"We're Living Within A Money Bubble Of Epic Proportions"

Tyler Durden's picture

Submitted by Adam Taggart via Peak Prosperity,

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 Weimer, 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):

 

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CPL's picture

http://www.forbes.com/sites/gordonchang/2014/01/26/china-halts-bank-cash...

China just closed all bank transfers.  Good luck on Monday everyone.

Seasmoke's picture

THIS IS SERIOUS NEWS !!!!!!!!!!!! WOW !!

kaiserhoff's picture

Katie, bar the door.

Hell's Bells.  This time she did.

Ineverslice's picture

 

Uncle Billy...He's your man!!!

Tall Tom's picture

 

 

 

Holiday...

It just another Banking Holiday

We're out of cash so now you just go away

And enjoy your Holiday.

Keyser's picture

That notice is rather ominous. Systematic maintenance is halting FX conversions for 9 days. Something doesn't smell right. 

 

maskone909's picture

If u peeps havent got ur pm's yet best do it quick

El Vaquero's picture

They know there is going to be a rather large default on Jan 31 and are trying to stop systemic contagion and bank runs.  

kaiserhoff's picture

Well, they got everyone's attention;)

Skateboarder's picture

It pains me to turn on the cable television, but let me see if any of the news outlets are reporting anything.

CNN: "Who should pay to keep brain-dead mom alive?"

FOX: Obama says "it's our generation's task to reignite the american productivity" or something like that. It actually sounded reasonable, but coming from his mouth, complete horsefeathers.

ABC: Gas prices are rising.

Okay. Business as usual.

Ineverslice's picture

 

Runs in China will be epic!

Those lines at the train station during New Year's Migration....Childs play.

I want to see it.

akak's picture

 

Runs in China will be epic!

Why is that, more tainted Kitten McNuggets?

Alas, alas, 1.3 billion times alas, just have to run to the nearest roadside and bare with it.

El Vaquero's picture

I'll have a Big Mutt, a 9 Piece Kitten McNugget, a Double Quarter Horse with Cheese and a Diet Coke, please!

 

Actually, OT, but funny story about me and McDonalds from when I was a teenager.  I was on my way to do a side job to earn a little extra money with a buddy of mine one fine day, and was hungry.  Being a teenager, I was not as put out about McDonalds as I am now, so I stopped at one and ordered a double quarter pounder.  Well, it tasted nasty, and I was only able to scarf down about 1/4 of it before I decided that I couldn't eat anymore of it.  It so happened that I was on the on ramp for the interstate, and I'm a firm believer in merging going the same speed as traffic, so I was already going 50-55mph.  With a simple flick of the wrist, I tossed the thing out the window into that little triangle patch of land that was bounded by the street, the on ramp and the interstate.  Well, a couple of kids that were probably around 13 or 14 just happened to be traversing the patch of land at the wrong time.  Motherfucking MCSMACK!  Right in one kid's face at 50-55mph.  I kind of felt bad for the kid, but that did not stop me from laughing my ass off.  That faux berger drilled the poor kid, catsup and faux beef sprayed everywhere, his hands immediately went to his face and he dropped to his knees. It had to have felt like getting drilled by a boxer, but holy shit!  Can you imagine explaining that black eye to your parents and friends? 

The Joker's picture

That story was hilarious but I still had to down vote you...for littering.

It reminded me of another on-ramp story, OT as well.  About twenty years ago I was cruising along with friend in his car on the freeway.  He was driving.  Out of nowhere he looks at me and says "Are you driving?"  I said "What?"  He said "I'm serious, I took three hits of acid and I can't tell if you are driving or I am driving!"  Immediately I told him to pull off the next exit and stop the car, after I called him all sorts of names.  So instead of pulling off the off ramp he drives under the overpass and turns up the on-ramp.  So, I'm yelling at him while he is dodging traffic when sirons and cop lights come on behind us. After we were stopped, the cop comes up to the driver window and says "Son, didn't you see the arrows?  Dave yells, "Arrows?!  I DIDN'T EVEN SEE THE INDIANS!!"

Dave went to jail that night.  Drive sober kids.

PS The look on the cops face was precious.

 

Ineverslice's picture

 

Wok don't run!

poor little pussies and pups.

 

nmewn's picture

Small splattering things.

The Peoples Revolution Indoctrinary Corp (the PRIC's) have already issued a call to arms!

akak's picture

The Great Leap Forward to the nearest roadside!

Because, after all, a turd in the dunghand is worth two in the bushes.

kaiserhoff's picture

Capital controls coming in

  4,3,2...

Babalooee's picture

The runs you get in China are always epic

Babalooee's picture

The runs you get in China are always epic

TuesdayBen's picture

No.  The runs I had in Greece were the worst.  Wound up in a hospital in Brindisi, Italy!

Miffed Microbiologist's picture

Well, that was worth saying twice! ;-)

Miffed;-)

OC Sure's picture

Mum's the word to quell panic.

Bloomberg headquarters live from Hong Kong does not have the story either.

nmewn's picture

Busily bribing every Chinese official on their roll-a-dex/contacts list no doubt.

Mr Pink's picture

But....all this time they have been telling me gold, silver and bitcoin have been the tulip bulbs

disabledvet's picture

no, no, no. they've been telling investment manias don't exist. you can have all the tulip bulbs you want.

and gold.

and silver.

and bitcoin.

"just keep buying Beeks."

ArkansasAngie's picture

Closed for maintenance.  I guess they will blaming Obama's NSA?

Monday is certainly going to be interesting.

Uncle Sugar's picture

Let me guess, CGI built the back end programs.

Ignatius's picture

From January 30th to February 2nd.  Hmmm.....

americanspirit's picture

CPL - I followed your link - thank you. Great find!

However, as the Forbes article points out, CBOC is only doing this because of the need for "system maintenance". They said so themselves. Nothing to see. Move along.

Squid-puppets a-go-go's picture

crony capitalst-hybrid communist system maintenance.

these people dont fib

Roscoe's picture

Probably to give folks time to cool off after the Cash = Gold or Debt = Gold (I forgot the exact name) fund fails. I don't think that strategy has ever worked...

Jack Burton's picture

"due to system maintenance". A claim like that means that the PBoC has no ability to backup it's computer systems while maintenance is done on parts of it? That is a dubious excuse for 9 days of no foreign currency conversions! Has something in the China shadow banking system blown up and cascaded into financial instruments backed by nothing but promises and promise of future earnings? We all know that one blow up in the right place would dislocate many financial engineering frauds. This may or may not be big news, if it is, then tomorrow will be a harrowing day on the street. As for the cover story, I do not believe that excuse for a moment, that is fake, what it covers up we can not yet know. Were I in the markets, I would, this very night, be seeking to exit all I could.

Race Car Driver's picture

> http://www.forbes.com/sites/gordonchang/2014/01/26/china-halts-bank-cash...

Ugh. Words. Lots and lots of words.

I'll wait until Tyler posts a cartoon version, thanks.

War_is_Peace's picture

Anyone else getting an error message when trying to access the Forbes article? Is this the ministry of truth at work or irrefutable evidence of my computer illiteracy?

The Gooch's picture

"promises are going to be broken left and right."

 Sounds familiar.

 

Edit: CPL, That escalated quickly.

"Maintenance" = Fill those tanks, stock those pantries, fill the desiccant boxes and grab some popcorn.

Goldilocks's picture

Pat Travers - Boom Boom (Out Go The Lights) Studio Version
http://www.youtube.com/watch?v=oBf1e6WWWA0 (2:46)

Constitutional Republic's picture

Good Evening James if you are reading this. It is a pleasure to see you on ZH. Your viewpoints are particularly well timed today, as we see money lock-ins at 3 British banking groups at the moment: HSBC, Lloyds Group and Bank of Scotland.

Your attempts to educate the financial public in recent years will prove to be prescient, in my opinion. Best wishes to you, GATA and the goldmoney team in Jersey.

Interesting that the ZHer 'CPL' just posted a link to the closing of bank transfers in China. HSBC contagion or vice versa?

SteveNYC's picture

"....and you want to avoid, as much as possible, your involvement in any financial assets."

 

Sounds good in theory, but these are the exact "assets" that taxpayers were forced to back, bail-out, and suffer zero interest rates for 5 years in a row, in order to save. Perhaps he is missing the point that these "assets" come with a systemic/societal guarantee behind them? What is that worth? Hate to spoil a good article, as I respect what this man has to say.

Moe Hamhead's picture

Well, in theory anyway,  shares of a well run company represent an ownership interest.  And if a well run factory or company is not tangible, nothing is.

I think I'd rather have part of a bricks and mortar than part of my grandfather's farm.  Farming sounds like work, and it's not as liquid if you don't want it, or you have to leave in a hurry.

Problems always arise of course if a bricks and mortar goes belly-up, but farms do also.

As for heavy metal, I can't see myself with a wheeled cart hauling bullion down the road when things turn bad.  I remember stories of people crossing the border into Suisse from the north trying to trade silverware and gold for food and safe passage.  In this culture you wouldn't get to the town line with both your life and your gold.

The point isn't that shares of Walmart or Apple are any better at that time; the point is nothing is going to be as valuable as your resourcefulness and mental preparation.  And having to stand guard over a stash is just going to tie me down.