Martenson Interviews Dines: 'Wealth In The Ground' Is Your Best Bet to Surviving the Coming 'Supernova of Inflations'

Tyler Durden's picture

Submitted by Chris Martenson

James Dines: Owning 'Wealth In The Ground' Is Your Best Bet to Surviving the Coming 'Supernova of Inflations'

James Dines has been in the business of making bold calls for over 50 years. In this deep-diving interview, he minces no words about the dire risks the US economy - and the world at large - faces at this juncture.

Simply put, he sees the excessive credit in the financial system as having placed the global economy on a collision-course with hyperinflation.

Unlike past periods of turmoil, there are no truly 'safe' places for investment capital to hide. Geographic markets and almost all asset classes are positively correlated these days. They share many of the same risks and if a systemic crash occurs, they will crash together.

At this point, says Mr Dines, you want to invest in assets that can not be printed away by government desperation. You want to hold hard assets; "wealth in the ground" as Dines says (physical commodities, mining companies, etc). They're your best best to make money faster at a rate faster than inflation is going to happen. 

On Government's Odds Of 'Saving' The Economy

They are borrowing money with no intention of paying it off. Politicians hope to be safely dead by the time it hits the fan. This year alone America is going to be running a deficit of 1.3 trillion dollars. Most people do not really even grasp how much a trillion dollars is. One trillion dollars. If you spend one million dollars each and every day from now on, back to the time of Jesus’ birth, you could not spend one trillion dollars. Right now America’s debt is approaching 15 trillion dollars, which are numbers used for astronomy. How is America going to earn that? With Facebook and Twitter corporations? Our industrial base is gone. Entitlements of fixed forced payments are a large and growing section of it.

On Resource Scarcity 

 Energy is, of course, extremely important. We have been writing in recent years about the coming resource imperialism. I founded the neo-Malthusian school of economics, which says that the planet is limited and the population is soaring. By brute logic, it is obviously unsustainable. You cannot just keep having more and more people on the same planet without, someday, sooner or later, running out. The nations that perceive this would start buying assets with that in mind. The primary example, of course, is China. 

So there will come a time, in the not-too-distant-future, where the last new copper mine on the planet will be found. Hard to believe – because there has always been more – but with the world’s population soaring into the billions on an accelerating uptrend, something is going to break. Along with the currency going to break, things are going to be happening here from out of nowhere. Because when you are going at high speeds toward a brick wall in the dark, things can happen very quickly.

On Peak Oil

So the rapidly increasing demand and the shrinking supply of oil, despite any short-term oversupply, which is probably true now… is going to lead to a stratospherically higher oil prices. As soon as the military grasps that they will start needing to put windmills on airplanes, they will seize the remaining supplies and you will not be able to drive your car until the last drop. At some point there are some very disruptive changes coming to society.

On Gold

The price of gold and silver did not go up. It is the paper money that went down. Gold and silver are the ultimate money, coins of which are good anywhere in the world, no matter what is stamped on them, and that is the money. Depending on the amount of paper each nation prints is the price of gold in that particular country, or in that particular currency.

That is one way we were protected by the price of gold. Gold is the only investible asset in the world that has gone up the last 11 years without interruption, and that is because they are just running the printing presses. The more they do, the more value builds into gold and silver. Now of course, it will have its fluctuations. It went down in the 2008 crash but came right back up and made new highs. We tend to ride those out, and it is very important understanding what the main trend is. When you are really clear what is happening in the world, you know how to place your bets, instead of doing it blindly or just following casual recommendations from people.

 Click the play button below to listen to Chris' interview with James Dines (runtime 56m:21s): 

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Lucius Cornelius Sulla's picture

I'll believe inflation arguements when wages rise along with housing prices.  If you truly believe that inflation is coming then you would load up on debt and buy the biggest house on the biggest lot possible.

Blindweb's picture

If you think war and social unrest is coming I wouldn't tie your assets down into a fixed location

redpill's picture

There's only so much you can carry, it does make sense to "tie your assets down" if it means having somewhere you have some land, could potentially grow things, etc.   If you have to abandon that, well it means things are bad enough that what you thought of as your "assets" before are largely worthless anyway because you can only carry so much food and ammo.

knukles's picture

Hey Tyler!

Brian Westbery (bury?) is at it again, this time reciting the same in one of his videos.

http://www.ftportfolios.com/blogs/EconBlog/2012/2/3/wesbury-101---the-growth-deniers

Mr Lennon Hendrix's picture

This guy is the biggest douchebag in the universe.

Tyler Durden is Matt Drudge....

Wow, talk about taking the meme of Fight Club too far.

MayIMommaDogFace2theBananaPatch's picture

OMFG!  Mr Hendrix does not exaggerate in the slight amount.  Biggest DB in the universe -- BAR NONE.

TruthInSunshine's picture

I think the best question to ask is not whether the money masters will print - they will, without question, and in massive quantities (inflation is always their easiest & most seductive option on the path to 'fix' things [aka screwing the bulk of the population]) - but to whom the digitized fiat will flow, and how debt deflation and/or deleveraging will take place and in what aggregate amount - as a countervailing force to printing fiat.

Only by comparing and contrasting the nominal sums represented by the printing and the debt deflation/deleveraging, can one even roughly approximate how badly screwed the economy will get (and how badly broken markets will be, with malinvestment and bubbles everywhere).

And lest we forget, we surely could have a period of rapid deflation followed by rapid inflation, to whatever degree each takes place and for how long, or we could have a vicious period of stagflation (that has its own unique set of wicked variables).

 

On the issue of the BLS U3 January 2012 report, I'd be remiss to not share this with my fellow ZH's (yesterday's BLS report has really, really been bothering me):

 

Another FANTASTIC break down of the flaws in the January 2012 BLS U3 report by Robert Oak over at Economic Populist (this guy is on fire - I hope Zero Hedge starts linking his articles).

He has a knack for separating the wheat from the chaff in the statistical data used by the BLS in pointing out the misleading (intentional or not) factors:

The January Employment Report Shows Things Aren't as Rosy as Some Want to Believe

 

And here's an excerpt of his that is purely AWESOME, which speaks to how the census bureau data that revised the U.S. population adjustment for the entire last year got dumped into January's pool that the BLS used to compute U3, rendering January's report WORTHLESS (not to mention that the December 2011 to January 2012 month-over-month change is nothing but noise):

The December to January unemployment statistics are often reported wrong in the press. We're sorry, god love ya, but these articles are plain incorrect. People like to compare the month to month change in population, the number of people no longer considered part of the labor force and other data. The grave mistake made by so many in the press and elsewhere is not realizing annual population adjustments are placed in the January data, not distributed evenly across the entire year, or backwards applied and that's why one cannot compare these two months. Below is a graph of non-institutional population monthly change. This is the number from where all other unemployment statistics are derived. It represents people 16 and older, not locked up somewhere, in a medical facility or in the military.

 

 

Getting It Wrong on the BLS Employment Report

linrom's picture

Debt/deflation was a theory proposed by Prof. Fisher as an explanation of the causes of the Great Depression. Deleveraging refers to contraction of Debt in relation to GDP to the point where the ratio stops falling and begins to stabilize and then rises again. Steve Keen analyzed deleveraging in Australia during the Long Depression of 1890s and the Great Depression of 1930s. In both instances Debt/GDP ratio fell for 15-years at rates of 4% and 8% respectively

In the US, deleveraging in 1930s happened very rapidly because of the debt collapse in 1932 that was then followed by rapid growth in GDP brought about by rearmament.

TruthInSunshine's picture

I just want to point out one thing, and if you think I'm wrong, I'd genuinely like to know how so I can reassess my own thoughts:

 

Debt deflation is the process of pre-existing debts being either paid down, cut ('haircuts' or settled for less than face amount) or wiped out (defaults, bankruptcies, forgiveness, write-offs/exclusions), whereas deleveraging encompasses both existing debt being impaired/reduced, and also the reluctance of consumers, businesses and sovereigns to take on or assume new debt (for whatever period of time).

So, the process of debt deflation is necessarily time limited, whereas deleveraging can last for a undetermined period of time (in theory, it can last forever).

This is primarily the reason I believe Bernanke is caught in a monetary web of his own making, which is impairing fiscal policy and economic activity:  He is focusing so heavily on monetary policy designed to benefit the banking sector that he is stimulating debt deflation and encouraging current and future deleveraging (I realize there has been a period of time whereby U.S. publicly traded corporations have issued a record amount of debt in the form of corporate bonds - 12 trillion USD worth - but that is slowing as there's no incremental need for additional monies at this point, given the macroeconomic fundamentals).

linrom's picture

I think I understand the distinction you are making between debt reduction(you call it debt deflation?) and deleveraging. You could theoretically add financial repression to your list of things that lead to debt reduction - a term that Jim Pulplava likes to to mention every week-which is supposedly a policy of keeping interest rates low and boosting the rate of inflation to reduce debt burden in order to pay it off. He conveniently forgets to omit that for this to work, top tax bracket needs to move to its historical highs of 70-90%.

I disagree with the way you define deleveraging. To me deleveraging simply means reduction in debt and the associated fall in GDP to a level where borrowing can start up again.

TruthInSunshine's picture

If Mr. & Mrs. Smith decide to not add the sunroom to their home, after much consideration, because they don't want to assume the debt in doing so (assume they are not cash buyers), how is this not "deleveraging?"

You would agree that if Mr. & Mrs. Smith decide to use savings to pay off their existing HELOC in one lump sum, prior to the time it is due (assuming there's no ban against pre-payment), that this would be "deleveraging," obviously, correct?

The only difference between the above two courses of action is that one deals with future debt and one deals with existing debt.

Demonoid's picture

You're right. Robert Oak is the real stuff. His knife cuts clean.

He even caught ZH making a dumb mistake on the "disappearance" of 1.2 million from the labor force. I like how he wields his Sabatier without snark, too.

http://www.economicpopulist.org/content/getting-it-wrong-bls-employment-...

I owe you a beer for the new bookmark.

 

r00t61's picture

Do you really want to take the title away from John Edward, come on now!

DaveyJones's picture

physical assets are one category. Relearning old (pre oil skills) are another, perhaps more valuable category.

Blindweb's picture

Yes.  Invest in your body and brain, another mobile investment.  If one has the resources buy the best quality food you can; live in a clean environment.  If you have excess resources to invest put yourself through medical school or engineering school, weapons training, MMA.  While Dr. Zhivago was fiction I suspect being a doctor will be useful in all situations.

HungrySeagull's picture

If you put together 500 people and gave them something to solve, they will get it done.

It aint pretty, but they will get it done.

11b40's picture

Does not apply to Congress.

TruthInSunshine's picture

You took the thoughts from my brain. It was like a Jedi mind trick.

 

akak's picture

He used the power of the Farce.

prole's picture

"If you put together 500 people and gave them something to solve, they will get it done.

It aint pretty, but they will get it done."

reply

"Does not apply to Congress."

YOU ARE SO WRONG!! (You are 100% wrong never been more wronger)

Ahem, sorry.

"OK Gentlemen what is the problem?"
"Everyone's money is not in our pocket yet"
"Then let's solve the problem"

Amish Hacker's picture

Another valuable category, DaveyJones, is developing community. How many of us really know our neighbors? I mean not just as someone we wave to as we drive by, but as someone we would trust with our safety, or even (in the Mad Max scenario) our lives. 

Mad Max aside, a more likely scenario, imho, is a wide-ranging breakdown in transportation, communication, public utilities, and all the government services we currently take for granted. Imagine any kind of scenario where you'd need to call 911, and then imagine that there is no 911. This is where your neighbors can help you, and you can help them. But first you have to know them, which ones you can count on and which ones are best avoided.

Whatever's coming after the SHTF, teamwork, compassion, and cooperation are going to be the way to go, not trying to act out some Rambo fantasy.

Dugald's picture

Yo Bro Is'e hear ya, Love thy neighbor, I do, I do, problem is most of them have husbands......!

DaveyJones's picture

very true. I am working in my 200 home development on a community garden, food growing skill teaching, winter production, and a food exchange system.

SAT 800's picture

200 home development;?. A gated White Ghetto? How chi chi. pretty soon you'll be completely politically correct and you can eat your organic peas.

DaveyJones's picture

close by a long shot. This development is very humble and has folks from nearly everywhere in the world mostly with computer degrees working at Microsoft.   

Oh regional Indian's picture

Very insightful man, Dines. Deflationary is obvious in Crap. Inflation is obvious in essentials.

But for that oil story, now is the time to move to increasing efficiency.

The MASTER Resource, energy, needs to be done much much better. 

The Industrial Way is just plain inefficient. Cars, 10%-15% efficient to the ground. .......

ori

/watershed-day-may-this-pour-through-a-million-pairs-of-eyes/

kito's picture

Dines is an egomaniac. The man names everything after himself. I heard hes pushing to rename February 14 valenDines day........

Likstane's picture

Are you that guy who lived in OJ's garage?

Ponzi Unit's picture

Yes, he calls himself a pioneer in technical analysis, when McGee and Edwards wrote the book before Dines set foot on Wall Street.

SAT 800's picture

He's been publishing entertainment for the masses for forty years; but then so has the Krishna Press; it's amazing what there's a market for out there.

akak's picture

Very true SAT, and those are good points to always re-emphasize.  It is precisely to avoid confusion that I prefer to use the phrase "currency depreciation" rather than "inflation" --- the former being without any question the REAL threat to the financial health of the average person in the future, not some putative appreciating fiat currency as a result of a mythical and never-before-seen fiat currency deflation.

r00t61's picture

That's right.  You get deflation in the stuff that you own, like your houses, your cars, your electronic gadgets, and your 401ks.  Meanwhile, you get inflation in food, gas, water, and electricity.

Biflation, really.

Freddie's picture

Didn't Kyle Bass just the other day say that deflation is the stuff you got (house) and inflation is the stuff you need or maybe use (food, commodities).

SAT 800's picture

Yes, he did say that; it's very un-fortunate because it destroys language. Language is necessary for communication and one needs to learn the meaning of the words; using deflation to mean lower prices and inflation to mean higher prices is a serious trashing of the language. This immediately results in confusion; no conclusions can be drawn because you're not talking about what you thought you were talking about. There definitions for deflation and inflation; learn them, use them. This is called literacy.

SAT 800's picture

I'm sure you'll fix it all up for us, you ignorant mofo.

Silver Bug's picture

Dines has been remarkable at calling bull markets early. I agree, I would much rather have wealth in the ground, rather than trash in the bank.

 

http://davidmorganblog.blogspot.com/

Ponzi Unit's picture

Dines is clear thinker, but he has an enormous ego. Not a deal killer, just an observation.

i_fly_me's picture

A friend at work and I have a Gartner'esque magic square classification system for the people we have to deal with during the course of our job:

   X-axis: arrogance   y-axis: competence

We can work with anyone except quadrant 4 types.

grid-b-gone's picture

Here's the test. Gather everything you would flee with if it came to the point of home abandonment.

Forget the apocalypse, survivalist scenario. This is a prudent exercise just for emergency preparedness.

Do you even have a backpack? That designer wheelie suitcase is useless in the woods.

For long walks, like doing 70 miles in Philmont, your load should ideally be 25% of body weight. Many Americans already exceed this rule of thumb with the excess pounds they carry.

Water weighs 62.4 lbs/gal. You'll need a gallon per day if walking. More in dry climates.

Let's face it. Aging, out-of-shape America can drive, but not flee. If you're driving during a public panic, you'll lose the vehicle and valuables.

Assets in the ground that can't be burned, stolen, or devalued make a lot of sense.

 

DavidPierre's picture

1 US Gallon of water = approx. 8.35 lb.

Weight of 1 imperial gallon  of water weighs 10 pounds by definition.

grid-b-gone's picture

I stand corrected. 62.4 lbs. is per cubic ft. 

Hulk's picture

Holy water is 62.3 lbs per cubic meter as demons weigh .1lb per cubic ft...

LudwigVon's picture

If d, demons has mass M, d must also have an wave equivalent, counterbalanced with the inverse energy, perhaps with Holy work W, dissolving Md by imparting the correct delta K to the system in question, effectively "turning off the strobe" of standing waves any particle emits to claim its relative existence.

 

francis_sawyer's picture

close enough for 'government' work...

flattrader's picture

The real trick is to know how to find water...and carry the equip necessary to make it potable...not carry a ton of water around with you.  I have four different water purification methods that cover the range from hunker in place to hiking the back country.

I carry dry, hihgly concentrated bleach tabs and paper filters with me in case I get separated from my vehicle and vehicle bug out bag while about town in an earthquake.  It takes up little space in a back pack, fanny pack, carry bag or purse.  Find two emply bottles water and you are in business.

Flakmeister's picture

A ketadyne is a handy thing to have in the bug-out survival pack....