Expect A Paper Currency Collapse

In this interview, James Turk talks about gold, silver, the U.S. dollar and his latest book “The Money Bubble – What to do before it pops” which he co-authored with John Rubino.

The key premise of the new book is how paper currencies are expected to stop functioning.

Turk says: “There is a difference between money and money substitutes. We use these fiat currencies today, those are currencies backed by nothing except government promises, as a money substitute. They are all based on credit. They don’t pay for goods and services. You actually have to produce goods and services to pay for goods and services. The problem with fiat currencies today is that payment risk is growing and growing because of fiscal policies by governments (which are creating too much debt) and the monetary policies from central banks around the world (who are turning this debt into currency).”

Gold, silver and tangible assets of all sorts are the protection against a paper currency collapse. The reason why for instance collectibles are going much higher in price lately is because some people are willing to pay for it as rare tangible assets will always preserve their value. On the other hand, holding cash in the bank carries a risk as central banks in the West are constantly debasing their currencies.

Even with Janet Yellen as the new Chairman, there is no big change to be expected: the dollar will collapse. Central banks know one thing: they can only print money. The keyphrase “Inflate or die” (originated by R. Russell) is exactly what central banks stand for. They can only inflate the monetary base (hence hoping to inflate the money supply), otherwise the monetary system is going to die.

In the new year, Turk advices to watch three key things:

  1. The Federal Reserve balance sheet.
  2. The 10-year T-bill rate.
  3. The gold-to-silver ratio.

The US Fed is likely to print much more dollars. Those dollars have to go somewhere. They went into the stock market last year. The correlation with gold broke down last year but should be restored this year.

“Whether you see it this year or next year is not the relevant thing, it is whether or not you own enough physical metal to protect yourself when currencies do collapse.”

In closing, Turk comments on the “economic recovery” the media and econimists are talking about. Basically, Turk does not really see an economic recovery in the US. A lot of these numbers are fictitious. For instance, the headline unemployment numbers could look good but the fact of the matter is that a misleading metric is used, one which does exclude the dropping workforce. Less people working does lead to a weaker economies, which in turn will cause a weaking banking sector.

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