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James Turk: We're Living Within A Money Bubble of Epic Proportion

On par with the South Sea & Dutch Tulip bubbles
Saturday, January 25, 2014, 5:46 PM

James Turk believes the time we live in now will be studied by future historians for generations to come. Just as we today marvel at the collective madness that resulted in the South Sea and Dutch Tulip manias, our age will be known as the era when society lost sight of what money really is.

And as result, the wrong kinds of wealth today, that's mostly financial assets are valued and pursued. And just like those bubbles from centuries ago, when the current asset boom goes bust, the value of paper wealth will vaporize. 

In contrast, those holding tangible productive assets or real money will fare much better on a relative basis.

James and co-author John Rubino (of DollarCollapse.com) have recently published a new book covering the details of this prediction called The Money Bubble: What to Do Before It Pops. Within it, they delve into the reasons for why the world is destined for what Ludwig von Mises termed a "crack-up boom":

Wealth comes in two forms.  It comes in financial assets, bonds, and T-Bills, and things of that nature, and it also comes in tangible assets: real estate, oil wells, timberland, farmland, houses and things that are tangible. And when you’re in a financial bust – and we’ve been in a financial bust since the dot-com bubble collapsed back in 2000 – what you want to do is you want to be involved with tangible assets and you want to avoid, as much as possible, your involvement in any financial assets.  So, consequently, what people should still be focusing on, even though we’re 14 years into this bust, is continuing the accumulation of tangible assets. 

Because when this bust is over, promises are going to be broken left and right.  And that means financial assets where you have counterparty risk where you own an asset, the value of which is based on someone’s promise – a lot of those financial assets are going to be diminished in value.  Now, there’s a special kind of financial asset called a stock in a company.  It’s almost like a tangible asset in the sense that if you own stock in EXXON, you’re basically owning a tangible asset, because it’s involved in oil and it owns tangible assets all over the world. 

But then, there are financial stocks, credit-card companies and banks, that are financial wealth rather than tangible wealth.  So, you don’t want to own stocks in those companies.  So, basically, own tangible assets or stocks in companies that are involved with tangible assets – those stocks, I call near-tangible – I think that’s the thing that everybody should be focusing on.

And when it comes to money and liquidity, the money, of course, would be physical gold or physical silver or a combination thereof because they will re-emerge in the historical and traditional role as money. 

Keep in mind, gold’s been money for 5,000 years.  It was made money by the market.  Money comes from the market.  It doesn’t come from the government.  Over the past century, government’s certainly usurped that authority to control money.  And over the last 40 years, they’ve gone even further afield by completely divorcing fiat currency from the gold that used to back money.  And because of the time element that’s involved, we’ve lost sight of what money really is, and that’s what’s created the money bubble, Chris.

And it’s this money bubble where people have to come back to reality as to what money really is.  It’s liquid, tangible assets being used in the economy in exchange for real goods and services.  And it’s ultimately where we’re going.  And I think it’s going to be very, very disruptive because if you look at an individual country like Weimar, Germany or Zimbabwe more recently, or what Venezuela or Argentina are going through now.  You can see the disruption to the economy when the money is no good.

We’re talking here about fiat currencies throughout the world because nobody’s tied to gold anymore.  No country’s currency is tied to gold anymore.  So this is going to be the bubble, I think, that generations from now, hundreds of years from now people are going to be talking about just like we talk today about the South Sea Bubble or the Mississippi Bubble, from those episodes in history a couple hundred years ago.

Click the play button below to listen to Chris' interview with James Turk (35m:26s):

Transcript: 

Chris Martenson: Welcome to this Peak Prosperity Podcast. I am your host, Chris Martenson, and today we have the distinct privilege of speaking with James Turk, founder of GoldMoney and whose experience in markets and precious metals spans more than four decades. He is also Director of The GoldMoney Foundation, a not-for-profit, educational organization dedicated to providing information on sound money.

James is one of the foremost authorities on precious metals and has long offered market forecast and commentary, including co-authoring The Collapse of the Dollar and How to Profit from It, with our good friend, John Rubino of DollarCollapse.Com.

John and James, they have a new book out called, The Money Bubble, which has some interesting insights, which we’re going to discuss today.

I’m delighted to have you back, James.

James Turk: Thanks, Chris. It’s always great to speak with you.

Chris Martenson: I have a tall stack of questions prepared. Are you ready to dive in?

James Turk: I sure am.

Chris Martenson: All right. Well, great. Let’s start here. It’s been a while since “The Coming Collapse of the Dollar” was written. Obviously, a lot has changed. And some things haven’t changed. The landscape has some familiar features that you wrote about back then. Some of the things you wrote about came to pass.

Obviously, there have been some heroic measures, if we can call them that, on the part of central banks to continue things as they are.

What sort of a grade would you give them?

James Turk: Well, whenever you’re going to intervene in free markets, I always have to give them an “F.” In terms of what they should be doing, they should be allowing individuals to buy out early, interact with one another without all of this intervention and trying to control individual lives by trying to control all economic activity.

But in terms of being able to kick the can down the road, which is I think what you’re getting at, I’d probably give them an A+ because they’ve managed to keep this system together longer than John and I originally suspected when we put “The Coming Collapse of the Dollar” together back in 2004.

In that book, Chris, were a couple of major themes that John and I made. One was that you should be buying gold, and secondly, you should be betting against the housing bubble, and do that in a variety of different ways including shorting financial stocks.

And when 2008 came along, we thought that the final piece of the puzzle would fall at the place where the dollar would collapse. Generally, as currency, gold would soar. And maybe central bankers and central pawners would get the idea that they’re on the wrong road and we have to go back to basics. But what they’ve managed to do is, an unprecedented amount of money printing has just built yet a bigger bubble. And this is the theme of the new book; the bubble itself is now money.

Chris Martenson: Money. And by money, quick definition – what do you mean when you say, “money”?

James Turk: Let me explain it this way. If you’re a shopkeeper, Chris, and I want to buy a loaf of bread from you, I go in and I’ll say, Well, I’ll pay you in a week’s time, but give me the loaf of bread now. You, as a shopkeeper, haven’t been paid. You’ve accepted credit. If I go into your shop and use “fiat” currency, it’s the same thing. You’ve accepted credit, and you’ve got payment risk associated with that. But if I go into your shop and buy a loaf of bread with a silver coin or a gold coin, the assets are exchanged for assets. There’s no lingering payment risk. The exchange is extinguished at that particular moment of time.

And that’s what really money is. Money is the most liquid, tangible asset in the economy, and that happens to be gold and, to a certain extent, silver as well. But we’ve lost sight of that. What we’re using today is not money. We’re using a money substitute in place of money, and that’s what’s created the illusion that that everybody’s acting upon, and it’s this illusion that’s really created the money bubble.

I think we have to go back to basics when this final, biggest bubble finally pops. The basics, of course, are that money is the most tangible asset and the most liquid tangible asset in the economy, which, of course, is gold.

Chris Martenson: I needed to check what you meant by “money” because there’s been this big debate between the deflationists/inflationists, and the proper definition of money has to include certain debt instruments and credit. And as you note in your book, and something that I’ve noted as well – since about 1980, we’ve been expanding our total credit markets by roughly twice the rate of the underlying economies underneath them. And that’s across most of the developed world.

So with this, when you’re borrowing like crazy – it gives you the sense of prosperity, that illusion, the idea is that you have to pay it back at some point. I think the debate, as I understand it right now, is between those who believe that fundamentally that catches up with you. You have to pay it back. You pay it back in the form of defaults or inflation or hyperinflation. But one way or the other, those claims get diminished or destroyed.

And on the other side, I think we have people who believe that you can just kick this can down the road indefinitely. And is that a fair way to summarize the state of the spectrum of thinking on this right now?

James Turk: Yes. I think that’s really a very good description of it. But clearly, I’m in the former camp that you can only take so much debt on in the economy because debt has to be serviced. You have to generate wealth to pay back the interest expense on the debt that you’re accumulating.

And ultimately that determines how far you can go. And we’re long past the stage where the amount of debt has been put on the – the burden on the economy where the service interest can be properly serviced. And what they’re trying to do is to perpetuate the system by debasing the currency. But as you debase the currency, you’re ultimately destroying capital.

Look at the middle class and savers and generally how badly they’re being hurt by this policy of zero interest rates. You’re basically destroying capital with this policy of zero interest rates. You’re destroying purchasing power. But it’s being done simply to make it appear that the U.S. Government can continue to fulfill all of these promises that it has made and that it can continue to service this debt burden – but it can’t.

Let’s put some numbers on it. There’s $17-trillion of debt now, and that’s just the direct obligations of the U.S. Government. If interest rates were at one percent, that’s $170 billion. That’s about five percent of government revenues. If they went to a more normal level, you’re talking about an additional trillion dollars of expenses. And what that does is it puts you on this vicious downward cycle where the higher the interest expense becomes, the more money has to be printed to keep the system going. But that just leads to higher interest expense and ultimately hyperinflation of the currency.

And my guess is that’s the way we’re headed.

Chris Martenson: Well, let’s take a petri dish sort of an example around this. Japan – and Japan cuts both ways in this story. One, some people hold it out and say, Well, look, obviously you can hold interest rates at one percent pretty much indefinitely. Japan’s got a couple of decades of financial repression under their belt. And so that’s held up as an idea that that can carry on forever.

I just saw a tweet this morning from a Robert Ward, very interesting. In 2010, the population of Japan was 128 million. Best-case trend is that in 2100 they’ll have 65 million. Worst case, they’ll have 38 million people.

The question that was asked on that: Who pays back all the public debt again? So, here’s Japan piling up their public debt faster and faster and faster into a declining population, which I think just lays bare, in a fairly large petri-dish example, just how ridiculous this glide path that they happen to be on really is.

And is that a fair way to look at it? And if it is, is Europe or the United States on any different of a path?

James Turk: No. They’re really not. And ultimately, if you really look at the total level of debt, not just the direct debt but all of the promises that it made, the only rational conclusion that one could come up with is that a lot of promises are going to be broken.

What those broken promises will be, will be determined in the future by politicians. But we’re generally – given the fact that they only have a limited capacity to fulfill all of these promises, you as an individual investor has to basically decide, do you want to participate in any kind of government promise, be it the T-Bill or T-Bond, Social Security payment or whatever, hoping that you’re going to choose correctly and that they’ll continue to make good on the promise that they’ve given you?

Or, do you just want to avoid the sector completely, which is what I recommend, and go to something that’s safe, which is basically tangible assets and avoid debt instruments.

Chris Martenson: Let’s get to the theory of how this all comes to an end. Obviously, interest rates are one form of the Achilles’ heel, but you have in your book a notion of something called the “crack-up boom.” What is a crack-up boom?

James Turk: Yes. The term comes from Ludwig von Mises, the Austrian School of Economics. And basically, it’s just a shorthand way of saying that governments will destroy the currency to relieve the burden of all of the promises that they made when you reach that point in time that you can’t fulfill all of the promises.

So yes, crack-up boom is basically a flight from the currency, because people want to exit the currency, because they know it’s going to continue losing purchasing power, because of government and central bank actions that debase the currency.

Chris Martenson: This is an interesting point, then, because all fiat currencies owe a large portion of their value, as it were, to faith. We have to have faith, particularly on an international setting. Within a border, a government can dictate that your currency has value because a) you have to pay taxes, and b) they can arrest you and do other things in circumstances if you don’t trust their currency appropriately.

But given that trust is a component of this, that’s really what in my mind shifts you from an inflation to a hyperinflation. Hyperinflation is just a state of mind more than an actual mathematical place to be. It’s when people have lost confidence in the paper currency and they want to be in anything else.

So let’s talk about – you talked in your book, again, about distorted signals and lost trust. What are you talking about when you say “lost trust”? Because I’ve lost plenty of trust; I’m wondering how you characterize that?

James Turk: Yes. People don’t trust institutions anymore. They don’t trust the government anymore. The approval rating of Congress is something like 8%. And ultimately, people start to question what’s going on. They realize they’re not being treated fairly by what government is doing. The banking system is favored over individuals. Eighty percent of the American population was against the bailout in 2008, the bailout of the banks. But the banks got bailed out anyway.

And all of these things lead to, ultimately, a breakdown in trust. And the economy depends upon everybody being able to work with everybody else on a level playing field. That’s what governments are supposed to do. They’re supposed to maintain a level playing field by maintaining a standard rule of law that everybody abides by regardless of whether you’re a big bank or a little shopkeeper on Main Street or a husband and wife trying to get by in a very difficult situation.

But the playing field has been tilted now. It’s been tilted by various vested interests to serve themselves, rather than to serve the general public. And that ultimately leads to a major breakdown in trust and a flight from the currency in the Crack-Up Boom.

Chris Martenson: You talked about shrinking trust horizons. You had a list of things that might be indicators of that. This reads like my personal indicator list, by the way, where people might begin buying local food instead of national brands because they no longer trust the institutions that are producing the food. Community banks over money center banks. I have most of my wealth stored in community or local banks. Homeschooling over public schools – started that about eight, 10 years ago, tuning out national politics, etc. and so forth.

There’s a whole list there saying that people have lost a bit of faith. We detect that in the Congressional approval ratings.

There’s another one I’d like to talk about here for a minute, which is sort of my own proxy. And I’m looking at a chart here of CNBC viewership. So, CNBC being one of the primary mouthpieces for Wall Street, Here’s how you invest in the markets. Buy stocks. Here’s how you participate in the equity markets.

And what’s interesting in this chart is that their viewership rose all the way through the 1990s right up through 2000. So, the viewership rose with a rising market. And then it fell again down into a depth at around 2003 or 2004, and then it rose again with the markets up to 2007; fell and has continued falling; there’s been no recovery in their viewership with the so-called return of prosperity as evidenced by all-time new highs in global stock markets in many cases.

Why do you – is this – is it fair? I mean, when I’m looking at this, I’m thinking that the reason their viewership is falling off is the same reason I’m not watching, which is, I don’t think there’s any useful information on that program for a person like me.

James Turk: Yes. I think you’re right. There’s a bigger-picture issue here. You sort of touched on it in what you were just saying, that during periods of rising prosperity, the viewership rose, but during periods of declining prosperity, it didn’t.

So, despite what you hear in the media about the economy supposedly getting better, it’s not. There’s no rising prosperity in pretty much most of the world today, because the economy is getting worse and worse, because fewer and fewer people are working today. There are less people working now in America than there were back in 2005.

And the only way an economy is going to improve is if you have people interacting with one another, and that comes with a greater number of people working.

So, it brings up another point, Chris. Not only is there a decline in trust, but we have to look at the other side of the coin. It’s that the less people trust institutions or governments, the more governments respond by exercising financial repression.

What they do is, they try to maintain the system by imposing more and controls. And it’s these controls that ultimately are the final last-gasp effort by government to maintain a system that is no longer sustainable.

And you’re seeing these controls now being imposed regularly, not only in the United States but in many countries around the world. Increasing government intervention is not the solution to the problems that are faced today. The solution to the problem is less government, less taxes, less burden on working individuals and a sound money so that people can interact regardless where they are in the world, on a level playing field, because these interactions create commerce and it’s commerce which raises everybody’s standards of living.

And that’s ultimately what government should be doing – withdrawing all of this financial repression, withdrawing all the taxes and the overheads and the burdens, and let individuals get on with their lives.

Chris Martenson: Well, James, one man’s repression is another man’s gold mine. The financial repression has certainly been hitting savers of all stripes, people living on fixed incomes, pensions, endowments, you name it. But there have been absolutely enormous beneficiaries of that, not the least of which is seeing the rising wealth gaps that occurs everywhere – which, by the way, is just a mathematical function of what happens when you print money. Those closest to it certainly do very, very well. And those further from it do less well, even negatively well.

And so what I’m seeing in this data is, first of all, it’s fully predictable that when the Fed, et al., meaning all the other central banks, do what they do, there’s going to be a certain class of speculators that are going to reap the majority of those gains.

What do you think – I mean, just to speculate for a second – the Fed’s now got five going on six years of information about how their policies are working by many, many of the statistics that we’ve talked about here: unemployment, the true nature of the unemployment when you dig into the statistics a little between part-time/full-time jobs, the amount of capital expenditure spending by corporations. There’s a lot of things to say the seeds for good, organic growth are simply not there.

They’ve created a speculative arena, which they should have known was what they were going to create, because there’s lots of papers written about that well-known phenomenon. What do you think they’re thinking now going on into the sixth year of this?

James Turk: I don't know. It’s hard to put myself in the shoes of a central banker. But I mean, if they looked at themselves honestly, here we are supposedly five, six years into an economic recovery, and they’re still printing money hand over fist? I mean, how can that possibly be? If they’re supposedly having good economic activity, why do they continue to print money?

Central bankers only have one solution to everything. They just print money and print money. But what they don’t understand is they’re ultimately destroying the currency and destroying the economy as a consequence.

Yes, Bernanke today could be very much compared to Doctor Havenstein, who ran the Reichsbank in Germany, which was its central bank during the Weimar Republic in the early 1920s. He felt that he had to continue buying government debt and turning it into currency because if he didn’t, that there would be an economic collapse and unemployment would rise.

Well, Bernanke’s turning U.S. government debt into currency for the same thing. It didn’t work out well in Germany. Obviously, central bankers should be reading the history books to see what happens as a consequence of money printing. This is one of the key themes that John and I are putting in this book, that we’re on a path that’s unsustainable, and we have to turn around and basically go back in the right direction. And each individual themselves has to take those steps to make sure that they themselves – they and their family – are protected come what may. And what we do is offer a variety of different ideas as to how to do that. And of course, precious metals are a key element of that strategy.

Chris Martenson: Let’s get to precious metals in a minute. One of the more enduring debates is whether or not precious metals are being manipulated in any way, shape, or form. So, before we talk about the potential for various market participants, I’ll call them, to manipulate the price of gold or silver – let’s review a couple of the other market riggings and overt frauds that we know about.

The LIBOR Scandal, if you followed that, that’s the very definition of a huge, gigantic conspiracy involving lots and lots of players that persisted for years and years. And yet, it was, they are fiddling around with rates that literally impact hundreds of trillions of dollars of derivatives and related investments.

So, when you look at the LIBOR Scandal, what – do you see anything other than big banks behaving badly?

James Turk: Absolutely not. I think that is a good example, and it’s just one of many. I mean, look at the number of things that various banks have become involved with in terms of scandals, and lying to authorities, lying to regulators, lying to customers. Why are precious metals any different from any of the other things that central banks have tried to do?

And it all comes down to the interest rates. Gold is money. It has its own interest rate. The market is basically for interest rates controlled by governments, so they have to control the gold price in order to control gold interest rates. It’s very simple and very straightforward.

But there’s a bigger picture here, Chris. What governments are doing now is no different than what they’ve been doing for over 100 years. It used to be under the classical gold standard, but what governments did is they managed domestic currency in order to maintain the constant purchasing power of gold.

About 100 years ago, they flipped that around. They started managing gold in order to maintain the ever-diminishing purchasing power of the domestic currency, and they do that by trying to control the gold price. I mean, we saw a good example of it in the 1960s, particularly with the collapse of the central Banking Cartel called the London Gold Pool. When eventually they couldn’t sustain the financial depression anymore, the gold pool collapsed and the gold price rose.

We have a similar set of circumstances today. We’re getting, I think, very close to the stage where the managing of the gold price or manipulation or the intervention in the market, however you want to describe it, is approaching its end. And that ultimately means a much higher gold price in the months and years ahead.

Chris Martenson: I just want to tick down this list I’ve got because it’s really instructive. So, my view is this: Anything that banks or central banks can do in order to achieve a profit or a policy aim, they will do. And banks, in particular, have proven extraordinarily aggressive at all manner of frauds, many of them just rather dramatic.

So we mentioned LIBOR. They’ve also been implicated now in Forex and currency manipulations, particularly banging the close on those markets. There’s the gold price fix. Certainly, in London they had an investigation there. I think Germany’s now in on that. Bafin’s checking out Deutsche Bank.

Others, on the CDL markets there were material withholdings from clients. The energy markets in California and other states were heavily manipulated by banks that got tagged in that. Mortgages, obviously, the Platt’s oil prices for global oil prices, those benchmarks had been – it’s been alleged and is under investigation. Active rigging there.

The ISDA fix that sets the benchmark for a $380-trillion stock market also been tagged with banks just quietly backpedaling away, saying, We’re leaving. Don’t investigate us. And obviously, the daily high-frequency trading, quote-stuffing shenanigans, overt price manipulation – this is the world we live in now.

If it turns out that – when I look at that constellation, I say, Oh, you really just can’t trust that the bank’s self-interest and your interest align even remotely. They don’t.

So, what does a person who’s more of an average investor supposed to do when they see that’s the world that we live in and that regulators seem to be rather uninterested in untangling that mess. And what a mess it is. Where do they go? What do they do?

James Turk: Wealth comes in two forms. It comes in financial assets, bonds, and T-Bills, and things of that nature, and it also comes in tangible assets: real estate, oil wells, timberland, farmland, houses and things that are tangible. And when you’re in a financial bust – and we’ve been in a financial bust since the dot-com bubble collapsed back in 2000 – what you want to do is you want to be involved with tangible assets and you want to avoid, as much as possible, your involvement in any financial assets. So, consequently, what people should still be focusing on, even though we’re 14 years into this bust, is continuing the accumulation of tangible assets.

Because when this bust is over, promises are going to be broken left and right. And that means financial assets where you have counterparty risk where you own an asset, the value of which is based on someone’s promise – a lot of those financial assets are going to be diminished in value. Now, there’s a special kind of financial asset called a stock in a company. It’s almost like a tangible asset in the sense that if you own stock in EXXON, you’re basically owning a tangible asset, because it’s involved in oil and it owns tangible assets all over the world.

But then, there are financial stocks, credit-card companies and banks, that are financial wealth rather than tangible wealth. So, you don’t want to own stocks in those companies. So, basically, own tangible assets or stocks in companies that are involved with tangible assets – those stocks, I call near-tangible – I think that’s the thing that everybody should be focusing on.

And when it comes to money and liquidity, the money, of course, would be physical gold or physical silver or a combination thereof because they will re-emerge in the historical and traditional role as money.

Keep in mind, gold’s been money for 5,000 years. It was made money by the market. Money comes from the market. It doesn’t come from the government. Over the past century, government’s certainly usurped that authority to control money. And over the last 40 years, they’ve gone even further afield by completely divorcing fiat currency from the gold that used to back money. And because of the time element that’s involved, we’ve lost sight of what money really is, and that’s what’s created the money bubble, Chris.

And it’s this money bubble where people have to come back to reality as to what money really is. It’s liquid, tangible assets being used in the economy in exchange for real goods and services. And it’s ultimately where we’re going. And I think it’s going to be very, very disruptive because if you look at an individual country like Weimar, Germany or Zimbabwe more recently, or what Venezuela or Argentina are going through now. You can see the disruption to the economy when the money is no good.

We’re talking here about fiat currencies throughout the world because nobody’s tied to gold anymore. No country’s currency is tied to gold anymore. So this is going to be the bubble, I think, that generations from now, hundreds of years from now people are going to be talking about just like we talk today about the South Sea Bubble or the Mississippi Bubble, from those episodes in history a couple hundred years ago.

Chris Martenson: If a country was going to behave more rationally and responsibly, how would we detect that? Looking at, say, Europe to the U.S., some are saying Europe is not printing nearly to the same degree as the United States.

Do you find any merit in that sort of, let’s say, jurisdictional analysis where you’re lumping, all fiat currencies are headed for the same cliff?

James Turk: Yes. All fiat currencies are headed for the same cliff. And the way you’re going to turn away from the cliff is, you have to look at what the central bank has in terms of gold reserves. If the central bank still has a credible amount of gold reserves relative to the amount of promises that the government has issued and the amount of paper that the central bank has issued, they have the ability to go back to some kind of a gold standard.

I mean, if the U.S. Gold Reserves are still there, they could probably do it at a gold price of $10 or $12 thousand an ounce or maybe a little bit higher. And you’d still have a lot of promises be broken, though, by the U.S. Government.

But if the gold’s not there in the central bank, then there’s no hope. And that’s really the worrying thing, because we don’t really know where all of the physical gold is these days. All we do know is that a lot of physical gold is moving from West to East, is being accumulated by people in Asia who understand gold and its historical role as money that is being taken away from people in the West, who view gold as an investment and something to speculate on, rather than something that’s fundamental to economic activity.

Chris Martenson: Well, it’s interesting. I’ve seen several studies that have done this same thing and asked the question, If you wanted to have a permanent portfolio…? meaning it would survive every war and it would perform well on every single up and down cycle as you go forward, the perfect weighting has 20% gold in it and then different weightings in stocks and bonds.

So, it had a role. And the thing that’s interesting to me is that you can, with just simple risk-adjusted returns put gold in a portfolio. Dial it up and down. Ask what’s going on. A very high weighting delivers the best efficient frontier on an idealized portfolio, back-tested through the last 100 years of history, and what I detect in my country from the United States is the slandering of gold at every opportunity in the mainstream press.

Do you see the same thing? And if so, what’s the motivation?

James Turk: Yes. Because it’s a type of financial repression. Propaganda is repression. They can’t let the truth get out that gold really is money, because if they do, then you’re going to have people fleeing fiat currency and going into gold. And that’s the worst fear of central bankers.

So governments and central bankers have this unholy alliance that governments borrow money and central banks facilitate that process by making sure that governments have all the money they want to spend. And the mainstream media basically facilitates it by providing anti-gold propaganda and telling everybody the economy is good, when in fact, all you have to do is talk to some of your neighbors and you’ll find out that the economy is not as good as the media tends to portray.

And we’re on this path where trust in institutions and things is rapidly declining.

Chris Martenson: And maybe for good reason, if you pay attention.

As we get towards the end here, here is a common question I get, and I think this is a tricky one. It’s around the idea of debt. And if you have to break the subject of debt down, that’s fine, because not all debts are created equal.

You have a chapter in here entitled, “Pay Off Debt and Internationalize,” but on the debt side of this, why would you advise getting out of debt at this point in history?

James Turk: Yes. There is this beguiling belief that if you have a lot of debt and the currency gets destroyed, your obligation will get destroyed with it. It may not work out that way. We live in an economy today where governments are heavily influenced by the banking system. If the currency collapses, there’s no reason to believe that the bank’s obligations are going to be minimized. They may impose on the government a rule that the debt has to be repaid in the new currency at fair economic value, not in a depreciated currency.

And I like to use the example of what happened to Thomas Jefferson – other than the Declaration of Independence and third president of the United States – he ended up dying a pauper because he ended up paying the debt on his father-in-law’s estate twice. He paid it once during the War of Independence and put the money with the Virginia Government, but the currency was destroyed by the end of the war. And he was then obligated to repay the debt again in pound sterling, which of course, was on a gold standard. And that basically bankrupted him and he ended up dying a pauper years later.

So, don’t assume that you’re going to benefit from having debt. It could very well be that the debt is going to be re-denominated in the new currency after the fiat currency collapses. The safe way to play it is to own tangible assets without any debt obligations.

Chris Martenson: I agree, and I have one other wrinkle on that, which is, there’s also this enduring idea, maybe a fantasy that as the currency debases, your income will be going up. But if it turns out labor markets have no power and your income stays low in nominal terms and is below the rate of inflation, you get a 3% percent raise but inflation goes to 10%, then you’re going to find that your disposable income is just shrinking and shrinking and shrinking. Your debt payments are fixed, and all of your other non-discretionary payments are fixed, and so things just get tighter and tighter.

Hey, that’s just the ‘70s. It’s stagflation again, in some way, but this time without the rising wages that we had back then. So I think it could be quite damaging to be holding debt.

James Turk: That’s a very good point and one of the things that John and I talk about in the book is that it’s becoming more and more difficult to actually measure wealth. What you really need to do is you need to measure the wealth by determining purchasing power, and we use, in this regard, ounces of gold. That’s a great way to measure whether your wealth is actually increasing or decreasing as an indication measure of purchasing power, rather than using dollars or Swiss francs or euros or any other currency.

But it’s just an indication of how bad things have become with regard to the monetary unit. One of the basic things as to why things are money is because they use them for economic calculation, to measure the prices of goods and services. And it’s becoming extremely difficult when you’re adjusting the size of the measuring stick.

In the book we use the example of what happened if a meter kept changing; how would you measure records at the Olympics from year to year? And that’s what we’re trying to do with this fiat currency that’s in circulation today.

Chris Martenson: So, from a macro perspective, nothing’s really changed. We’re trying to paper over it – the issues. We’re trying to sustain the unsustainable, as it were. We’re trying to pretend as if the next 30 years can resemble the past 30 years, which were extraordinarily unique in financial history with the run-up in debt relative to income.

So, that’s the macro story. And so you’re saying that even though it’s been a rough couple of years for precious metals investors, that they still remain one of the obvious solutions to the story; one of the obvious resolutions will come through precious metals, at least in part, with precious metals as a representative of tangible assets?

James Turk: Yes. Because, the last year, gold was down, but it was up 12 prior years. You can’t look at just the last year in isolation. You have to look at the big swing of things. And we’ve been in a gold boom market, believe it or not, since 100 years ago, since the Federal Reserve was created.

If you had held gold over that period of time instead of owning dollars, because a 1913 dollar has been so debased compared to what we have as dollars today, it takes only a penny of a 1913 dollar to purchase today what a full dollar today purchases.

So, I mean, it’s sort of like the end of currency in the Roman Empire. In over 100 years, it kept getting debased and debased and debased until it finally collapsed. And the same thing is likely to happen with the dollar. And every individual has to take those steps to protect themselves, come what may.

Chris Martenson: Absolutely. I agree.

Well, the book is, The Money Bubble: What to Do Before It Pops. I’m sure it’s going to be a great read if it’s anything like The Coming Collapse of the Dollar.

James, it’s been a pleasure talking with you. Where would people find your book?

James Turk: It’s available on Amazon, of course, and it’s also available through local bookstores.

Chris Martenson: Well, fantastic. You self-published this, didn’t you?

James Turk: Yes. We did. But it’s so easy to self-publish a book now that you can use the same distribution systems that the big publishing company houses use. What John and I wanted to do is, we self-published this because we didn’t want to go through the editing process that’s required when you’re using big publishing houses. What we wanted to say, we actually say without having to worry about what a publishing house might or might not cut out.

Chris Martenson: Oh, yes. That’s a very important consideration.

Well, thank you so much for your time today. I’m going to look forward to reading more of the book, and it’s going to be a very interesting 2014, I hope. Thank you for everything you’ve been doing to help raise awareness around one of the most important topics of our generation.

Thank you very much, Chris, I’m hopeful that The Money Bubble will be – well, it already is well-received, I hope it gets a lot of attention, because I think that I’m hoping that, as “Coming Collapse of the Dollar” did, it helped a lot of people, I think The Money Bubble will provide a lot of educational material that people will find useful as they try to get a handle on the crazy things that are going on today.

Well, James, thanks again and be well.

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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34 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
The FED does have a plan.

They are going to hand the reins over to a little old lady and slip out the back door. (The FED's Exit plan.)

The economy might be splitting in two. One that serves real people and one that serves pretend people (companies)..

If I am right and the economy is becoming de-coupled from the affairs of humanity then what humans value will be become less important.

Do any pretend people own gold? Yes, but only for it's utility. They value silver for its conductivity, and gold for corrosion free contacts.

Gold and silver still have value in the human economy so they should work to purchase the fruits of human labour. But who needs a sward-smith when the machine can produce them by the thousand, and deliver them with autonomous drones or over the internet to printers?

The fulcrum in this story is still energy, because without it nothing moves.

Over-unity phenomena are a dime a dozen now. The yardstick by which they are being measured is the reverse cycle heat pump which has a gain of three. Rossie did produce energy but he could not control it and has sold out to Industrial Heat.

Hotrod's picture
Hotrod
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Posts: 135
Chairman Yellen

Will the reins be handed over to  Janet or to the newly appointed vice chair, Steven Fisher, formerly president of the Bank of Israel? This is just too convenient.

davefairtex's picture
davefairtex
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Posts: 3665
james turk: tangible assets

Tangible assets with no debt is definitely the least risky way to go.  I especially liked the point that both Chris and James made about not loading up on debt and expecting inflation to eat it away - either wages won't rise because labor has no power, and/or the system will simply operate to change the rules so the little debtor doesn't end up benefiting from the (hyper)inflationary outcome.

I do have to point out that Jim's last book's title never came to pass - and that indeed, in every crisis, people outside the US have run to the dollar rather than away from it, and they continue to do so.  This enables our central bank to engage in conduct that, if done by Argentina, would result in - well, the unfortunate Argentina outcome.

The upcoming money bubble pop will be a process.  Some of the intermediate stages might be a surprise to people expecting a hyperinflationary switch to get flipped as soon as trouble starts to occur.

mobius's picture
mobius
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Posts: 160
"A priori" - or all other things remaining equal...

Two thoughts seem to be converging here. As a credit controller for a medium sized business I can say that the search for & financialisation of tangible assets is certainly real.  And while I've been listening to this and other podcasts and what occurs to me is that the "forecasters" are surprised that loose monatery policies have been tolerated by the financial markets for so long.  And even though the "Crash" hasn't happend in a blaze & fury already.  But there are trends that I'm seeing that are trickling down to microeconomy/small & medium business :

- writing off debt for shares of an income stream

- claiming "real" assets to offset fictional charges.  We see this tactic being used in reverse logistic charges (like a penalty) to be deducted from the delivery of hard products.

- European payment mirgration to SEPA (single european payments area) is reinforcing the electronisation of currency.  In other words, the perception of currency are jus debits & credits, "plusses and minusses" with an eventual balance (being in the black or in the red).

My concern here is that Government is also funding itself using its (future) working population as the collateral for its own present day funding.  And that obscure insurance policy, my future pension can be obliterated of its value by being diminished or through inflation.

My concern is that when I am of retiring age and I am willing to trade my tangible asset for a good/service, it will enter a system of financialisation that will end up skimming some unproportionate take on its value and my past labour that earned it.  So, the assumption that all other things remain equal is rather academic, but not practical.

Warm Sunday morning regards, Joanne.

PS - If the Peak Prosperity will have a retirement community that I can invest in today, I'm in! ;)

codetalker's picture
codetalker
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Posts: 1
Silver and Gold

I'm don't care what happens to the money bubble, but I do care for my children's sake, but they don't care  because they can't afford silver and gold.  So screw the bubble.  We both plan on living well even if that means living different at some point.  If the bubble should pop let it pop loudly.  I'm sure the wailing of those who don't know how to live will be the loudest. Like death and taxes we live not fear.

DennisC's picture
DennisC
Status: Silver Member (Offline)
Joined: Mar 19 2011
Posts: 161
"Let's Get Physical"

A Zerohedge reader posted a link to this the other day.  It's a fairly long article but I thought it was an interesting roll-up of several gold-related topics.

http://tocqueville.com/insights/lets-get-physical

Mark_BC's picture
Mark_BC
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Posts: 387
Good interview but as usual I

Good interview but as usual I take issue with some of the core tenets of Austrian Economics filtering through:

“And the only way an economy is going to improve is if you have people interacting with one another, and that comes with a greater number of people working … Increasing government intervention is not the solution to the problems that are faced today. The solution to the problem is less government, less taxes, less burden on working individuals and a sound money so that people can interact regardless where they are in the world, on a level playing field, because these interactions create commerce and it’s commerce which raises everybody’s standards of living.”

Yes I agree that the average Joe should be paying less tax but I am wondering if “improving economy” is just code-speak for “economic growth”?

I don’t understand how society will continue functioning if government is slashed.

Cut military spending? Sure, but this will ultimately lead to the rejection of the US dollar internationally which will destroy the currency – although that’s pretty much a given now, regardless. Plus all those military workers will end up jobless, which would require increased welfare.

Cut environmental regulations, privatize it all, and open up any remaining resources to full unbridled exploitation? That’s what they do up here in Canada to balance the budget but anyone who understands the first thing about where our wealth really comes from can appreciate that ruining the environment is the surest way to destroy civilization. Canada is on a path to destruction, but the thing is the rest of the world will get there first…

Cut welfare programs, to incentivize everyone off their butts and back to work “producing”? To “interact” with each other more which creates commerce and raises our standard of living? This may be Adam Smith talking, who argued that the more people there are doing something to goods along a production cycle, the more embedded value the end products will contain, and the better off we’ll all be as a result. But Adam Smith lived centuries ago before anyone understood how production processes actually work…

The Austrians argue that their “free market” policies will best foster economic activity / commerce (“growth?”) and therefore lead us into future prosperity. The Fed central planners on the other hand believe that playing with monetary and fiscal levers to use the wealth effect to get people to consume more will best lead to production and commerce and therefore future prosperity.

Well, I contend that they are both wrong. We aren’t going to see improved economic activity or commerce no matter what we do now. The issue is not how do we foster more economic activity, it’s how we handle less, without falling into social chaos as unemployment skyrockets. The Austrians like to criticize the unemployment problem but they don’t have a solution to technological automation throwing people out of work. Cutting back welfare payments isn’t going to solve unemployment because there aren’t enough resources left at reasonable prices to support the consumption rates that would be required to bring on the production that would suck up the unemployed. Historically, the only way to address automation unemployment has been via economic growth. That is ending.

HughK's picture
HughK
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Posts: 758
agreed, Mark

Hi Mark and all,

I agree with your interpretation of the Austrian economics/libertarian/goldbug argument put forward here in some ways by Turk, namely that a reduction of government involvement in the economy and debt deleveraging, however painful, will eventually lead to a healthy, vibrant free market and hence we will grow our way out of our predicament.

I am currently listening to Michael Pento's new book on audio - for as long as I can stomach it - and it's the same sort of stuff.  It's also the same analysis you hear from Peter Schiff and, more or less, from John Mauldin.

I very much value the interpretations of all of the people I listed above for their criticism of the Federal Reserve, ultra loose monetary policy and the unsustainability of debt accumulation.  I also agree with them that getting out of bonds and indexed stock market funds and buying gold/silver is likely to produce better returns and to better retain wealth in the years ahead.

But, none of them seem to see past that to the deeper problems with global industrial capitalism, the core of which is that it has ridden upon the back of rapid expansion of fossil fuel production and that it is an extractive system that requires continuous growth.  

I don't know if any of these guys have any concern for the relationship between the economy and the environment, either.  One of the biggest illusions of capitalist theory is that the use of private property only concerns the owner.  When a private investor in Brazil buys a track of rainforest, cuts down most of the trees,and puts in soybean fields and cattle farms, he is imposing costs on the whole Amazon system as well as on the climate.  He is not violating anyone's property rights according to our dominant philosophy, nor is he doing anything illegal.  But, he is subtly violating the natural rights of all humans on Earth by appropriating a productive and vital aspect of the biosphere for his own profit.  Just as, in Locke's theory, it is wrong to murder in a state of nature because humans are endowed with the natural rights of life, liberty, and property, it is also wrong to undertake massive, extractive transformations of the biosphere for personal profit because it violates the natural rights of humans all over the planet.

I buy precious metals and I am aware of the very damaging, extractive, and often corrupt practices of PM mining companies, especially in developing nations, so this is not a judgment of others but rather a recognition of the ethical predicament faced by all of us who expect to live in a way that is unsustainable in the long run.  This ethical predicament should be humbling to those who excoriate the Federal Reserve and JP Morgan, as, on many levels, middle and upper class people anywhere on the planet, are participating in an environmentally corrupt system in which industrial, extractive capitalism as well as modern nation-states play a central role, and in which middle class consumers of thousands of disposable products play a vital part as well.

There is no clear answer here, at least as far as I can see, but recognition of this ethical predicament helps me to be less dualistic when I look at economic policymakers or financial executives whose decisions I don't particularly like.  To a great extent, simply by being a middle class consumer I am a junior partner in the same unsustainable and corrupt system led by those elites.  For me personally, it seems that airplane flights and precious metals purchases are the greatest ways in which I impose negative externalities upon other people.  I am aware that buying either silver or a plane flight is not a simple transaction and that the good/service purchased is more than my private property. The story is much bigger than that, which is why the whole concept of use of private property is, to some extent, a modern myth, no less deceptive than the modern myth which holds that the answer to economic downturns is simply to stimulate demand either through Keynesian deficit spending or monetary stimulus.

I don't advocate command-and-control centralization, of course, but I certainly do believe that democratic, constitutional governments should make regulations regarding the environment and the use of fossil fuels.  I certainly don't accept the assertion that free market capitalism with virtually no government at all is the most ethical system.  George Soros, a consummate capitalist and student of Karl Popper, calls this view "free market fundamentalism."

One idea I really like is Reiner Kummel's proposal to focus taxes on energy, and not labor, because, he, like other biophysical economists, believes that energy is where most of society's productivity comes from.

I'm also not claiming to have all of this figured out.  For me, the problems and predicaments are clearer than the solutions, although I am at peace with the daily choices I make.  I don't allow myself to feel guilty, because there's no use in that, but I also don't allow myself to believe that I deserve everything I've worked for, end of story.  That's because, as one example, a lot of what I've worked for has been leveraged by the transfer of ultra-cheap fossil fuels going from the ground to the atmosphere, and that process involves several types of negative externalities.

I also don't allow myself to be certain that if only they did things according to my philosophy that everything would be just and prosperous.  One of the exciting things about a major shift in civilization is that we all have new puzzles to solve and new paradigms to construct and that's one reason that I enjoy the dialog here.

Cheers,

Hugh

cmartenson's picture
cmartenson
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Joined: Jun 7 2007
Posts: 4722
I (Obviously) Agree That Growth Is Not The Answer

Mark and Hugh,

I do think the Austrians and Free Market crowd need to address the idea of how their version of economic freedom is any different from the endless growth ideology of the Big Government and Debt-Money crowds.

Unless you are going to argue that somehow private enterprise can somehow evade limits where government and statists cannot, you've got to address the issue.

Because they usually don't address the issue, I have to conclude that the core thinking that undergirds these other ideologies was also derived in earlier times when one could safely ignore limits.

I cannot fault that, but I would suggest that changing times require a re-think, and I would love to see what the output would be from that exercise.

I did get one disappointing peek at the version of the Free Market ideology espoused by the Cato institute when I got into a very weird panel 'discussion' at the Cape May forum when Jerry Taylor told me in no uncertain terms that humans create resources, so the more humans we have the more resources we'll have.

End of discussion.

Nowhere to go after that.

So I'm looking for a better 'debate' at some point with some clarification of how limits and free markets intersect.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
What a Lovely Man, Reiner Kummel.

Thanks Hugh.

The maths was a bit rushed, but he argues that economic output is more dependent on energy than labour.

High energy throughput (entropy)= high economic growth.

Labour = expensive and poor economic output. (Or words to that effect.)

Combine the two and we end up with pressure to automate.

Take home message: Humans are becoming less and less relevant to the economy.

I consider the owners of this concentrated wealth to be a part of their own machine because there are so few of them. Edit: I see a time when they are replaced by algorithms, and then even they will become irrelevant.

I take aim at the assertion that the first two laws of thermodynamics are sacrosanct- No product of the Model making Left hemisphere is off limits.

I take comfort in Einstein's observation that Nature is not malicious but it is subtle.

I am referring of cause to virtual particles. Tomorrows technology is todays magic.

LogansRun's picture
LogansRun
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Posts: 1421
I take it that they believe

I take it that they believe these "limits" will drive the free market forces to change as the limits change.  So, if there's less oil, the free market will take affect, and force less use of that resource, and force the use of other resources.  I think most can see the flaw in this thinking (life style change being the least of these flaws, starvation, mass die offs, etc...being the most).  

Any economic system based on "Survival of the fittest/smartest/sneakiest/etc...." is flawed IMO.  

cmartenson wrote:

Mark and Hugh,

I do think the Austrians and Freemarket crowd need to address the idea of how their version of economic freedom is any different from the endless growth ideology of the Big Government and Debt-Money crowds.

Unless you are going to argue that somehow private enterprise can somehow evade limits where government and statists cannot, you've got to address the issue.

Because they usually don't address the issue, I have to conclude that the core thinking that undergirds these other ideologies was also derived in earlier times when one could safely ignore limits.

I cannot fault that, but I wold suggest that changing times require a re-think and I would love to see what the output would be from that exercise.

I did get one disappointing peek at the version of the Free Market ideology espoused by the Cato institute when I got into a very weird panel 'discussion' at the Cape May forum when Jerry Taylor told me in no uncertain terms that humans create resources, so the more humans we have the more resources we'll have.

End of discussion.

Nowhere to go after that.

So I'm looking for a better 'debate' at some point with some clarification of how limits and free markets intersect.

Wildlife Tracker's picture
Wildlife Tracker
Status: Gold Member (Offline)
Joined: Jan 14 2012
Posts: 403
Boom and Bust Cycles (single resource-based relationships)

There was nothing humanity could have done differently. We were the first species to develop tool-use and to adapt to quick and rich energy solutions  that brought us to this point. It was inevitable and nothing short of spectacular for humanity to get here.

Unfortunately with a single resource-based relationships, which is what we have with quick energy resources, the decline is as impressive as the incline. There was no control that a government could have done to change this outcome in my opinion.

Oak trees go through mast (acorn) cycles where they stop producing to control squirrel populations (when this happens squirrels become cannibalistic and isolated), and over-browsed plants will start to produce toxins to control hare populations, in combination with their specialist predator, the lynx which follows suite. 

Humanity found a way to surpass every natural control the system offers whether it was disease, crop failures, etc. because of quick and rich energy and it created the biggest population bubble the planet has ever seen. Based on evidence presented by Art Berman and others regarding our energy position, we are sitting at the tip of a boom period, and the only thing going for us is our adaptability.

earthwise's picture
earthwise
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Posts: 845
Austrian economics not growth dependant

I'm not an Austrian (or any other kind of) economist by any means so I don't pretend to speak for them. In fact I hardly feel qualified to be taken seriously, but I thought I'd hang this pinata out there for anyone to take a whack at: 

i) The Austrian economic theory as I understand it is not so much of a systematic approach as say Keynesianism, socialism or any other -ism or the status quo. It's basically a description of the cumulative effect of individuals being left alone to make free and unfettered choices of how to conduct their economic transactions.

ii) One result (of many) would be that people would be free to use whatever is their choosing as money, therefore rendering a Central Bank unnecessary which would eliminate the need for the Grow or Die template necessitated by the interest on a debt based currency.

iii) A multitude of individuals making individual decisions would result in a greater efficiency of the allocation of resources than would a centralized systematic ideology imposed on society by fiat which is prone to undue influence and miscalculation. I don't see Austrian economic theory so much as a means of evading the limits imposed on the dwindling availability of resources, it's more of a way to best deal with the reality of what's left.

That's all I got.

Mark_BC's picture
Mark_BC
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Posts: 387
HughK, I don't think there's

HughK, I don't think there's much for me to add to your post! You "took the words out of my mouth".

Regarding your concerns about the implications of PM mining, that is the big problem with PM’s and the main response I get from my friend whom I was trying to convince to buy PM’s. She is passionate about South American nature (as I am) and hates everything the gold miners do down there. I had to agree. My response was that the alternative, Fed paper money, is even worse because of the more indirect things it facilitates. I said that, “it’s a Malthusian Collapse. It ain’t pretty”. In a way I can rationalize my purchase of PM’s because I will have bought when they’re cheap and will sell when they’re expensive, which will alleviate the extreme price spike and therefore in some way satiate future demand for them. We are essentially conserving them.

That was an interesting talk by Reimer Kummel. At first the math had me worried he was going the way of Keynesian Economics but he pulled it together. I noticed that all his charts have to do with measuring production, (i.e. "productivity"). I have never heard anyone explain to me what production actually is. The story goes that production requires energy conversion and that all energy conversion results in production of entropy ("disorder") and a reduction of exergy (useful energy). This is an oversimplified explanation, as Tom Murphy pointed out in Do the Math. There is a lot of confusion about the different kinds of "entropies" and what they mean, and I've been guilty of misrepresentation as has almost everyone.

I've been working on a big treatise trying to explain what economic production actually is, rather than just measuring it via productivity functions, from a sound understanding of "what thermodynamic entropy is". It's a huge task but I'm trying to push myself to get it done.

And then I see from Wildlife Tracker, "There was nothing humanity could have done differently... Unfortunately with a single resource-based relationships, which is what we have with quick energy resources, the decline is as impressive as the incline.", which I unfortunately agree with. Then I wonder what's the point.

kaimu's picture
kaimu
Status: Silver Member (Offline)
Joined: Sep 20 2013
Posts: 114
OIL & CEO FDIC

Aloha! Yes, tangible wealth, but you cannot eat oil. Four basics are food, water, clothes and shelter. Anyone who visits any of the slums in the Third World sees how little of those four tangibles is required for basic life full of hardships. The US government is only at this status quo due to reserve currency and that status was only achieved with military supremacy after WW2 via Bretton Woods. Even Keynes himself was upset at the outcome of Bretton Woods as it was based on a singular currency rather than a basket of currencies which is what Keynes preferred. Still Keynes did not have the US military backing him and after WW2 most countries in Europe and Asia were still mopping up owing the US government plenty from the Marshal Plan. The world has had to suffer the whims of the US Fed and its government creator ever since.

Since the petro dollar America has gone from this ... http://tinyurl.com/kz6ybso

Looking_North_along_the_coast_toward_Lon

To this ... http://tinyurl.com/outhm5d

060307-081..jpg

At one time we had to actually see and breath and swim in the tangibles we were consuming. Now we consume ever more yet never have to live with the eye sores and pollution it takes to consume, but just because it is out of sight-out of mind does not mean it does not exist. It does though in the Third World where a lot of these resources are drilled and mined. It is therefore hypocritical for a college kid who owns an iPhone to claim they are environmental conscious. Move to China and say that! At least US consumers in the 1930s literally lived with their consumer choices.

Right now a bank CEO has more FDIC backing him than his depositors. In other words the bank CEO has much more options for the protection of his wealth than his unwashed clients who save their dollars at his holding facilities. Whether it is a depository bank like Bank America branches or a Morgan Stanley investment bank. Both bail-in and bail-out loom large on the horizon. This is the quality that gold offers in that there is no liability attached, except that of an FDRish government.

Those who will escape the next trial by fire as so in the past are all those who are closest to those who govern. Even with the FDR gold confiscation and criminalization you could own gold if you had the permission of Congress/Treasury. FDR admonished US citizens for hoarding gold yet who now is the largest single hoarder of gold on the planet. It is the same government in FDR days who took the people's gold. At least you knew where you stood with Hitler. The monetary status-quo does not like the equalizer effect gold has for the masses. Lets face it the ruling elite of any era has never liked the masses period! By ruling elite you can use any form of dictatorship or governance whether it be Communism, Democracy, Monarchy or Nationalist Socialism. Every form of governance has its legalized "monopolies".

One such monopoly. I note that since last year a Class 2 Laborer under prevailing wage law(legal labor wage monopoly) has risen $2000 from $89,000 annual wage to $91,000. What is a Class 2 Laborer? An uneducated ditch digger. This Davis Bacon Act started in 1931 during the emergency of the Great Depression. This shows you that once a law-always law! Where's the emergency been the last 60 years? We can agree this is legalized built-in wage inflation and if you add in the cronyistic public works procurement of materials then you get multi-trillions of added tax and debt liabilities to the US citizen since Nixon days and beyond. Yet the benefits of this monopolistic law is for the few who are union, which begs the question then shouldn't unions be part of the 1%? It is a monopoly, which has nothing to do with democracy. Union workers are thereby exempt from real work wages/benefits at Congress behest. However none of us, not even the 1%, are exempt from the ravages of a monopolistic monetary regime like we have now. Running to the US Dollar will continue until the rest of the world demands an end to Bretton Woods, for in a very real sense Bretton Woods is still here. I think QE and its unintended consequences will hasten that outcome. Soon Bernanke will be laughing in a hot tub in Vail while Yellen will be crying on the hot seat. Yet the world turns no matter what is reserve currency and what isn't ... no matter who is Fed Chairman ... no matter who ruins the worlds economy. And we are back to the four basics I started with ... food, water, clothes and shelter. Permanently provide those assets for your family year round and that becomes better than gold ... it becomes priceless in a pricey world!

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LesPhelps
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Clearly we could have done something

Wildlife Tracker wrote:

There was nothing humanity could have done differently.

We could have used the same intelligence we used to extract and exploit planetary resources to fashion a society and economy that controls procreation and consumption.  We did not have to act, as a species, the same way an algae bloom does.

The fact that we still torture and kill one another over differences in 2,000 year old religions, is a perfect indication of our inability to abandon poor ideologies and behaviors.

Just about everything we are doing today has been tried before, just not on a global scale. Clearly, we do not learn from our past.

I think everyone on this website can envision what the future is likely to look like.  A large reduction in population is inevitable.  Jobs will move away from consumer manufacturing and back to food and necessity manufacturing.  Elbow grease will in part replace oil as an energy source.  These are not necessarily bad things, but there are issues.  Working folk will no longer be able to support as many idle folk as they do today.

One of the wild cards is who will try to exert control over us in the future and how they will do it.  Here again, the past does not paint a very nice picture.

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Bankers Slave
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The Cronies just for laughs

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Mots
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boom and bust cycle: squirrels become cannabalistic

This is such a great thread.  I like particularly  the biological perspective that "Wildlife Tracker" graphically presents wherein oak tree growth and squirrel populations cycle such that at some time, the stored up value: (nuts) disappears and the squirrels "become cannabalistic."  

In this same vein, please note James Turk's comment :

" In 2010, the population of Japan was 128 million. Best-case trend is that in 2100 they’ll have 65 million. Worst case, they’ll have 38 million people.The question that was asked on that: Who pays back all the public debt again?"

Answer: The squirrels.

The Japanese debt  is owed to the old squirrels who socked away their savings in the post office administered public debt system.  Not to the Chinese and not to the European or other banksters.   All the old squirrels WILL die (this is happening rapidly now) attrition is by natural causes, cannabalism not needed here.  A Japanese government minister (commenting on debt) last year actually publicaly stated his wish that the "old people would just die."  

If the US debt were owed to 70 year old (average age)  squirrels (instead of to banksters) and the population of such squirrels decreased by 5% a year continuously, what would happen to the effects of the vanishing  squirrels?  No one has considered this basic important factor.

Biology is based on reality, is a useful model to understand humans, yet is overlooked.  "economics" in contrast, is pure fantasy land.  Most economics  analysis is unmoored from reality.  The most important concepts on this blog are reality (PM, real  wealth) based, from the viewpoint of what this species  really needs. We are the squirrels.  By saving real wealth as PM, learning how to produce wealth (food  energy, communications, real friendships) we at this web site are focusing  on reality.   All this other  "financial analysis" in contrast is primarily entertaining nonsense.  What are the squirrels doing?  The banksters are merely using tricks, mostly based on their fractional reserve game, to steal nuts from the squirrels.   Lets not get too lost in ephemeral trick details.  We need to follow possession (physical and contractual) of real wealth (the nuts), and pay less attention to the toilet paper that the banksters have taught us to worship.  

thanks Wildlife Tracker

lol

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Wildlife Tracker
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That was brilliant Mots!

I think the group of folks here are way ahead of the curve here when it comes the population correction, but we cant go at it alone. Certain rural, well-educated, resourceful communities, have a lot of potential to rebuild something worth keeping. The problem is that there are not many of those around. I don't think it will be easy going forward as an individual or as a creature on this planet, but as a community there is a lot of potential. That is what this website is about after all!

I can't tell you how grateful I am to have resources like the one here at peak prosperity to share insights and to learn from the experience of others. Chris has done such a nice job. Thank you Mots for that squirrel analogy. Very clever.

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Oliveoilguy
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Fashioning a Society

LesPhelps wrote:

Wildlife Tracker wrote:

There was nothing humanity could have done differently.

We could have used the same intelligence we used to extract and exploit planetary resources to fashion a society and economy that controls procreation and consumption.  

What model of government are you suggesting?  

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Austrian economics and resource limits

Chris, Mark and Hugh

Austrian economics describes how markets work. The subjective issues of endless growth or sustainable development lie beyond what it directly explains. However, it does clearly show how the current interventionist system leads to unsustainable and capital destroying practices. This capital destruction includes unsustainable degradation of the natural environment and the waste of natural resources.

Further, it seems all to common for people to point out problems with negative externalities that need to be addressed through the establishment of proper legal rights and obligations and link this to the invalidity of Austrian economics. Enforceable property rights are the realm of politics of which libertarianism or classical liberalism is the closest cousin to Austrian economics. However you can use Austrian theory to understand economics and not be a libertarian or classical liberal .

The Dao of Capital by Mark Spitznagel presents a wonderful comparison of how natural systems such as forests rely on negative feedback loops in a similar way to economics as described by Austrian economists. When these are interfered with either through the prevention of small fires in the case of forests or price controls and bailouts in the case of economies the result is even more damaging fires and larger economic calamities respectively. The empirical proof is not hard to find.

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Parasites.

The way I see this thing panning out is that humans will fall off the economic train completely and end up as parasites that will be controlled with endocrine disrupters.

The machine will decide that there is no logic to war. The algos will over-ride the egos.

Paradise? It could be had with soma.

The trick will be to convince the algos that we give meaning to their existence.

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LesPhelps
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Oliveoilguy wrote:LesPhelps

Oliveoilguy wrote:

LesPhelps wrote:

Wildlife Tracker wrote:

There was nothing humanity could have done differently.

We could have used the same intelligence we used to extract and exploit planetary resources to fashion a society and economy that controls procreation and consumption.  

What model of government are you suggesting?  

I am not suggesting that government limits on procreation were required.  I knew about the exponential issue as it pertains to population growth in the 1970s, before I had kids.  I was and am a believer in ZPG.  I had two children in light of that knowledge.

Globally, governments could have educated the populations regarding the problem.  It might not have entirely solved the issue, but it would have helped.

Another thing we could have done in the US, and perhaps elsewhere, is stop subsidizing children.  The way we fund schools systems in the US is completely independent of family size.  Most health care plans charge for children, but don't take into account the number of children.  More children result in a greater need for government resources and yet they are a deduction off of tax returns.  If you have more kids, you pay less tax.  Welfare and food stamp systems subsidize children.  What's up with that?

As I said, it was clear this problem was coming by the 1970s and yet we ignored it.  Why?  Actually, I have no doubt some people knew of this before the 1970s.  Thomas Malthus brought the issue up in the late 1800s.  His solution was to stop subsidizing excess population as a way to minimize suffering.  Obviously, the term Malthusian comes from Thomas Malthus and is pinned on anyone who has the audacity to think that resources are limited.

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Hotrod
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Religion

If I am not mistaken somewhere it says, "Be fruitful and multiply".  As long as religion turns a blind eye to resource limitations there will not be much progress on the population issue in many areas of the world. I'll bet you can tie fighting over limited resources to many, if not most wars throughout history.

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Martenson Moments: Mauling anti-Malthusians

LesPhelps said;

As I said, it was clear this problem was coming by the 1970s and yet we ignored it.  Why?  Actually, I have no doubt some people knew of this before the 1970s.  Thomas Malthus brought the issue up in the late 1800s.  His solution was to stop subsidizing excess population as a way to minimize suffering.  Obviously, the term Malthusian comes from Thomas Malthus and is pinned on anyone who has the audacity to think that resources are limited.

This brought to mind a moment during the question and answer period depicted in this video of Chris from two years ago where he schools an anti-Malthusian... watch the clip from 0:49 - 0:52 minutes;

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Beautiful clip!

Thanks, Jim, and Chris, for this clip.

I'm doing my best to try to engage a small number of high school students regarding this concept, and, of course, they don't have as many preconceived notions about the future, since they haven't lived as long.  But, they still carry a lot of assumptions regarding comfort and abundance due to their experiences so far, and the increase of technology has probably decreased their conscious connection to the natural world.

Hugh 

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Arthur Robey
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Is the Future a Habit?

If there is no future, why the agonizing? Perhaps it is just habit. I'm too old to change now, so let me agonize away.

The future is not going to look anything like the past:-Agreed. Then why do we look to the past for the future performance of gold?

Come to that, why do we think that our future lies at the bottom of this, or any gravity well. Edit (4)

Why do we consider humans to be central to the economy when it can be argued that they are too expensive and not productive in comparison to automation,innovation and energy? (The mind dwells on the production of light, and the economic effects of installing LEDs worldwide, as an example.)

Why do we dwell on the issues of the past-such as the role of religion in wars and the birth rate when endocrine disrupters (2) (3) are more significant to the total world population? On the other hand Tony Wright asserts that our brains evolved in a soup of endocrine disrupters. (My level of belief in his theory has slipped downward.)

Why do we look to chemistry for our energy needs?- more habit.

Perhaps this continual casting over our shoulders to the past for guidance to the future is a maladaptive habit.

In any event, I am a creature of habit. And so I continue to look for a way past the bottleneck, assuming that there is  a bottle.

Wildlife Tracker's picture
Wildlife Tracker
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Looking to the past

Looking at the past provides an excellent tool to see what "worked" and what "didn't work" for humans and for other species. It teaches you how to learn from your mistakes. If not from learning from the past, you would still be touching a hot stove and your hands would be red and scared.

Millions of years have gone by and the only SUSTAINABLE energy resource that has remained constant that living creatures utilize is the sun, and everything derived from the sun's energy. If there was another energy resource that mattered, you would see more productivity in the ocean deep rather than the sparse signs of life that survives by recycling marine snow and opportunistic hunting/scavenging. You would see more productivity in the winter months in northern climates when low-light conditions force most plants to go dormant because the EROEI is too low to continue to be productive. Also, the free-floating algae in outer space that have been found, specialize in harnessing solar energy.

Therefore the way forward is to learn how to harvest solar energy better, and we know that through millions (or quadrillions?) of years of evolution.

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Wildlife Tracker
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Going against human nature

WE as a community here on Peak Prosperity are not like other people. Most people who are presented with this information that the future is going to be different would go into denial-mode because that is the natural human response. 

It's why this website has hundreds of regular followers and not thousands or millions. 

Humans were never smart enough, and are still not smart enough to go against their human nature. There is not a creature on this planet that would have done things differently. Send a weasel into a chicken coupe and they will kill all your chickens without questioning it because that's the natural response and its in their best interest. Like the weasel, we have evolved to consume and save as if the same resource won't be there tomorrow. That's partly why we buy more groceries at a grocery store for more than a day's use. It's caching behavior, it's instinctual, and a natural survival response.

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Snydeman
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As a teacher

I teach high school history, and I've begun to gently weave elements of this "story" (the Crash Course) into the lessons I teach. I am attempting to get the students to be more skeptical, more analytical, and better critical thinkers. What boggles MY mind is that every student in all of my classes inherently seems to understand and know that the party is almost over. They know we are running out of oil, resources, and time. Yet they live in a society where the adults don't seem to care, and so to a certain degree they don't either. It's scary.

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Phaedrus the younger
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Posts: 57
musical interlude

Today my fav classic vinyl station played  "I'd Love to Change the World" by Ten Years After.   Seemed incredibly relevant 43 years after.  

Tried to paste a link to the you-tube recording but can't seem to get the link dialogue box to cooperate. frown

Nervous Nelly's picture
Nervous Nelly
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Posts: 209
lyrics "I'd love to Change the World"
Everywhere is freaks and hairies

Dykes and fairies, tell me where is sanity

Tax the rich, feed the poor

Till there are no rich no more



I'd love to change the world

But I don't know what to do

So I'll leave it up to you





Population keeps on breeding

Nation bleeding, still more feeding economy

Life is funny, skies are sunny

Bees make honey, who needs money, monopoly





I'd love to change the world

But I don't know what to do

So I'll leave it up to you





World pollution, there's no solution

Institution, electrocution

Just black and white, rich or poor

Them and us, stop the war





I'd love to change the world

But I don't know what to do

So I'll leave it up to youdarkblue_right.gif
I'd Love To Change The World lyrics © CHRYSALIS MUSIC GROUP
Oliveoilguy's picture
Oliveoilguy
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Posts: 532
Great Song

GianniH's picture
GianniH
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Posts: 1
Scary

It is pretty scary how people can so quickly fall into any kind of security 'bubble.' It would serve people well to take advantage of these offers and to look into the gold money that is available.

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