Chris Martenson Interviews James Turk: "Gold Is Our Defense Against the Fiat Currency Graveyard"

Tyler Durden's picture

Submitted by Chris Martenson

James Turk: Gold Is Our Defense Against the Fiat Currency Graveyard

"The rule of law has basically been thrown out the window. Money printing is the order of the day. And when politicians take control of central banks, which they have done in the United States and they are also doing in Europe, that basically destroys the currency. It puts the currency on the road to what I call the Fiat Currency Graveyard, so I expect there are going to be massive currency problems as we go forward. The financial crisis that we have been dealing with for the last several years has not been solved."

So cautions James Turk, widely-respected precious metals expert and founder/chairman of GoldMoney. In this detailed interview (recorded in June), Chris and James explore the probable outcome of the current US debt-ceiling operatics, the likelihood of future Fed money printing, and strategies for preserving wealth. In short, James believes we are witnessing the decline of the world's major fiat currencies, and expects gold to be remonetized in the aftermath.

James explains why he expects:

  • The US Government to raise the debt ceiling in August, which will require the Federal Reserve to print more money in order to soak up the new debt, sending gold and silver prices much higher this summer.
  • Holders of fiat currencies to experience increasing losses in the purchasing power of their wealth; contrary to those who hold precious metals, who will see the reverse.
  • This pattern of currency devaluation to be similar to the many other examples seen throughout monetary history. In short, the “unthinkable” event of a dollar collapse is a much more probable event than most consider.
  • Precious metals to be an excellent vehicle for preserving purchasing power through this next transition, and whatever future currency emerges, their historic role as money to be restored.
  • The end of the bull market in precious metals is years away. We’ll know its ending when holders of PMs begin trading them for other assets (e.g. property, securities) that have become overly undervalued.

Click here to listen to Chris' interview with James Turk (runtime 49m:11s):

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Or start reading the transcript below:

Chris Martenson: Welcome to another Chris Martenson.com podcast. I am your host of course, Chris Martenson. And today we have the distinct privilege of speaking with James Turk, 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 foremost authorities on precious metals and has long offered market forecast commentary including co-authoring The Coming Collapse Of the Dollar and How to Profit From It, with our good friend, John Rubino, of DollarCollapse.com. He has built his career on decades of experience in international banking and finance spending many of those years living outside of the US, which gives him a critical advantage to look at our economy with an outsiders eyes. I am really delighted to have you here, James, and I have a tall stack of questions prepared for you. Are you ready to dive in?

James Turk: I sure am, Chris. It is a pleasure to speak with you.

Chris Martenson: The pleasure is mine. So, short-term, what I’m really interested in here is to start diving into where gold is going to go short-term, where do we buy gold? Do we buy it now? Over the short-term people are very concerned about the price of gold and where it’s at and where it might be headed. So with QE2 ending here at the end of this month, -we are in June right now - how do you expect the precious metals to be impacted?

James Turk: Well I think the precious metals are going to do quite well this summer. And I don’t agree that QE2 is going to end in June. It may “end” in June but it is not going to end on August 2nd because on August 2nd the US government is going to increase its spending limit probably by $2 trillion and the Federal Reserve is going to have to step in and start buying some of that government debt and run the printing presses again with all this new money creation. And I think that is what is going to light a fire under both gold and silver this summer. 

Chris Martenson: So you are of the view that QE whatever, 3, is a done deal because they are in something of a box. The federal government has enormous borrowing needs and you are of the opinion that really without the federal reserve being there, there is insufficient buying power for all the borrowing needs they have?

James Turk: Yes that’s exactly right. Look at what has happened since August of 2010 when the Federal Reserve announced QE2. During that period of time, up to the present, the US Government debt has increased about $900 billion, about $500 billion of that has been purchased by the Federal Reserve. What is happening is that the US Government is spending so much money it is forcing it to borrow more money than the market is willing to lend to it. When that happens, only two things can happen: spending has to be cut back or the Federal Reserve steps in and buys that government debt and turns it into currency. And that is what QE is all about. This policy of buying government debt is going to continue once the debt limit is increased on August 2nd. Maybe the Federal Reserve will claim victory and say that they will stop QE on June 30th but the reality is it is only going to happen until the debt limit increase is approved. And I do believe at the end of the day, despite all the posturing we are seeing now Congress and the President are going to approve a $2 trillion debt increase by August 2nd

Chris Martenson: So really we are talking about July as a possible pause. And I have my concerns about that because we are looking at the data here for the first week in June roughly and what I’m seeing is a lot of weakness out there. The Feds’ so-called mandate around employment, around economic growth, there is a lot of weakness in that data right now. So you are of the opinion that QE if it does pause will only maybe for a month. 

James Turk: Yes, maybe for a month unless Congress finally chooses to act sooner than August 2nd, although I don’t expect that to happen. It is really just a question of numbers and mathematics, Chris. The US Government has to stop spending so much money or the Federal Reserve has to come in and turn that government debt into currency, those are the two alternatives. And I don’t see any discipline or intent by Congress to stop spending.

Chris Martenson: Yes, everything they have done so far is a bit of a dog-and-pony show without much substance; $30 billion, $90 billion. Please, that is meaningless at this point. And when we go over to the other side of the pond we see that Europe also has just extraordinary funding needs right now. They are using all sorts of fancy terms for a Greek default which will probably be the first of several shoes. But when you add it all up it looks like there is, again, enormous funding gaps there and the need for a massive amount of liquidity. What is your view of Europe then? Is Europe going to print? The ECB - are they too in a box or will they actually go for austerity and allow the chips to fall where they lay?

James Turk: No, they have been printing all along and, in fact, I think they are going to continue to print as well. You know, the turning point here in Europe was last May, May 2010, when the politicians got together when the Greek crisis sort of erupted and became quite serious. And on Monday morning after the politicians met, Mr. Trichet, the President of the European Central Bank, said that he is going to start buying Greek bonds, despite his pledge not to buy sovereign debt of any country. And despite the fact that it is against the EU Constitutional Principals for the ECB to be buying and sovereign debt. You know, the law is basically just being ignored. It is being ignored by 13 of the 16 Euro-zone countries who have debts exceeds 3% of – deficits, excuse me - 3% of GDP. So the rule of law has basically been thrown out the window. Money printing is the order of the day. And when politicians take control of central banks, which they have done in the United States and they are also doing in Europe, that basically destroys the currency. It puts the currency on the road to what I call the Fiat Currency Graveyard, so I expect there is going to be some massive currency problems as we go forward. The financial crisis that we have been dealing with for the last several years has not been solved. 

Click here to read the rest of the transcript.

 

Note: listeners interested in the conclusions expressed within this interview will also want to read Chris' recent report on The Screaming Fundamentals For Owning Gold And Silver, which takes a deep dive into the data behind the supply and demand imbalances in the bullion markets.

 

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YesWeKahn's picture

I am pretty sure that Bernanke advices his family and relatives to buy gold.

DC's picture

How could you possibly know that?

packman's picture

"And when politicians take control of central banks..."

LOLOLOLOL.... Um.... yeah.

 

Screwball's picture

That's where I stopped.  Maybe someone can explain, but don't get this statement at all.

thesapein's picture

It's like when the actors in a film try directing, maybe? But I hear you; he speaks as if chickens and eggs are two different creatures today and to really get what he (a real banker) is saying you gotta pretend or guess at what exact political maneuvers in history he is referencing given that these two powers have a complex history. But, please, don't discount James Turk based on his own biases that we all have. He is still a very good source of info in his industry. Cheers.

CIABS's picture

packman, screwball, et al:

right.  "...when politicians take control of central banks..."

politicians, central banks, central bankers, bankers, et cetera, ad nauseum.

economic history might move slowly enough that ordinary people can keep adjusting to the "status quo" so as to believe that there is such a thing.  but the process is like a raging fire, if not an explosion.  it will leave only a world of ashes.

Mr Lennon Hendrix's picture
Calling JPM's Naked Silver Shorts

The COMEX has been looted of its silver during the last few months to little fanfare.   Not only have not many people noticed, but the ones that have have not asked who and why this happened.  It happened because JPM and other proxie banks were forced to cover their naked short calls, and they had to go out on the market and get the collateral.  This because long calls exercised their strikes and wanted payment....

Calling JPM's Naked Silver Shorts:

http://lhmarketwatch.blogspot.com/2011/07/calling-jpms-naked-silver-shor...

 

topcallingtroll's picture

Houston we have a problem.

Obama said he wont accept a short term deal nor a deal without tax increases. The republicans cant go back on Grover's tax pledge they signed or they will be voted out of office.

I hate to be chicken little, but prepare for fireworks. Gold, not silver, diversified cash, diversified ultra short term sovereign bonds.

This is not the time to speculate or play games. The market can have the next upside five percent move. Batten down the hatches.

vast-dom's picture

I believe Silver will rise faster than gold, as relative %age.

thesapein's picture

it's one of the few things i'm most sure about. one day, silver will trade like a precious metal again.

hack3434's picture

 diversified ultra short term sovereign bonds

 

This is not the time to speculate or play games

 

Talk about oxymorons...Why do people with less than a billion net worth even bother? gotta chase that 0.03% yield heh!


 


Magnix's picture

Help me understand how is gold defense against currency if the market price is $1500+ and then when they standardize the gold then it will be worth $20 face value and lost $1500????

BigJim's picture

If 'they' standardize at a $20 face value that's fine. I'll buy it all and tile my house with it.

Are you fucking serious?

baby_BLYTHE's picture

Gold should be viewed as an alternative currency to the dollar, not just another investment vechile.

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Gold should be viewed as "insurance" against the stupidity and theft of governments.

 

Tuco Benedicto Pacifico Juan Maria Ramirez

thesapein's picture

Should? Really? Why not let some people view gold as insurance but why me? I hate insurance, yuck. It's just another form of gambling, hoping you'll get lucky and pay less into the scam than you'll get back, tho lucky isn't the right word if you just had a car accident. It also encourages reckless behavior. So, if there should be a "should" let's say not to view gold as just another legally inforced scam.

Quintus's picture

If you don't understand how gold has been a defence against every currency collapse in history then you need to do some reading my friend.  If, during your research, you can find a single instance where gold holders fared worse than paper holders during a currency crisis scenario, please point it out to us, because I've never seen or heard of such an occurrence.

Bastiat's picture

If they "standardized" gold at 20 "new dollars", then $20 would be around average monthly income . . .or it may be 4 months income.

 

JollyRoger's picture

It is what you can trade for a specified weight of gold that will matter, not the dollar number they attach to it.  The relative weight will retain it's purchasing power.  www.silvercointrader.com

Smiddywesson's picture

Help me understand how is gold defense against currency if the market price is $1500+ and then when they standardize the gold then it will be worth $20 face value and lost $1500????

They have had three years to stock up on gold.  Why would they peg the price lower????  They have massive debt.  They don't want to default any more than is necessary.  In order to deleverage, they want their gold valued higher, not lower, and they have the means to drive is as high as they want.

 

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

It's all about "purchasing power"!  Nominal values mean nothing.

 

Tuco Benedicto Pacifico Juan Maria Ramirez

ian807's picture

"They" can standardize until the cows come home, within the borders of the USA.

So I get the gold out of the country and sell it at fair market value, convert to some preferred currency, fly back home.

The USA is not the world. Whatever shenanigans they try and pull here, will not be pulled everywhere. When travel and removal of gold are restricted, there will immediately be a cottage industry dedicated to both. In an internet connected world, governments are finding their limits.

 

 

thesapein's picture

An answer is only as good as the question.

Sudden Debt's picture

It will not only be gold and silver.

It will be any hard asset that will gain in fiat value.

but silver and gold are the most prefered once.

 

Smiddywesson's picture

It will not only be gold and silver.

It will be any hard asset that will gain in fiat value.

but silver and gold are the most prefered once.

Sure, if they don't tinker with the economy.  I could see TPTB pressuring for price ceilings on most hard assets "to protect the public", thereby increasing inflationary pricing in gold.  These people have all the power and tricks on their side.

Sudden Debt's picture

untill they don't.

If you look at the silver, it's pretty clear they really want to keep it below 40$.

AND THAT'S OKE!

They will keep it below that price untill they can't anymore.

When all stocks are empty.

When everybody wants it.

And then, whatever power you've got, SUPPLY/DEMAND will kick in.

I kind of hope I can buy more on the cheap for the next 12 months. But afters weeks like this, I don't think so.

But just imagine we could! I would love it. I would be kind of sad if the price would rocket up now. Kind of like less profit because I could have bought more in 1 more year.

 

cougar_w's picture

There can never be anything wrong with a currency that cannot be corrected by warfare.

packman's picture

Yes of course.  Remind us - exactly how much is a 1920 Papiermark, or for that matter a 1924 Reichsmark worth at this point?

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

That is a myth.  Wars destroy lives, currencies and economies.  Only the banks benefit as they lend to both sides at interest as is becoming of demons!

 

Tuco Benedicto Pacifico Juan Maria Ramirez

Fix It Again Timmy's picture

Life is difficult enough without having to worry about the purchasing power of the "fruits of your labor", yet TPTB have constantly eroded it since 1913 - you need to think about how to foil that "theft" - that's all you need to do and we all know a simple way of doing that...

janchup's picture

No one mentions the fact that governments can and will do anything. A new tax on gold will appear. How about 95%?

Popo's picture

The gold transaction tax is indeed the biggest fear.  

It would allow you to keep your gold,  but selling it would incur a hefty tax. 

This effectively bashes the gold price down as buyers leave the room.

And for those who say "I'll take my gold abroad" -- good luck with that.  You can't even fly with more than $10k, and customs in most countries isn't going to let you bring in tens of thousands of dollars worth of gold.

Getting around the tax is *not* going to be easy.

As someone who got his investing-ass kicked when the government passed the "no shorting" rule on financial stocks in 2008 -- I now know that the goverment *will* change the rules right under your feet -- even if it seems completely unfair or illegal.

KingdomKum's picture

most will surely sell on the black market, eliminating all taxation  .  .   .  

Nage42's picture

$10K of "financial instruments" words are important.
That means 200 x $50 Canadian Maple Leaf coins (legal tender).
If you've got north of $320K (current spot) in liquid wealth then you've got better methods than this (GM or BV in Switzerland), but still, that's a boatload of starter funds...

Quintus's picture

No problem.  Gold is a currency in its own right accepted anywhere in the globe.  I'll take my metal abroad (in fact I already store some of it abroad) and exchange it into currency as and when required in a jurisdiction that does not levy a 95% tax on gold.  Switzerland maybe.  

Of course we could see global capital controls implemented in every country in the world and a system for tracking every ounce of gold everywhere on earth, but I doubt it.  In circumstances where a tax such as you propose would be implemented, I suspect the Governments of the world will not be in a mutually cooperative frame of mind, and will each be seeking to attract wealth to their jurisdictions at the expense of the others.

Popo's picture

LOL.  Sure.  You can just take all that gold right out of the US, and into customs somewhere else.

No, there won't be a problem with that....  

</sarc>

Quintus's picture

I don't live in the US, but even if I did are you telling me that the US customs are so efficient that nothing ever gets in or out without their knowing about it?  How's that world-leading drug industry you have there working then?  Or the millions of illegal immigrants residing in the US?  How can they possibly be just walking in and out when Customs and border controls clearly make that impossible?

gdogus erectus's picture

Yes, but in America, if you are going to be a smuggler - it helps if you can use the company's C-130.

Popo's picture

Oh, so your plan is to *smuggle* the gold through customs. 

Ok.  Well that's always an option.  But if you're investing in gold to *limit* your exposure to risk, then smuggling gold through customs is what you definitely *don't* want to to.

Quintus's picture

Don't be silly.  

The risk I am hedging with gold is the inevitable collapse in the value of fiat currency.  More correctly, since this event is inevitable, I am hedging the timing of it.  IF that event happens in my lifetime, taking across borders that portion of my gold that is not already abroad (in the unlikely event that this is even required) will be a minor inconvenience compared to, say, begging in the streets for sustenance like paper holders will likely have to do.  Just read some accounts of what happened to the middle classes in Argentina during their currency crisis.

JOYFUL's picture

 taking across borders that portion of my gold that is not already abroad (in the unlikely event that this is even required) will be a minor inconvenience compared to...

 

 

umm, nice try, but I suggest you return the fee charged for your course in rhetoric and demand a complete refund...ya, like, living in Gulag Camp X34(aka DHS 'temporary relocation facility 666) is a lot better than, lets say...bein a chicken with it's head cut off!?!? 


After asking a series of leading questions that dare the reader to suppose that you are either being like, totally ironical, or, alternately, have just arrived here from planet (...fill in space 51 on Form ABD here.......)

 

 

 

are you telling me that the US customs are so efficient that nothing ever gets in or out without their knowing about it?  How's that world-leading drug industry you have there working then?  Or the millions of illegal immigrants residing in the US?  How can they possibly be just walking in and out when Customs and border controls clearly make that impossible?...

 

you dare demand of others to avoid being "silly"!?!?

Most folks(even non Merikans....er, perhaps make that especially non Merikans) know that it's the gubberment itself masquerading behind various acronyms like DEA FDA FBI CIA NSA DHS TSA...ad nauseum which run the drug trail which starts under the protection of NATO 'liberators' in Afghanistan, runs through central Asia to liberated KOSOVO on into Europe and across the pond to various veins on both coasts of the USA....if you don't, then I suspect any words of wisdom about your forthcoming encounter with the folks what get profiled on these pages EVERY DAY, (or more particularly their tax payer supported front line minions!) and their hatred of shiny stuff and those what hold it would be entirely wasted on thee..."Don't be silly" sayest thou!?!?

Sorry bud, you the last stop on that line! 


 


Quintus's picture

Man, I thought I had a big tinfoil hat.  I defer, sir, to your altogether superior paranoia levels.

But seriously, back to the topic at hand.  You have convinced me.  There is clearly absolutely no way that anybody who was threatened with a 95% tax on his gold could take it to somewhere that it was not so heavily taxed.  Not without the mind-reading all-knowing super-efficient Government finding out about it and stopping them.  No, they'd have to just sit quietly at home and wait for the man from the Fed to knock at the door and take their metal from them.

What was I thinking?  Now if you'll excuse me, I have to go buy some NFLX to protect my wealth.

JOYFUL's picture

I recommend you get a stretch limo for the trip to the airport, then give the driver a super BBbbig tip...at least you'll have given one last tip o da hat to small bizness! Assuming you to have libertarian tendencies from your purported need to hold gold, that at least will feel better than letting the state have it all! 

My hat is not tinfoil but it is super big, like bigger than the biggest Pancho Villa Mejicano sombrero yu never seen....it's Taxco silver over a base of Dia de los Muertes huesos gringo! 

 

as for paranoia, don't defer to me,(i'm just a bump on da log!) but rather, ponder the words of Claude Steiner(from way back in the good ol days): "

Paranoia is a state of heightened awareness. Most people are persecuted beyond their wildest delusions

knowless's picture

One doesn't need to smuggle it personally, merely pay a fee to a smuggler during the sale, say gold can get you so many fiats, you know this, they know this, so you negotiate a price, you would never need to cross a border, they have mules for that.

it's really not that difficult of a concept.

Abitdodgie's picture

But taxes are voluntary so who cares , unless you are a slave then sorry.

Bastiat's picture

And will they impose that worldwide?  Will the Chinese and Indians be subject to that tax?   If your idea is to decrease demand it is mistaken because it affects a miniscule segment of the international market. It would also not raise much money for the US Treasury since the extent US taxpayer cap gains in gold is trivial in the big picture. 

au_bayitch's picture

How many people pay a sales tax on the gold coins they purchase now? If a new tax is put in place, why pay? Go to another shop.

throughthewire's picture

This guy's predictions are much too early for the destruction of the dollar. The final, final bubble will come in the US dollar when the world realizes there's no where near enough dollars (despite the printing press) in the world to pay off the worldwide dollar denominated debt. When the final bubble arrives the mother of all depressions will be well underway.