mining stocks, which have performed poorly.

Turk has NEVER warned of a pull back or price drop. When Silver was getting close to $50, Turk was talking about Silver going beyond $100.

Anyway, please be very cautious when listening to James Turk predictions. He may be right about Hyperinflation someday, but never forget that he is a GOLD AND SILVER SALESMAN who uses FEAR to convince people to buy his product.

Jim H's picture
Jim H
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Posts: 1478
Pete from WI

Thanks so much for joining just so that you could point out how crazy wrong Turk's predictions have been since the 2006-2007 timeframe.  The average price of Gold in 2007 was $695 (see ref. below)...   so I can see why you would be so down on Turk, since if you had invested $1000 in Gold then you would only have $2388 left today.  I can see how that would leave a real bitter taste in your mouth.  That's what I call some WRONG, WRONG, WRONG investment advice.... right? 

You are a troll of the highest order Pete.  I am only sorry that more people don't understand what you are doing here - otherwise, how to explain the thumbs up ratings?

We are all adults here and we know that everyone talks their book.  Turk does not hard sell Gold Money... you can take it or leave it as a means to invest in Gold.  Please take your paperbug talk somewhere you will be appreciated.. because here ain't the place.   

http://www.nma.org/pdf/gold/his_gold_prices.pdf

Pete in Wisconsin's picture
Pete in Wisconsin
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Posts: 5
Paperbug?

Jim H:

So you're saying that because James Turk kinda sorta got a trend right, we should ignore his ridiculous perma-bull calls?

Okay, lets try that approach with a different example to see if it makes sense...In the year 2000 gasoline was about $1.50 per gallon. If I'd said at that time that there would be a major fuel shortage and that gas prices would go to $500 per gallon my 2013, you're saying that I would forgiven for making this horribly innacurate prediction because the price of gas today is $3.30 per gallon? Because I sorta got called the general direction of the trend, I don't need to be right on the specific prediction? Would you listen to me and defend me now if I started talking about Gasoline going to $1,000 per gallon?

Remember, Turk called for HYPERINFLATION by the end of 2010...Hyperinflation cannotes runaway food prices, middle class women turning to prostitution to feed their kids, old people freezing to death in winter, crime rates exploding, crazy speculation, kidnapping for ransom being common place, landlords requiring diesel fuel for rent payments, city people attacking farms for food,$100 dollar bill toilet paper, etc. Apparantly, you think its okay to yell FIRE and try to scare the crap out of people like Turk did to me...as long as gold went up a thousand bucks in six years?

I like the false accusation of "paperbug"...on what FACTS are you basing this ad hominen attack? I can back up all my claims with FACTS...how about you?

I invested a heck of a lot more into physical precous metals than $1,000 in 2007-2007, and I would have done so anyway without Turk's fear mongering BS.

Jim H's picture
Jim H
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Posts: 1478
Timing the markets...

A.  Timing markets is near impossible.  Blame Turk all you want.. but this lesson must be learned by all at some point in their investing careers.      

B.  If you are mad that Gold, Silver, and miners have not appreciated fast enough compared to paper money..  and you don't cite the fact that the banking cartel has been working overtime to suppress metals, then you don't understand what is going on, and you are effectively making the case for the opposite of metals, which is paper.  You made a fairly strong paperbug case in your previous post.  If we should not buy Gold out of fear that the dollar will depreciate.. the argument you are making is that there is no reason to fear depreciation of the dollar.  I can give you 85 Billion reasons per month to fear depreciation of the dollar, and it's name is QE.    

C.  The $1000 figure was made simply to illustrate investment returns in a way that is easy to comprehend.  I didn't wake up until 2009...  I would be an even happier camper than I am had I started converting green paper in to metal in 2007.  Exactly what is the source of your ire? 

D.  Turk may not have his timing right (see A.).. but the fact remains, the entire world's debt-based, derivative-underpinned money and banking system is going to destruct in a short number of years.  This is not fear mongering.. it is simple mathematical reality.  Japan holds a national debt that is 24X their tax roll.  While other black swans could preclude Japan from being the proximate cause, Japan is at least the most visible fuse that is already lit.  Don't listen to me though... listen instead to Klye Bass;

 

If you don't have some fear of what is coming, then you have simply not done enough research.       

locksmithuk's picture
locksmithuk
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Posts: 30
Fiat valuation of metals

I read Turk's predictions with a wry smile. In the current climate of universal price warping anyone who stakes his/her reputation on timing and price projections is a fool. Cheap marketing. Unless of course your inflation/DOW/yield/debt ratio crystal ball is in full working order.

If the common belief of currency devaluation amongst PP members holds, then who cares that your ounce is priced at $10,000 in 2 years' time? As the distortion between price and value becomes more acute I'll become less interested in $ prices and far more interested in the ratio of ounces to a single acre of land, or to a unit of productive asset. The Weimar & Zimbabwean experiences should've taught us that, if nothing else.

LogansRun's picture
LogansRun
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Posts: 1369
Jim H.

Your responses are showing that Pete hit on one of your beliefs, and not logical thinking.  Your belief in Au and Ag as the end all be all is something I would hope you'll look in the mirror about.  

We all have been following Turk for quite a while, and IMO Pete is correct in some ways.  Do I discount everything that Turk says?  No.  But as with anyone, I take his info in, and decide what I like and don't like....but I do it in a logical manner, not through a belief system.

Jim, you're a smart guy and give a ton to this community.  But to attack someone because they've gone against your beliefs is wrong IMO.

davefairtex's picture
davefairtex
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Posts: 1222
timing, markets, predictions

If one is going to make predictions about a market, one best be right about both the price level AND the timing, or else the prediction should be considered wrong.  Timing really does matter in markets, and if you are going to make a prediction and you are unsure of the timing, then say so: there is a big difference between saying "the world will end, but I'm not sure when" versus "the world will end by the end of next week."

I think the past two years has given the gold perma-bulls a bit more humility about timing issues.  Turk is now talking about how markets do have pullbacks and that's all for the positive.

There is a lot of talk about hyperinflation from money printing.  If you believe that (hyper)inflation comes from the expansion of the total amount of money and credit in the economy, the Fed printing a few trillion is nothing compared to the total credit outstanding of 55 trillion dollars.  Velocity matters too, but if we just do a static analysis, it would appear hyperinflation is still far away.

RJE's picture
RJE
Status: Diamond Member (Offline)
Joined: Aug 31 2008
Posts: 1369
Nobody knows jack shit really

Yeah, there are some people who just pick at your scabs and it is difficult to just let these Folks go by without a little piece of your mind. Boys being boys I guess.

Jim H. has absolutely a valuable voice here at PP and I think if he stepped back he would see the silliness of being upset with someone on the other side of this blue screen. I've been pulled in a couple of times myself.

I am unemotional about Gold. I have just determined that I need it. I am unemotional about Silver. I have just decided I needed it. In both cases I believe these physically held metals are a bank account who over time will keep with inflation.

If everything in our economy works out and I am wrong about precious metals then I will still live a very rewarding life. If these expectations are halved and I don't realize some of our pensions, Soc. Sec etc...then my/our Gold and Silver will supplement our standard of living. These are my hopes, and come what may I see I have zero control over what will transpire so I will, and are making the best choices for a survivable future.

Lastly, I am NOT in the totally and completely PARANOID camp as some here most certainly are.

RED, WHITE and BLUE forever, that's me. I still DO NOT believe the FED will completely eradicate the dollar or even risk reserve currency status but I prepare as if that is exactly their plans. 

What will replace the dollar and is globalization even in the cards any longer?

I have no fears financially so much because I basically have weighted every possible outcome.

I come here to PP and all other reserach sights to learn as an " in the world student " on how to protect what I have. I do this with a lifetime of experience as a business owner and Man of his household along with the help of a truly gifted Lady.

Everybody talks their books and NO ONE is fully trustworthy as they seek their own advantage not yours. Truthworthy is not to imply anyone here isn't but everyone here has a different mind set and goals structure so is different perhaps to mine. So I TRUST my thoughts and many of these thoughts are solidified by the TEACHERS like Chris, and others. 

What is perfectly clear to me however is that NO ONE has a definative conclusion as to what even tomorrow will bring. So I care NOT AT ALL what some will say to me based on their conclusions if they don't jive with mine. I will admit that some here are so negative or contrary as to disturb my morning bliss and it gets to me sometimes. As it has with Jim (meant disrespect Jim) and the poster who has effected his bliss.

I am blessed to be able to balance things out a bit and not risk putting all my eggs in one basket. I DO NOT care if I am the riches Man on the block I just want three squares and a bunk. 

I am in the camp that feels the Fed "MAY" just end its QE plans earlier than is expected. The last Fed minutes were somewhat telling. Who knows right? So we/I plan for all outcomes. We MUST.

I read the "Depression and 50% unemployment" statement by Chris and still had to ask myself if this is the way forward and we get out of this mess in shorter order then lets do it. I just see Hyperinflation as the equal but opposite bad outcome. Meaning the same results as it would probably cause 50% unemployment but would also include the destruction of our currency and a sure way to HELL was a continuation of my thought process. Each outcome isn't all that appealing so why wait. Most all of us know how to handle a Depression but few understand how to handle a Hyperinflationary event.

I believe even Chris has stated on many occasions that we have the technology and the energy now to effect change and I assume an ease of transition if we get under way and I agree. I also believe Churchill has said we will try everything else before doing the right thing. I could site many such quotes throughout our history, and they are all born out of our history as Americans, our trials and tribulations, and so I weight a great deal towards historical patterns. In roughly 250 years through some serious times we have stayed the day of execution and still have a rather strong pulse.

I give no more weighting to precious metals than a good company stock (Oil is my strongest weighting however when I am in the game). I do have more physical Gold and Silver than I probably need and this is equal to what (in todays dollars) will support an off the grid, paid off log cabin, and the land enough to sustain a relatively quite, and mostly sustained system for food and vegetables and fruits. I may just stay where I'm at.

I know this for absolute certainty the flag of the United States will still fly, and we will call ourselves capitalist with Marxist, Socialistic and all other ' istics' too as we have always been. Capitalism has never been, and is an idea so we move along defining and redefining. What is new about any of this. We have always been allowed to our religious and political beliefs. We have always took care of our sick and poor, and so we move along, and the system ends up being what it is. Honestly, three squares a bunk and my Tigers games are all I ever wanted. I imagine I will live the rest of my life with my wishes being granted.

Peace

BOB

Oliveoilguy's picture
Oliveoilguy
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Posts: 363
Turk Correct on Trend

davefairtex wrote:

If one is going to make predictions about a market, one best be right about both the price level AND the timing, or else the prediction should be considered wrong.  Timing really does matter in markets, and if you are going to make a prediction and you are unsure of the timing, then say so: there is a big difference between saying "the world will end, but I'm not sure when" versus "the world will end by the end of next week."

Granted Turk missed the timing, but let's look at the Big Picture. He identified the trend before it was popular as it is today. Had anyone followed his advice 10 years ago they would be in good financial shape. IMHO he is still correct on the trend. (Dollar devaluation and Gold Price Stability.)

Let's give the guys like Turk and Martensen who raised our awareness early on, some credit even though they make an occasional bad call. At least they have the courage to make calls and give us the opportunity to accept or reject their assumptions.

I was fortunate to have lunch with James and his son at the Gata Conference in London 2 summers ago, and regard him as an honest individual. I don't use Gold Money personally, but see him as a pioneer in a very difficult market invironment. 

Jim H's picture
Jim H
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Posts: 1478
LR, Oliveoil, and Bob...

I apologize for my histrionics last night.. this community does a very good job of censoring itself, and I did go overboard. That being said, I stand by my original point, which is pretty much what Olive is saying above.  WI Pete, "doth protest too much methinks" for more than doubling his money in Gold in five years time.

As with any community, I think we sometimes get caught up in the minutiae of our differences in belief or outlook, and I am guilty of this as well.  The thing I forget, the thing many of us seem to forget, is that not one in one hundred folks you meet in daily life has any idea how tenuous our economies and monetary systems are... buying hook, line, and sinker the propagandizing prognostications of our Gov't, Corp., and Corp. media leaders.  Gold and Silver are suppressed to make sure that the 99% stay asleep.  Most continue to buy, hook, line, and sinker, the falsified signals coming from the BLS, the captured and QE'ed interest rate markets, the QE-infused stock markets, and the inventory-controlled, Gov't backstopped housing markets.  It takes much study coupled with critical thinking skills to see through all of this to a clearer view of the underlying truth.  

What I find truly amazing is that many commentators, including Kyle Bass, whom I referenced above, see the system crashing WITHOUT even considering CM's meme of resource depletion as added drag.  So, we have unprecedented drag on future growth prospects from debt, around the world, and a largely unrecognized new form on drag due to the peak of almost all finite resources the world has to offer.  We have fake markets that promote the status quo at a time where our only real chance of surviving without a major catastrophe demands that we face the truth, extinguish bad debts, and allow the process of creative destruction to occur on a broad scale.     

RJE's picture
RJE
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Posts: 1369
Jim,

...well stated my friend. I would hate to tussle with you I know that for sure.

Honestly Jim, I have no real clue where this is headed, I just don't. In the same breath that Kyle Bass calls for the imminent destruction of Japan, Europe and his disdain for China, and all that entails he is betting rather large on the U.S. housing market. That sounds like life after death to me. That the dollar still will stand tall and he's buying paper not the physical asset in housing. He doesn't have a super large (percentage wise) dowry in Gold or Silver (physical). So I am just playing the way the Big Boys are playing. As a fiduciary he has responsibilities, and I'm guessing here but if he felt Gold was it then I suppose he would weight a great deal more than his stated allotment.

I have read and re-read most every word written by Bass and he is consistent and doesn't scream dump the dollar. No one does, if anything it's called "the best horse in the glue factory or "best house on the block", "cleanest shirt in the laundry basket".

Those who's interests in their assets are allot stronger than others, they only naturally defend their positions, that is where conviction comes from. Which does require a great deal of research and contemplation as Oil does with me.

I do know this, Gold has been a good play, and no one has lost any cash if they purchased four years ago and that's a good thing. I am, and imagine you have been one of the lucky ones. I invested because it made sense and was a hedge not for monetary gain just to stay even with inflation, and that has been accomplished.

If I gained the world owning Gold and lost my country I would not feel as though I won I know that. So I could cares less about the price of Gold really. Just insurance.

Respectfully Given

BOB

Pete in Wisconsin's picture
Pete in Wisconsin
Status: Member (Offline)
Joined: Jan 26 2013
Posts: 5
You said: "Blame

You said:

"Blame Turk"

"Sources of ire"

"Mad that gold...(has not) appreciated fast enough"

I think you ASSUME I'm mad or angry at James Turk or for outcomes I do not like...Wrong!

What I am trying to do is warn people that James Turk has a bad track record for making predictions so others don't take his information too seriously like I did. I would have greatly appreciated knowing this in 2007 so I would have taken his prognostications with a grain of salt. Of course my metals investments did great, but I was already buying before I heard of Turk. Unfortunately, I believed his Hyperinflation predictions, and I ended up living a very fearful existence. For example, I had been a successful real estate investor, but when I started believing in Turk's hyperinflation predictions, I quit investing in house/rentals because I was sure that rice and beans were a better hedge aganst the coming tempest. I missed some of the best real estate buys of a lifetime during 2007-2010 because guys like James Turk had me convinced that Hyperinflation was immenent. I'm not angry about this, but I don't want others to be tricked like I was.

The only people I feel anger towards are the interviewers and writers for precious metals related websites who introduce Turk like some kind of highly-respected psychic guru, and never challenge him on his previous failed predictions. The fact that the only place you're hearing any criticism of Turk is in some rarely-read comment section should be evidence of my claim.

Since you brought up the subject of QE and "paper" money, please be aware that Turk repeatedly says "Governments" create money out of thin air. This is not true. All "money" in our debt-enslavement monetary system is created by banks in the form of debt. When a person borrows $200k for a mortgage, the bank creates this checkbook "money" instantly out of thin air via a simple ledger entry. The government borrows its money from the Federal Reserve which is privately owned by the same legalized counterfeiters called banks. Turk claims to be of the Austrian School but he keeps saying "Governments create money out of thin air," and "Governments print money." Guess the "Austrian" Turk has never read Murray Rothbard and does not understand the fraudulent currency creation process...another reason to question James Turk.

debu's picture
debu
Status: Silver Member (Offline)
Joined: Aug 17 2009
Posts: 130
No Need to be a Latter Day Nostradamus

I grant James Turk that he was early in his higher gold call and that he has been directionally correct. And I have no quibbles with his integrity, nor the fact that some of his predictions havebeen wrong, or possibly just early.

The problem, as I see it is, a certain forgetfulness on his part on past wrong calls.  It would be more helpful to analyst and reader alike for him to revisit previous forecasts and review which ones were correct and which ones missed the mark and the reasons why.  As to the ones that were wrong, what tweaks to his analytical framework might allow more accurate predictions in the future?  It is through this iterative process that an understanding of the multiple factors at work in the changing value of precious metals is deepened and the credibility of the analyst is enhanced.   

We don’t demand infallibility of the analyst but rather intellectual curiosity and the ability to adapt the analysis to the ever evolving reality of the world we live in.

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Brother Pete,

...step back from your computer screen, take stock of those who love you as they are the only ones who truly feel your pain. Hug them, kiss them, and let what has happened go. Frankly, the finger should be pointed in one direct, a hard concept sometimes but the truth none the less.

Brother we are always bombarded with someone elses book, take a look:

...and we all feel this and have felt this:

...so what do we do now? We live to fight another day:

...don't get me wrong, I like a good fight as anyone should. Take a look:

I wish you well.

BOB

Respectfully Given

BOB

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@oliveoilguyFull credit to

@oliveoilguy

Full credit to Chris and Mr Turk for calling the gold price trend correctly back in 2002.  And Chris for all he's done here.  I didn't realize either of those two things were at issue.

Market timing remains an important issue with me.  Was anyone at KWN calling the top for silver at $50?  I certainly don't remember them doing so.  It was dreadfully overextended, and had you bought silver there, you'd have lost 40% of the value of your investment.  Timing really does matter, and apart from our Faith in the Ultimate Victory of Gold over Evil Central Banking, its probably a good idea to measure how extended a market is prior to making buying and/or selling decisions.  It doesn't require Market Manipulators to cause a price correction in something that's really overextended.

Secondly, I'd like to continue asking for evidence of this incipient hyperinflation I hear so much about.  What evidence do we have that hyperinflation is on the way?  What indicators should we be looking at?  None that I follow suggest hyperinflation.

From what I can tell, looking at the metrics I believe in (inflation being driven by an expansion of money and credit), hyperinflation just isn't happening.  At best, we're creeping along at an overall 2% inflation rate, based on growth in TCMDO.  (TCMDO = total credit market debt owed)

Third, is gold overvalued, fairly valued, or undervalued?  It depends on what you measure, and what you compare it to.  During the interview, Chris mentioned comparisons with other commodities.  I thought that was interesting enough that I went off and created some charts and put them up on a page.  Gold vs other commodities - gold looks fairly priced.  Gold as a backing for total money - gold is distinctly undervalued.  Gold vs the US equity market both short term, and long term - perhaps somewhat undervalued.  Which indicators do you believe in?  Are there others that bear watching?

http://mdbriefing.com/goldvalue.shtml

So 3 issues.

1) Timing does matter, we can measure it in various ways, and it might be a good idea to remember that it is probably best not to buy something when things are overextended on the high side.

2) What is the theat of hyperinflation and how we measure that, and

3) Whether or not gold is over or under-valued, and how we measure that.

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Evidence of Hyperinflation?

DAVEFAIRTEX:

I'm replying to your challenge, "Secondly, I'd like to continue asking for evidence of this incipient hyperinflation I hear so much about."

I agree that right now there is no clear sign that Hyperinflation has begun or will begin in the immediate future. Contrary to Jim H's claims that I am James Turk hating troll, I actually agree with James Turk that there will likely be a Hyperinflation in the US in my lifetime (I'm 41 now).

The best argument for hyperinflation I've seen is the 2008 study by Swiss economist Peter Bernholz. He studied all known hyperinflations that occurred after 1980 (there were 28 of them) and studied them all to determine the common denominator. His conclusion was that hyperinflation is INEVITABLE when a government borrows more than 40% of their expenditures. THe US crossed that threshold around 2009-2010. I don;t know the exact number, but I heard talk-show conservative Mark Levin say in 2012 that the US is borrowing over 43 cents for every dollar spent.

Here's a link to an article mentioning the study by Bernholz:

http://www.rapidtrends.com/2009/10/26/hyperinflation-in-the-us-no-way-ok...

We may have already crossed the point of no return to hyperinflation, but low rates are temporarily preventing the horrible outcome. 

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Hyperinflation

There may be a mathmatical defination of hyperinflation and for you chart watchers you may not think we are there yet.  However, for many, many Americans we are. Here is an example I use.  Went to the grocery store and got one bag of groceries.  I spent a lot more than I thought one bag should cost so when I got home I spread everything out and took a good look at my receipt.  There it was, the culprit, a $9.00 head of cauliflower.  It cost almost $3.00 per pound, not each, but per pound.  Now I have a niece who is trying to get a job making $15.00 per hour, gas up here is right around $3.75 per gallon, how far will her paycheck go?  Regardless of what the "experts" say if prices have gone up so much that people have trouble putting food on the table it is fair for them to believe there is hyperinflation.  It's a matter of perspective folks, collapse and hyperinflation hasn't happened yet if you have a job, disposable income and 3 square meals a day.

There is your evidence "Pete in Wisconsin".  No disrespect intended just a different perspective. I challenge any of your to volunteer at a Food Bank and then come back and tell us all there is NO hyperinflation.

AK Granny

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God Bless Bob!

Bob, I can't tell you how much I enjoy your posts...

Honestly, three squares a bunk and my Tigers games are all I ever wanted. I imagine I will live the rest of my life with my wishes being granted.

Honestly, that statement is priceless! LOL You are the great PP moderator! I've been trying to keep up with this thread between Jim and Pete and with all the ping ponging back and forth all I can think of is the frantic song Blue Rondo a la Turk (pun intended)...

No offense to either Jim or Pete. Just trying to find some humor.

Peace!

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Hyperinflation of the reserve currency

Will occur via loss of the reserve currency status.  This has been happening incrementally for years, and continues to happen under our noses;

http://www.resilience.org/stories/2013-01-07/commentary-why-peak-oil-thr...

What’s important to understand here is that the whole reason the U.S. can get away with running trillion-dollar budget deficits without the bond market revolting (a la Greece) is because of exorbitant privilege. And that privilege is a direct consequence of the U.S. dollar serving as the world’s reserve currency. If international trade were not conducted in dollars, exporting nations (both manufacturers and oil exporters) would no longer need to hold large reserves of U.S. dollars.

Put another way, when the U.S. dollar loses its reserve currency status, the U.S.will lose its exorbitant privilege of spending beyond its means on easy credit. The U.S. Treasury bond market will most likely crash, and borrowing costs will skyrocket. Those increased borrowing costs will further exacerbate the fiscal deficit. Can you say self-reinforcing vicious cycle?

three days ago;

http://uk.reuters.com/article/2013/01/24/uk-britain-yuan-idUKBRE90N11520...

The bank's Executive Director for Banking Services, Chris Salmon, told a meeting of senior bankers in London that the move was aimed at underpinning a developing offshore market in yuan trade out of London that Britain is keen to encourage.

It would be the latest in a string of bilateral currency agreements that China has signed in the past three years to promote use of the yuan in trade and investment.

Kyle Bass is a smart guy, and yet he readily admits that he is not up to calling the end of a 70-year debt supercycle.  We can talk all we want about the markers we expect along the way, but the truth is there are too many variables at work to allow for any kind of predictive model.  I am pretty happy just being able to discern the markers as they pass by.. the more time I have to prepare, the better.  

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You're confusing Hyperinflation with price increases

DearAkGrannyWGrit:

The common definition I've heard for hyperinflation involves price increases of at least 50% per month. JOhn Williams at shadowstats says its when $100-dollar-bills are more valuable as toilet paper than medium of exchange. During the Continental Dollar collapse during and after the American Revolution, people made suits of clothes out of the worthless money and wore them around as a joke. Weimar had people using stacks of "money" to burn in furnaces. After 1865, Confederate scrip was used to wallpaper outhouses. Zimbabwe Dollars were carted around by the wheelbarrow-load. In Hungary's post-war hyperinflation (worst ever recorded) shop keepers rang a bell whenever prices DOUBLED, often many times DAILY.

Yes, we've all noticed increases in the prices of food, gas, property taxes, tuition, automobiles, etc., but I disagree with you that we're anywhere near hyperinflation levels.

I think we'll get there someday, but lets not sound the alarm too soon.

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Hyperinflation will be like a Rocket

Pete in Wisconsin wrote:

Yes, we've all noticed increases in the prices of food, gas, property taxes, tuition, automobiles, etc., but I disagree with you that we're anywhere near hyperinflation levels.

I think we'll get there someday, but lets not sound the alarm too soon.

Pete,

The reason we need to sound the alarm now is because when this hyperinflation move starts it will move with a velocity never seen before in history. There will be no time left to adjust.

Think of someone holding a huge inflated ball under water, and more and more air is being pumped into the ball. When the person trying to hold it down finally gives up and releases it,  the ball will be unstoppable.

This gets back to the time element. As Jim H said "there are too many variables at work to allow for any kind of predictive model. " Most of us agree that hyperinflation is where we are headed, and if we wait till it manifests, it will be too late.

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Hyperinflation

I googled the defination of "hyperinflation" and this is the first thing that came up.

In economics, hyperinflation occurs when a country experiences very high, accelerating, and perceptibly "unstoppable" rates of inflation.

Again, I believe it's a matter of perspective.  If someone has no job and is hungry, now, they are experiencing collapse and hyperinflation. I go grocery shopping weekly and see first hand how prices are accelerating. Yes, I understand that you are talking about the entire economy crashing and burning and the dollar will loose its value on an even larger scale, but my point is, for many the suffering has already begun!  This is a distinction that is irrelevant when one is hungry.

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awesome!

Great bunch of replies to my question about hyperinflation.  I'll take them one at a time.

Pete: here's an article written by that same Peter Bernholz where he claims that he does NOT think there will be a hyperinflation in the US.  Its dated - about three years old - but read it and tell me what you think.  One signpost he gave for incipient hyperinflation is where 40% of government expenditures are being funded by money creation (direct monetization).  Looking at graphs on FRED, there's one year where that almost happened - 2009 - and then money creation backed off.  However, the metric IS interesting - measuring money creation divided by government expenditures, and more important than "winning" or "losing" such an argument, I'm looking exactly for such metrics so thanks!

Mr Bernholz also suggested another requirement is when people "turn positive" on the economy and all that money sitting around is suddenly mobilized.  That makes sense to me, and so that's something else we can follow.  I'll poke around and look for consumer sentiment metrics and see what I can dig up.

Here's the Bernholz article:

http://www.american.com/archive/2009/december-2009/how-likely-is-hyperin...

Here's the graph from Fred - USFED budget change y/o/y divided by annualized Fed Gov expenditures.  Once the FGEXPND series updates, we'll probably see that chart pop up again.  Perhaps there's a series on govt expenditures that updates more frequently.  I'll poke around.

@Jim

Loss of reserve currency status.  Yes I've heard that one too.  What can we use to measure this loss?  Presumably long term treasury rates are the metric - the ability to borrow money cheaply.  Martin Armstrong is a bit of a crank, but when a bunch of people predicted hyperinflation he has counterclaimed that a core economy never hyperinflates - that only happens in the periphery.  When trouble strikes, money runs towards the core, not away from it.  As measured by Treasury rates and the observation of money flows during the many phases of the eurozone crises, that thesis would seem to bear out.  The US remains a core economy.

Would you rather have your money in China, or in the US?  Me, I pick the US.  Heaven only knows what the Chinese government will do any day of the week.  And more anecdotal evidence suggests the chinese leadership have bought houses in the other core economies - the US, Canada, England.  But that's anecdotal - for metrics, we monitor money flows which means long treasurys and the USD.   Judging from how the yield on TIPS (top chart, trending down) and the trade-weighted US dollar (bottom chart, tracking sideways) are doing, we're not losing that reserve status as of today.  If TIPS start tracking up - say above 2% - and the dollar down below (say) 90, then we will have a problem.

@AKGranny

$3 per pound for cauliflower?  BLS response would be: try substituting a different vegetable!

The deeper truth here is, the impact of food price inflation on a person depends entirely on how much of their budget is used to buy food.  That's why food riots happen in very poor countries and not in rich ones.  People in Pakistan spend 45% of their budgets on food, so when food doubles in price, they get extremely upset.

Most people in the US do not spend anywhere near that (our average is about 7%), so we don't have food riots.  And we have a great deal of cheap (but perhaps not so nutritious) food.  FAO has a food price index http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/ which illustrates how dramatically international food prices have risen since 2007.  (I pick the orange line - nominal prices - since I'm not really seeing wage gains in nominal terms these days).  But if your food budget takes up 40% of your income, you REALLY notice this.  That's not hyperinflation, but for sure, its pain.  I'd claim that's linked to oil prices, and I have a chart for that too if you are interested.

Thanks for the replies, I think I'll go and make another page!  I have one on credit inflation and CPI inflation, but not one for signs of hyperinflation.

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As Jim Said

We cannot have Hyperinflation while being the reserve currency of the world.  I guess I shouldn't say "we cannot", but the chances are extremely slim as it would mean every other currency would go the same direction.

Once we lose reserve currency status (most likely to be done behind closed doors where the avg. US Citizen won't see it coming).  When that happens, Hyperinflation can occur.

My only argument against HI happening with the dollar is, it destroys the wealth of both the rich and the poor.  In other words, the elite's lose as well.  Now, they'll know it's coming, and move their wealth to another asset, but it's still an issue.  

The name of the game is a One World Currency.  When they decide to collapse the dollar, they'll have the solution waiting in the wings.  They'll allow a certain amount of pain, which will bring the masses to scream for the solution.  

Don't ever forget that the elite run off of the Hegelian Dialectic:   

Problem - Reaction - Solution

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Great analysis Davefairtex

davefairtex wrote:

Loss of reserve currency status.  Yes I've heard that one too.  What can we use to measure this loss?  Presumably long term treasury rates are the metric - the ability to borrow money cheaply.  Martin Armstrong is a bit of a crank, but when a bunch of people predicted hyperinflation he has counterclaimed that a core economy never hyperinflates - that only happens in the periphery.  When trouble strikes, money runs towards the core, not away from it.  

Davefairtex,

Seems like a concensus that the loss of reserve currency status would be a necessary precondition for a hyperinflation. 

It would be interesting to look back in History at former empires and look for parallel situations.

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Good discussion.  I agree

Good discussion.  I agree with Pete in that Turk makes specific predictions regarding silver price that turn out to be wrong.  If TPTB can manipulate prices, then why even make specific price forecasts, especially after being wrong again and again?  Yes, he's been right about the general trend, but maybe he should just say the trend is up and over time it should be a great investment, rather than the $65-$70 by March, 2012?

As to hyperinfllation, it makes sense that China and other countries will wean off the dollar as the reserve currency, and as they do, the dollars abroad will be spent back into the US as they are no longer needed as global currency reserves.  At some point, VELOCITY may increase, causing a panic and more velocity, etc.  Even if that does not happen, seems to me that velocity can't continue going down at the same rate as money supply being increased, which alone should cause higher PRICE inflation.  Stagflation 2013/2014?

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reserve currencies

I have posted about this before to the sound of crickets.  Reserve currency status is not a binary, on-off, either/or proposition.  It is more of a sliding scale with the largest economies making up larger shares of foreign exchange reserves.  According to Wikipedia this is the current balance of the various foreign exchange reserves:

http://en.wikipedia.org/wiki/Reserve_currency

The USD is still in the lead, making up about 62% of currencies held in foreign exchange reserves, but that is down from 71% in 1999.  The Euro is still a distant second, although the cumulative EU economy is about as big as the US.

There are other participants noted on the above chart and more, including Canada and Australia, are looking to join the party.

http://www.thebull.com.au/articles/a/34012-canada-and-australia-dollars-to-be-reserve-currencies.html

Quote:
There's always a difference in the markets between "de facto" ("in practice") and "de jure" ("in law"), and recent announcements regarding international reserve currencies would seem to reflect that difference. Word came out in mid-November that the IMF is likely to reclassify the Australian dollar and Canadian dollar as "official" reserve currencies. While this is indeed a significant development, it seems more a reflection of reality than a major prospective change.

My take away is that, particularly if China continues to grow at a staggering rate, our reserve currency status will slip away over time.  It won't be a cliff, but more of a downgrade.  This suggests to me that we won't see sudden hyperinflation, but could see garden variety high inflation as the USD loses status.

Doug

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Fed buying too much for bonds to be useful signals

davefairtex wrote:

Great bunch of replies to my question about hyperinflation.  I'll take them one at a time.

(...)

Loss of reserve currency status.  Yes I've heard that one too.  What can we use to measure this loss?  Presumably long term treasury rates are the metric - the ability to borrow money cheaply.  Martin Armstrong is a bit of a crank, but when a bunch of people predicted hyperinflation he has counterclaimed that a core economy never hyperinflates - that only happens in the periphery.  When trouble strikes, money runs towards the core, not away from it.  As measured by Treasury rates and the observation of money flows during the many phases of the eurozone crises, that thesis would seem to bear out.  The US remains a core economy.

Would you rather have your money in China, or in the US?  Me, I pick the US.  Heaven only knows what the Chinese government will do any day of the week.  And more anecdotal evidence suggests the chinese leadership have bought houses in the other core economies - the US, Canada, England.  But that's anecdotal - for metrics, we monitor money flows which means long treasurys and the USD.   Judging from how the yield on TIPS (top chart, trending down) and the trade-weighted US dollar (bottom chart, tracking sideways) are doing, we're not losing that reserve status as of today.  If TIPS start tracking up - say above 2% - and the dollar down below (say) 90, then we will have a problem.

A fine post.  

One point I'd like to continue to reinforce here at this site is that what bonds are 'telling us' is not as useful or meaningful as it has been in the past because of the Fed's heavy-handed intervention.

Accordingly, I don't put much stock in the predictive power of either Treasury bonds or TIPS.  

I agree that the US is the very core of the entire paper machine that currently fascinates and dominates the world, and that the first 'flight to safety' is always from the periphery towards the core so US paper assets will do better than average during the next crisis.

For a while.

The long-term perspective is that the US has a habit of borrowing at a faster pace than it grows production and that is a practice without a future.  Sooner or later, with 'later' being the case for the world's reserve currency, that has to stop and then reverse.  It's either that or the currency itself becomes worth less if not worthless.

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Doug, this time it's different

"Reserve currency status is not a binary, on-off, either/or proposition.  It is more of a sliding scale with the largest economies making up larger shares of foreign exchange reserves. "

This is how it was before the dollar became the reserve currency of the world.  But since oil is pegged to ONLY the dollar, the reserve status is no longer described as above.  Until Oil is priced in another currency, reserve status is binary.

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Re: James Turk's predictions are unreliable

No matter the product never listen to the salesman solely and the bigger the purchase the more due diligence to counter sell is needed.   I still think there is a good chance we will have a UN-like decision on gold if things get ugly before a WW3.

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Thanks for the comments on James Turk

Thanks for the comment on James Turk, Pete.  I also bought into the "imminent dollar collapse" back in 2008 (because, well, it made sense to me at the time) but I haven't been following James Turk that long but something about him just didn't sit well with me.  He seems kind of like the antithesis of the gold permabulls on MSNBC (the same people who told me it was in a "bubble" when it was $500/oz.)  

I've just never heard him say anything bad about gold at all.  It's just always going to the moon, Any Day Now.  Not that I think his analysis is completely worthless (although maybe you'd care to disagree?!) but an alarm bell goes off in my head every time I encounter one of these salesmen-types that never have anything bad to say about the product they sell.  Kind of like my broker my parents' Merilll Lynch broker:   for her it's always a "great time" to get into the stock market and it has never, to my knowledge, been anything close to a good time to buy gold.

Yes, gold will probably go much higher (and no one would love to see that more than myself, although $10000/oz gold will probably be concomtant with so much societal unrest that I'd rather _not_ see that unless it's a decade-long increase) but (again) I'm a bit wary of these "salesmen".  If I understand right, Turk won't appear on Jim Puplava's _Financial Sense_ podcast since Jim (arguably the fairest interviewer on the planet) wasn't quite pro-gold enough for his taste some years back.  

Jonathan Armstrong

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US losing reserve currency status

Apparently reserve currency status is not solely reliant on oil.  It is dependent on a more generalized use in international trade.

 http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2JIyQMO3k
 

Quote:
The global trading and financial systems require lubrication by an adequate supply of homogeneous assets that can be bought and sold at low cost and are expected to hold their value. For half a century, US Treasury bills and bonds played this role. Their unique combination of safety and liquidity has made them the dominant vehicle for bank funding globally: it explains why the bulk of foreign exchange reserves are held in dollar form, and why the role of dollar credit in financing and settling international trade far exceeds the US share of international merchandise transactions.

But as emerging markets continue to rise, the US will unavoidably account for a declining fraction of global gross domestic product, limiting its ability to supply safe and liquid assets on the scale required. The US Treasury’s capacity to stand behind its obligations is limited by the revenues it can raise, which depend, in any scenario, on the relative size of the US economy. With emerging markets’ growth outstripping that of the US, the increase in the capacity of the US Treasury to supply safe and liquid assets will inevitably lag behind the increase in global transactions.

Further, China and Russia have agreed to trade in Rubles, including oil and gas, to which Russia has promised China unlimited access.  And, Iran is trying to sell its oil in Euros.  See:

http://www.ibtimes.com/china-russia-currency-agreement-further-threatens-us-dollar-248338

http://www.sott.net/article/251144-Dollar-no-longer-primary-oil-currency-China-begins-to-sell-oil-using-Yuan

http://www.caseyresearch.com/cdd/demise-petrodollar

Quote:
Tehran Pushes to Ditch the US Dollar

The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran's oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.

But that line doesn't make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.

The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.

The take away appears to be that, just as the USD became the dominant reserve currency "slowly but surely", it will likely lose that status slowly but surely.  True, energy, particularly oil, plays a big part in that status, it is not the only factor.  But, even if it is, oil is moving away from a USD only trade.

Doug

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China, Russia, Turkey, Iran and any other Asian...

...country is to basically stay acquainted with the competition. No big deal in other words that they nickle and dime banana's for Oil, Gold for Oil or any such barter..

Hyperinflation: Not in my lifetime (30 years plus...I hope).

Loss of Reserve Currency Status: Not in my lifetime. (30 years plus).

Proof: Don't have any just a lifetime of watching bureaucracy work. aka...snails pace, and it better be with good manners and gentlemanly behavior.

Respectfully Given

BOB

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Loss of Reserve Currency Status

LogansRun said,

But since oil is pegged to ONLY the dollar, the reserve status is no longer described as above.  Until Oil is priced in another currency, reserve status is binary.

If you investigate, you will find that oil has already started to trade outside of the dollar system... indeed, the petrodollar seems like it will die from 1000 cuts alongside the loss of reserve status;

http://www.ibtimes.com/china-russia-currency-agreement-further-threatens...

http://blogs.reuters.com/breakingviews/2012/05/09/irans-yuan-oil-payment...

http://21stcenturywire.com/2012/09/20/the-beginning-of-the-end-for-the-u...

"China and the United Arab Emirates (UAE) have announced an agreement which will use the yuan for oil trades."

It's hard to say where the tipping point is in terms of confidence.  To be honest, we have what I consider to be an all time low (as in lowlife) 3rd world nation effort on the part of the US to squelch the ratings agencies - the beatings will continue until confidence is restored;

http://www.sovereignman.com/expat/scam-complete-the-us-government-takes-...

As with any good scam, the government must maintain public confidence.  The moment someone says ‘the Emperor has no clothes,’ that shallow, fragile confidence will come crashing down and expose the scam. Dissent must be vigorously and swiftly pursued.

So when S&P finally downgraded the US one notch in August 2011, the SEC and Justice Department announced that S&P was under investigation, just two weeks later.

Egan-Jones, a smaller rating agency, has been even more aggressive, downgrading the US credit rating three times in 18 months. And while the federal government may not have imposed Diocletian’s death penalty, they are just as willing to squash dissent.

In a country that churns out thousands of pages of new regulations each week, it’s easy to find a reason to go after someone. As you read this letter, in fact, you are probably in violation of at least a dozen regulatory offenses.

In the case of Egan-Jones, the SEC brought administrative action against the agency within two weeks of their second downgrade. And a few days ago, the case was settled.

I’m sure you have already guessed the ending: Egan-Jones is banned from for the next 18 months from rating US government debt. They’ve effectively been silenced from telling the truth.

Finally, just to show you guys (and gals) that I have not completely lost my sense of humor, the latest from Turk today on KingWorldNews;

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/1/28_Hi...

“The politicians have finally done it, Eric.  The House passed a debt ceiling bill that throws away the last semblance of any discipline on federal spending.  It is now all but certain now that the dollar is headed for hyperinflation, assuming the Senate and then the President go along with the measure passed by the House a few days ago, and the indications are that they will.

By the way, I do agree with Turk that if the debt limit is effectively done away with...and wouldn't it be just like our legislators to pull a fast one by making it a permanent "termporary" suspension...  we are one giant leap closer to the endgame.... but then again, I was thinking that two QE's ago.  

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LogansRun
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Im well aware of the Petrol Dollar situation

in the main stream sense.  And I'm well aware of what you've been taught in regards to "who holds foreign reserves" and the likes.  Ugh.

When will you guys realize, the Dollar is not controlled by the markets.  It is controlled by the Rothschild/Rockefeller/etc..., Banking Cartel.  And until they allow the "Petrol Dollar" to collapse, it won't....period.

After all of these years, and all of the info that some of us have brought forward to you (over those years)...and having it play out as we've stated, many of you still can't see the "truth", is exhausting.

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it takes a village to get the signal

@Chris

I agree that the predictive power of TIPs is most definitely reduced when the Fed starts buying.  Its interesting that once the eurozone crisis quieted down and (presumably) the inflow of money from europe stopped, the Fed started buying treasury bonds again.  Once the eurozone crisis recurs, it is probable that we will see some more safe haven flows once again.  Perhaps the printing will mysteriously stop at that point too.

I constantly wrestle in my own mind about this hyperinflation issue.  And since I'm a chart guy, I like measurements.  I don't have my ego on the line for any particular outcome - hyperinflation, deflation, whatever. I've heard smart people on both sides make great cases.  So now I just want to see what's currently the most probable outcome at any given time.  I want to wake up every morning and ask, "how's that hyperinflation thing going today" and I want to have an answer!  As a result I'm looking to construct a gauge that when looked at in aggregate will let me measure this very thing.

My proposal:

  • TIPS yield (trigger > 2%)
  • US dollar index (trigger < 73)
  • monetization / FGEXPND (with trigger > 40%) + Consumer Sentiment "improving" (> 80)
  • velocity of money (Fred M2V) increasing (> 1.8)
  • worldwide CB reserve holdings decreasing (trigger say < 50%)

Rationale:

I'm not sure we're at a point yet where it could be distilled down to one "hyperinflation risk" number, but an aggregation of these five metrics taken together might tell the story pretty effectively.  The Fed can't control them all.   TIPS will operate just fine as a signal if the Fed doesn't buy them.  USD will trigger if the Fed buys too many, but fails to control currency exchange.  If the USG controls currency AND the Fed buys, then presumably the monetization % + velocity of money detectors will still function properly, along with the worldwide CB reserves measurements.

The "trigger" levels don't mean I think hyperinflation will happen when those levels are breached, only that it will be time to watch the situation much more carefully, and that the risks of a hyperinflationary outcome has significantly increased.

@Doug

Sorry to hear your previous posts landed on deaf ears.  I'm listening!  I can periodically get the IMF COFER data and construct an updating chart given a day or two.  The csv file (!) is updated quarterly, and lags by a quarter.  Measuring the CB reserves directly seems like an excellent way to see how our "reserve currency" status is going and the time lag isn't too horrible.  I'm not a huge fan of anecdotes that talk about how we're losing this or that.  If you can't chart it and look at its evolution through history, it doesn't exist!  :-)

http://www.imf.org/external/np/sta/cofer/eng/cofer.csv

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An additional dimension to Reserve Currency Calculus

Great discussion.  We are all clearly very worried about the US dollar.  I agree that intolerably high inflation would result if the dollars reserve currency status were substantially eroded.

I would like to suggest that our reserve currency status has many interlocking variables.  One that is often not factored in is the world’s dependency on the US's security services.

For example, it is the US navy that keeps the straights of Malacca open for super tanker transit and allows Singapore safe trade routes.   It is the presence of US forces in Korea that gives security for Japan, Taiwan, and S. Korea to trade.   Our security force presence in the Persian Gulf speaks for its self.   Our rivals clearly understand the necessity of our global military patrols.   I suggest this is a significant factor supporting US bond prices and the current resilience of the dollar's reserve currency status.

Importantly, I note that for the 1st time in ~20 years we are about to implement a major DoD funding reduction (the sequestration). These budget cuts will likely have a very large impact on our troop strength and naval vessels.  In my mind, these force contractions are necessary adjustments to the reality of our decaying means.  I also believe that as we necessarily withdraw from our global security role, nations will see proportionally less benefit in continuing to support the dollar as the reserve currency.

This may not be a decisive factor in the dollars rejection (and our bond prices)  but I do believe it will add a substantial further systemic stress.

Respectfully

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Folks, this whole subject has been terrific...

...and I have one very important question to ask: How much DEBT will be destroyed in the not to distant future before this bizarre Hyperinflation cycle begins (it never will is my guess)? I ask this only because what I am seeing, researching and musing on is a middle class getting the living HELL beat out of it, are intelligent enough to have thought their options through, and just how long do you think this will continue when a pain free balance sheet made " zero debt owed" is stamped on some official paper, in some court room by a Federal magistrate especially when the cost is but $500 dollar bankruptcy away?

I see a whole lot of printing and less and less Demand for anything. I see numbers that are bad, and were manipulated to not look as bad which in my world says, "things are really bad".

Just read the latest Fed reports. Philly Fed and such. These are the reported numbers, if it was better then they would have reported them, and if worse then these were the numbers they settled on which means these numbers could be way worse. I know this is paranoia speaking but I have been lied to, cheated, and have no faith in numbers as reported by our Government soooo, YIKES! 

Additionally, Europe has said that "everything is hunky dory" and that tells me flat out that things are even worse than we ever thought in Europe. Everybody lies about Europe just ask Junker, Junkman, Junkie, whatever his name is. Who's that dude with the fuzzy eye brows, leprechaun face, and has that truly evilness about his face that Nigel Farage (I absolutely LOVE THIS DUDE) keeps ripping?, Rambo, rumptyduppy, Rumpoy? Anyways, you Folks believe him all you want but that dude freaks me out and I call Bullshit with every word he speaks. Madame French Lady, well, you have no idea what my visuals of her are when I close my eyes because, well, locker room stuff so I won't share.

Everybody's darling is China, and well, I just think China is still developing, and until she has some maturity I will take her words with a grain of salt. I love China so don't get me wrong but like my little sister she will stomp her feet and scream like the dickens but, she's still my little sister (you can put little Brother here too if you feel better). You hear her/him but really, after living with 12 others just like them the noise gets muted out of the constant noise that is present always. Did I ever tell you that the cry of a baby is music to my ears? I love a babies cry, and can sleep hard when all hell breaks loose. I've been around lots and lots of babies.

China exports right? To whom may I ask? If we have a currency war as is being discussed then correct me if I'm wrong but that implies to me we are going to turn protectionist as a world reaction to this game being bandied about, Yes? So again, export to whom?

Who can buy anything as I hear China has all the cash that no one wants anymore even at zero percent interests! Those that do want the cash just want to pay down Debt so deflation, right? 

China would do the world a favor if she imported anything. Last I read she consumed something in the neighborhood of 35% in her economy and she should consume 50 to 60% just to meet world averages but the little brat is a hoarder and NOT a TEAM player. So when she grows up she will learn or fail because of her selfishness. We all do because the have nots will scream to take from the haves. Must have balance Folks.

I know, I know she has her supporters from the commodities exporters, neighbors, and they play silly games with each others currency, and do a little bartering but China has to realize she can't keep building bridges to nowhere, trains that no one travels on, cities to house millions of people and Malls that are bigger than most cities and NO ONE goes or lives there. Just how long will the commodity exporters just love China when she stops buying their commodities? I say they go talk with India, she's next up for those commodities are my thoughts. Have you followed the electrical issues in India? Man, how do people live like that? We may soon find out!

Japan's ninja economy is really fascinating to me, and I am a huge fan of Japan but Reinhart and Rogoff has spoken to me, and Japan is, well, sadly, toast.

I sense things are not as they appear, that printed paper has only increased Debt. Debt that was already in need of a good laundering, now we've added way more, and now what happens? I think the market can't go straight up especially when built on an illusion made of sand. Someone has to take their loses and I think that has to happen next.

Remember, I don't know anything, I truly am a student, and have no predictive powers in the least but I haven't lost sight of the fact that 2008 did happen, and everything that has been done since has most likely done jack shit to correct the fundamental problem that faces us. To darn much Debt and now we have more of it.

I am still confused as to why we didn't save housing first by creating a jobs programs in an energy build (natural gas and pipelines from Canada and the Bakkens, and rebuilt and modernized our electrical infrastructure. Added more rail because these type projects would be done in every corner of our country and benefit everyone in all those corners so the wealth effect would have been spread evenly are my thoughts. I think we would have been far better off if we had. I guess that was considered expensive but 50 million people collecting welfare for sitting on their arrssses is a great idea, and probably is very cheap to support?! OKaaayy. Really? I say for self esteem issues alone and the value to themselves, and to our country that we need to get to work on what will be critical going forward. Electricity, energy sources other than imported Oil and transportation like trains. Dummy me I guess.

Let the consumer pick the winners and losers, and get rid of all the bureaucracy that is worthless. Like Government itself and let the States run things for a while, and run representatives in to Washington to vote on issue their constituents find appropriate, and then get them back home quick before anyone can get their paws on them and take them out to a strip club or some darn place.  

OT: I seen my first Robin (that's our State bird) yesterday and it is the earliest I have seen a Robin in Michigan in my lifetime. Last year was the earliest when I seen one, actually several on Feb 6th, the previous earliest date. So I predict another very early spring here in Michigan. I love it except, I have all this information from a much beloved Mark Cochrane in my head, and I really wish he would be a part of a future Podcast. I am dying to hear what he sounds like, his sense of humor and above all else his adventures.

Note: Folks I normally do a lot of reading and research. Well I hurt my eye again, had surgery, and reading is difficult but I can type really fast ,and I have a spell check. I also have lots and lots of energy, always have, and I have stuff to say, muse upon so hopefully you don't mind. I basically write to have others rip apart my thoughts so I can learn. I don't really care if you do or not I just need to do this for whatever reason. I feel confind as I can't do anything to get my energy out so...Just listen you'll understand.

Yeah!, like that! LOL

Regards

BOB

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Doug
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The Big Lebowski

Dude, although the song far preceded the movie, it always reminds me of the Big Lebowski. yes

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Doug,

...if you don't know this I think you very sensible and intelligent. If I don't comment on what you write all the time just know my head is most always going up and down when you do say something. I was told that no news is good news, and that should mean to you that I value what you say and nothing more needs to be said. Capeesh?

Regarding that song: Many a times I heard that while some funny fog drifted about if you know what I mean, wayyyy back in the day.wink

Be Good

BOB

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Forex reserves chart

Doug, see my chart derived from the quarterly COFER data from the IMF - the same data that you quote from that wiki page, except that I'm using the quarterly data and not the annual data so its a bit more up to date.  Its in the lower right corner of the following page:

http://mdbriefing.com/hyperinflation.shtml

Note that in order to make the numbers align with the table you showed me, I had to use "allocated reserves" instead of "total reserves".

It doesn't appear we're losing reserve currency status at the moment.

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most excellent points re US security role

Hi Concobb2,

You have hit upon a very crucial point that I think is absent from the discussion of why the US dollar is able to retain its reserve currency status. Playing the global policeman has benefited many countries and allowed them to prosper from the stability offered by that security.

This line of thinking is outlined well in a book called The Next 100 Years by George Friedman. I have mentioned it before here, but is worth mentioning again. It provides an interesting geopolitical perspective which helped me to put together a few things about why things have evolved the way they have. (Friedman also has another book, The Next Decade, which is a great read as well. It is big picture geopolitcal stuff that certainly gives one an easy to understand peek into the whys behind foreign policy decisions)

One of the biggest points Friedman made was pointing out how the US domination arose out of its unrivaled ability to control all of the oceans and the critical shipping lanes. If the US does not want a ship to go somewhere, it will not go there. The ablility to enforce blockades or allow free trade at US discretion is huge power.

Geographically speaking, the US is gifted by having a strong presence on both the Atlantic and Pacific. Taking its cue from Britain, who was once the world's dominant naval power, the US built up a most formidible naval force, one that remains un-matched anywhere. By comparison, Russia and China are largely land-locked, with far less exposure/access to all important coastal water. It is for this reason that many believe the US will continue to dominate for a long time. China is struggling to build a rival naval force but it is unlikely they will be able to overcome the restrictions placed on that navy by the limited coastal exposure they have. Russia, in the long term, is not considered to be much of a player in this regard.

Friedman likened the US at this point in time to a teenager who is not all together certain or comfortable with its global role, and at times, makes ill-conceived decisions without thinking of the long term ramificatons. The "war on terror" is a good example. He talked about denial of Empire status, which I think is really valid. But like all teenagers, he hypothesized that the US will mature into a strong and solid global power once it gets past the growing up phase and truly embraces the idea of being an Empire. In between now and then are the growing pains (and mistakes) of accepting its role, and understanding better the strategic importance of its foreign policy decisions.

To use the navy as an analogy, in the short term for sure there are choppy seas and no doubt a few mines that will explode here and there. Some ships might go down, with others taking on water and listing badly, in spite of mad bailing (while some captains are wining and dining - hello Costa Concordia!). Unlike a cruise ship, this navy has huge depth. There is not just one ship, but many, with a backbone of service people like none other. Once the distress signal is truly recognized for what it is, the ships will be righted, and they will learn that you can't play around with responsibility for the helm when you are in charge.

The big questions are, when are they going to see the distress signal and when are they going to grow up?

Jan

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Empirically speaking

Jan,

I read somewhere that a nation-state taxes its own citizens to provide services and that an empire taxes the citizens of other nation-states to provide services at home. We coerce other nations to hold dollars and/or dollar equivalents. The seignorage (difference between face value and cost to produce) is a tax. They had to provide goods and services to receive those dollars. They even have to provide something or we won't give them foreign aid. Granted that these countries can sell the dollars back to us at face value, but that could be considered an act of war.

Ironically, only a debtor nation can have reserve currency status. Our most important export is the currency that greases the transactions between other countries. Can China perform this function? Is China in any position to change from a manufacturing center to a consuming center when their people currently save as much of their meager salary as they do? China has millions of people clamoring to find low paying jobs. Until they have more economic stability, they won't change. Can Germany or Japan step up to the plate? Is there any other country even close here? Is there enough gold in the world to do this without causing the price to spike by an order of magnitude?

As long as our military is the biggest bully on the block, these relationships will continue. The war on terror was concocted in order to justify spending as much as we do on our military. How else could any sane debtor country afford to spend nearly half of the world's military expenses? Are we really bringing democracy to these countries or just flexing our muscles? The threat of bringing democracy would have a sobering effect on any dictator, wouldn't it?

We receive benefits like an empire, we covertly act like an empire, but we don't admit we're an empire. Aren't actions louder than words?

Grover

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absolutely

Grover,

I am with you, and yes for sure, actions speak louder than words.

There are simply no other nations who have the financial clout to take over the role as reserve currency holder supreme. But that does not mean they won't try to weaken the power of the US in this regard. We are witnessing it now in the various deals that have been struck between certain countries to trade amongst themselves. Someone said on one of these threads a while back that holding reserve currency status does not have to be an all or nothing proposition. I think what we will see is the continuation of the US in that role for the majority of the world, with lots of little side deals made here and there to try to gain whatever benefits can be had. This ties in with the view point that we are in for a long, slow burn economically speaking, as opposed to a sudden implosion and dollar collapse. As long as the US is still the best horse in the glue factory and the biggest bully, the dollar will soldier on as the facilitator of global trade.

For sure China has aspirations in this regard, but like you said, they are first and foremost a nation of savers. I do not see that changing any time soon as their massive population has no social safety net or healthcare the way we do in the first world (even if our systems are broke and under-funded; in priniciple they still exist and bring peace of mind as a safety net). They also are facing a demographic timebomb, which is exacerbated with an overabundance of males without spouses due to their one child policy and the resulting female infintacides. These two facts are game changers.

I submit that if we had no food stamps, welfare, healthcare, medicare, unemployment insurance, old age security and so on, we would be far better savers and money managers than we are. As it is we have been completely spoiled by the combination of bloated government spending and financialization. There will be a price to be paid as we come down off of the spendthrift mountain.

Great input from you, thanks Grover.

Jan

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Heartache at Spendthrift Mountain

westcoastjan wrote:

I submit that if we had no food stamps, welfare, healthcare, medicare, unemployment insurance, old age security and so on, we would be far better savers and money managers than we are. As it is we have been completely spoiled by the combination of bloated government spending and financialization. There will be a price to be paid as we come down off of the spendthrift mountain.

Jan,

I'm imagining a couple of lovesick banksters who can't give up on each other's love of power.crying Thanks for the visual image!

I can't help but believe that all of those "benefits" were designed by our would-be leaders to enslave us (in both our countries.) We have rewarded them well. We elect politicians who offer the most lucre as long as it can be bought by anyone else. I've found that most people have fallen for the trap because it doesn't feel like a trap.

I don't dismiss the possibility of a sudden implosion and dollar collapse, but that isn't the likeliest scenario. I see the demise as a stair step financial crashcade. 2008 was the first major step down. Were it not for the government borrowing and spending, we'd be neck deep in deflation and default. That would be a game changer and relegate the money handlers and their purchased politicians to their proper position in society. They will do whatever they can to prolong the game.

Just as the price of gold and silver has been allowed to trickle upward, other countries have been allowed to utilize their own currency for limited mutual trade. It is when the threats to the current system are too extreme that military actions are sanctioned. Saddam Hussein violated the line by selling oil in euros. Moammar Gadhafi wanted to institute a unified African currency convertible to gold. Both men are now dead and their countries have been "liberated." <Warning: Speculation> These transgressions must have been viewed as too extreme. Why else did we take action to right these wrongs and yet we allow the senseless slaughter in central Africa to continue? As long as the brutal dictators pay tribute to the system, they can remain in limited power. Look at the House of Saud for an example.</speculation>

We'll likely wallow along as we have been the past few years. It could last a few more years or even a decade. Who knows what event will finally trip the trigger? As long as gold and silver remain repressed, the game will continue. As soon as paper promises to deliver PMs are viewed as being nearly worthless, the current game is over. I expect that to be the final step in the crashcade.

Then, the real heartache begins.

Grover

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Doug
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Jan and Grover

Quote:
There are simply no other nations who have the financial clout to take over the role as reserve currency holder supreme. But that does not mean they won't try to weaken the power of the US in this regard. We are witnessing it now in the various deals that have been struck between certain countries to trade amongst themselves. Someone said on one of these threads a while back that holding reserve currency status does not have to be an all or nothing proposition. I think what we will see is the continuation of the US in that role for the majority of the world, with lots of little side deals made here and there to try to gain whatever benefits can be had. This ties in with the view point that we are in for a long, slow burn economically speaking, as opposed to a sudden implosion and dollar collapse. As long as the US is still the best horse in the glue factory and the biggest bully, the dollar will soldier on as the facilitator of global trade.

Wrt reserve currency status, the size of the currency country's economy plays a big role.  Current projections, though they should perhaps be more accurately described as speculations, are that China's economy will surpass the US economy within roughly a decade.  That's not a long time in economic or national histories.  I assume that the next decade will be very interesting indeed in terms of environmental, geopolitical, resource and economic developments.  As noted in the table I posted above (#30) the USD is currently about 62% of the world's foreign exchange reserves and the Euro (in 2nd place) is about 25%.  Davefairtex provided some interesting data that I have some difficulty interpreting, but in ballpark terms these numbers do not appear to be wildly off the mark.

I also don't know how to figure military power into the evolution of reserve currency status.  Our current sequester projections suggest it wouldn't take too much of a financial disruption to keep large parts of our naval fleet tied up to some dock rather than projecting power around the globe.

There is another wild card to consider that is highlighted in Jim Rickards Currency Wars, in which he engaged in war games exercise.  He and his allies introduced the variable of a gold backed currency created by Russia into the mix.  His premise is far from some wild eyed fantasy as it is clear that China as well as Russia are actively exploring doing exactly that and/or coming to other currency agreements. 

The bottom line is that the future of the USD's reserve currency status is far from secure.  It seems likely that the USD will at least be significantly degraded if not replaced as the premier reserve currency within the next decade.  Grover's scenario of a stair step "crashcade" seems entirely reasonable.  China and Russia actively seeking such an end will be far more difficult to quash than the threats posed by relatively tiny Iraq and Libya.

Doug

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westcoastjan
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some good points Doug

For sure the status of the USD as reserve currency status is far from secure. We can only speculate around the myriad criteria that will contribute to the ongoing maintenance of this status.

One factor I tend to view skeptically is the Russian-Chinese collaboration. While they may have some ideological common ground, they both have their own agendas/aspirations; I just can't see them being good or committed dance partners for very long.

Without a doubt China is an increasing economic force, but there are many criteria beyond that which go to making a superpower. A good article discussing the various criteria is found here:

http://apac2020.thediplomat.com/feature/china%E2%80%99s-not-a-superpower/2/

One of the more salient points made in this article, from my perspective, is the idea that a superpower must have "an appealing ideology". At this point in time it is hard to discern exactly what ideology China is following. Regardless of what they may call it, I do not see it as being something that other countries will easily buy into.

The bottom line is we can only make educated guesses as to how this is going to unfold. We do indeed live in interesting times. All in all this is one mother of a global chess game which is at the same time both facinating and scary to watch.

Thanks for the input Doug, your thoughts are always well put together and appreciated.

Jan

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