Paul Tustain: Gold Is Sending A Signal That The Monetary System Is In Grave Danger

Tyler Durden's picture

Submitted by Chris Martenson

Paul Tustain: Gold Is Sending A Signal That The Monetary System Is In Grave Danger

"When a country's public debt exceeds 90% of GDP, that is the magic number. You get to 90%, there is no way back, and that is the number that the U.S. is going through pretty much as we speak. It is also the number which the UK has gone through; all of the PIGS are going through it, as well. They are all going past the 90% debt to GDP ratio. Obviously, Japan is miles past it already. It's up to 200%+. There does not appear, in the historical analysis, to be any great likelihood of getting back from that level of debt safely. There is this strong evidence that above 90% debt to GDP, you will experience either a cataclysmic default or some form of very serious inflation."

So observes Paul Tustain, gold market analyst and founder of BullionVault. In his view, gold serves as a beacon who's price is currently signalling the monetary system is in grave danger. He and Chris Martenson discuss the primary factors driving the price of gold and smart strategies for investors looking to build or maintain their holdings of the metal.

Click here to listen to Chris' interview with Paul Tustain (runtime 56m:55s):

Read the Transcript of the Podcast
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In this podcast, Paul covers:

  • The differences between unallocated and allocated buillion and the market problem that led Paul to found BullionVault
  • How central banks have recently shifted to become net buyers of gold after a long period of dis-hording bullion, and how this - combined with surging private investment - has sent demand for the metal skyrocketing 
  • Why we're currently experiencing inflation & deflation at the same time: our monetary policy is pushing more and more money into short-term investments, driving up the price of the things we use today (food, fuel, etc) and and lowering prices of the things we finance over longer periods (like houses)
  • Paul's approach to valuing gold and why he sees $3,844/ounce as a defensible (and conservative) estimate of it's appropriate value
  • Paul's perspective on silver, gold miners and ETFs 
  • The purpose and advantages of the allocated custodial bullion purchasing & storage model that BullionVault offers

Click here to read the transcript 


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TruthInSunshine's picture

If gold is sending that major signal, the poor man's gold, silver, is sending a signal that Joe Q. Publics everywhere are hatin' on their fiat.

"Hey boss, I don't want this filthy BernankBuck paper. Give me some silver, Cochise?"

The trend is not The Bernank's friend.

Turd Ferguson's picture

Other brilliant observations from Paul Tustain:

1) The sky is blue.

2) Nighttime is dark.

3) Paper covers rock.

Temporalist's picture

Some rocks are covered with lead...the shiny kind that you can't eat rocks.

uranian's picture

To be fair to the guy, he does have a very good website that explains the difference between unallocated and allocated bullion, for example. When I first started to buy gold, I read it a lot, as there's a lot of other useful info for the PM newbie.

But then I lost a lot of respect (and stopped using bullionvault) when they sold a chunk of  their company to the Rothschilds a while back.


IQ 145's picture

 It's an excellent article that needs to be downloaded and read as reference material; it explains the mechanism of signficant inflation from "small" printing exercises. He's a brilliant man who sold the banks their system of international money transfer, which he developed.

Hugh G Rection's picture

Isn't this a little dumbed-down for the ZH community?


This post should be on a site geared toward the moron-low grade imbecile crowd.


debt bad gold good durrrr.  Gold sucks buy silver, at least until we get back to 15/10-1 range.

trav7777's picture

blah blah blah...Japan hasn't defaulted yet and up until Fukushima was facing FX increase

Ahmeexnal's picture

It's easy for you to think that way. You are on food stamps.

High Plains Drifter's picture

wow!  is he really?  who knew?

trav7777's picture

I am?  WTF...I need to go flip them for smokes

Sudden Debt's picture

Japan hasn't defaulted because:

1. The loyal citizens buy all their crappy debt because it looks cool.

2. Because America has always been there.

hmmm... have you bought any US bonds lately?

Who's going to pull out the US from the quicksand?


tiger7905's picture

And besides, Spain's turn is next.

Sudden Debt's picture

with expectancy of 500 billion for Spain, that will indeed be the kicker.

June/July is the forecasted date.

And with low summer volumes, that's going to leave a sting in the markets.


Robot Traders Mom's picture

Thanks Captain Obvious. The ponzi can work a lot longer than people think, I'm not ready to think the end game is here.

augie's picture



The system works as long as people believe it works.

"all is well, we were always at war with eurasia"

I wonder what would happen if the ZH community got politically active and began speaking sense to people within their own communities.

JohnG's picture

Tried that.  All I get is blank stares and comments that I'm crazy, or just get blown off.  I got yelled at once for even suggesting that the "Government didn't have things under control...

Stopped trying.

Ostritches, blissfully ignorant.

Robot Traders Mom's picture

Exactly, when people quit thinking you're nuts is when we are closing in on the end game.

Harlequin001's picture

Have you ever consider that maybe you are nuts?

augie's picture

I feel ya man, but we need to remember this country was founded because brave men DIDN't stop stop trying.. Not trying to be dramatic just the way i have to force myself to feel.

flattrader's picture

Some of us are very politically active (and have been) in the real sense (not the keyboard commando sense.)

You'd be amazed at how few people on your block vote in fall elections if you pulled a voter list.


Truthiness's picture

Sigh...90% is grave danger. But then Japan has 200% and is still muddling through (or at least they were until the quake)...

The logic here is a little inconsistent...

tmosley's picture

Japan had the benefit of being a net exporter alongside the fact that their "debt" is to a large extent owned by its own people--which means it was very analogous to a tax.  If they defaulted, domestically at least, it would be exactly analogous to a tax.

Very little US debt is held by Americans, unless you count the Fed as "American", which I am proud to say I don't.

trav7777's picture

you're full of crap...most of the national debt is held by merkins.  SS is the largest creditor.

LawsofPhysics's picture

No, Japan held most of it's own debt and is a tiny island.  No one gave a shit.  The holders of the U.S. debt will respond very differently.  National parks and resource reserves will be theirs for pennies on the dollar and the essentially free slave labor of the American people will go get it for them.


Hedge accordingly.

Dr. Kenneth Noisewater's picture

Nobody's getting national parks or the Washington Monument.  Creditors will be converted into glowing ash before that happens.  It's good to have a few thousand multi-kiloton warheads around if you want to steal from the world..

samsara's picture

Japan was 200% with the rest of the world Not being.

Among 4 guys,  three can hold up one drunk,  If all 4 are drunk,  They're all going down....

That's your analogy

DosZap's picture

Big difference in J's GDP ratio, to ours.

Their people purchased most of their own debt with Japanese cash. For the last 30yrs, the personal savings rate in Japan was approx 25%.

We, have been at under 2%, until after '08, now up to approx 5-6%, and I hear dropping again.

Americans have no money, and cannot buy our debt, or will not put it in Treasuries of Bonds.with good reason.

This makes the logic between they and us tenable.

Urban Redneck's picture

His logic fails me when he states there is "magic" to the 90% number, since it is determined by ACCOUNTING REGULATIONS, and it is not like FASB cares much too about mark-to-market or off-balance-sheet assets and liabilities... Almost forgot- FASB gives the Government an even longer cheat sheet than it gives the Banksters.  If the 90% number was magic, this nightmare would be long over by now.

IQ 145's picture

 There's nothing wrong with the statements in the article; timing is always the problem. Read it again, it's a statement from a book detailing the fate of many real world paper currency/credit systems. It doesn't say anything is supposed to happen today; it says there's no polite controlled exit from this degree of financial irresponsibility.

redpill's picture

On days like today when PMs go parabolic, it's bitter sweet.  Even knowing that I have plenty stashed away, the fact that they are skyrocketing is an entirely undeniable sign that the foundations of the modern global economy are eroding beneath our feet.  When it finally breaks, it is going to be a very dark time.

ReallySparky's picture

Agreed, I keep thinking the same thing. 

spinone's picture

I wish I had been wrong to invest in silver.  Wish the economy improved and it hadn't doubled and tripled.  Suvivors guilt?

High Plains Drifter's picture

its fun to watch all the green, but it is sad to know why.

NOTW777's picture

check wheat and soybeans

plocequ1's picture

Think Thurman Munson.. " Im just happy to be here" 

High Plains Drifter's picture

Thurman Munson, one of the greatest baseball catchers to ever play the game........

falak pema's picture

Bingo! At last somebody is saying something that goes beyond navel gazing...Monetary system in danger...the golden danger...if it breaks...all else will seem derisory.

Look beyond the obvious and take stock of ALL that this implies.

ReeferMac's picture

Lesse, a guy who makes his living hoarding gold for a small fee for other people is bullish on the barbarous relic?

Shocked I am....

Sudden Debt's picture




Nate Taggart's picture

Dammit!  I can't BTFDs fast enough before it gets bid back up!  

Chasing the last of the physical!

THE DORK OF CORK's picture

I don't see public debt as a big problem - all that private credit creation however created a huge amount of deposits / liabilties in a banking system with little capacity to generate revenue with its assets.

The assets are also grossly overvalued

You can see this more clearly in Ireland or Iceland but the problem is everywhere in the western world.

The ECBs policey in Ireland seems to be about draining these deposits. ( although favouring bond holders) This may however create further disequilibrium - its best to push term deposits into Gold and recapitalise the money system

Public debt is not really debt - it may devalue the currency but it ain't debt

InconvenientCounterParty's picture

"Public debt is not really debt - it may devalue the currency but it ain't debt"


That's good, because collateral sure ain't what it used to be either.

THE DORK OF CORK's picture

Ask yourself why public debt is rising ? - its because the private banks cannot produce the private credit money supply and must buy off debt from the goverment and when they are stuffed the Central bank buys the stuff.

The central problem is that private banks balance sheets have been a illusion for decades and were finally found out to be a ponzi in 2008.

The entire system needs to be recapitalised by transferring private deposits into Gold and then installing this new Gold price on the CBs/ treausury balance sheet.

Harlequin001's picture

The solution is not to recapitalise the entire system, because the system begets more insolvency.

There is no solution but collapse...

LRC Fan's picture

Is there any news I'm missing?  Market has just tanked pretty hard in the past 30 min...

Should I just shut up and BTFD like Bill Griffin wants me to?

Sudden Debt's picture

market isn't tanking that much.






solidsteele's picture

Why wouldn't owning equities be the safest bet? Anymore when you go

to sell PM's your taxed at around 30%, in addition to whatever the spot

dealer robs you for. If there is a run on PM's, and the New currency is $GX

(global exchange notes????or whatever) the value would be obviously reset

to whatever the global banking system sets as the value.


It's my opinion that being vested in solid no consumer driven securities

would be the safest investment. In the event that we do wake up and

our financial accounts are newly valued in the NEW currency, the run/rush

to convert would drive up the equity value just like QEx is doin right now.

Sudden Debt's picture

No newly created currency would be accepted if it's not going to be backed by gold or silver.

So to do so, trade of PM's must be set lose for this creation.

Thats history repeating itself.