Monday, March 19, 2018

James Turk: Bankruptcy 1995 Revisited

In 1992 a book entitled “Bankruptcy 1995: The Coming Collapse of America and How to Stop It” hit the nation by storm. Written by Harry Figgie, a prominent businessman who had built a Fortune 500 company, and Gerald Swanson, an economics professor with expertise in public finance, it forecast that the US federal government would go bankrupt in 1995 and default.

The default would arise from a currency[i] collapse. Each lender to the federal government might receive back the same number of dollars they had loaned, but those dollars would have considerably less purchasing power[ii], and possibly none at all, making them worthless. So US Treasury debt instruments would have little or no value because they are denominated in dollars, the purchasing power of which would be decimated by hyperinflation.

Obviously it hasn’t happened. Even though the dollar subsequently experienced some horrific swoons and its purchasing power continues to erode, it has endured, but we should not ignore this book’s conclusions.

Two Key Assumptions Underlying “Bankruptcy 1995”

The logic of the authors’ analysis was faultless, but it was built on two assumptions, one of which turned out to be wrong. The first correctly inferred that the federal government’s debt would continue to increase, which at the time they wrote it had done every year since 1969. This ignominious annual streak of new indebtedness remains unbroken to this day.

The incorrect assumption was that interest rates would remain high and even increase. This interest rate outcome would occur because of the federal government’s growing debt load. The authors naturally expected that lenders would require higher interest rates to compensate them as the risk of default grew as a direct result of the growing debt burden.

The authors did not, however, anticipate that the Federal Reserve would force interest rates to unnaturally low levels. They did not – nor did anyone else – expect to endure what we now call “financial repression”, but forcing interest rates lower was only part of the repression.

The federal government also had to convince the purchasers who bought its debt that everyone was getting a fair deal. In other words, not only did the federal government need to lower interest rates, it needed to make the inflation rate look low too.[iii] In this way, real interest rates – the nominal interest rate less the purported inflation rate – would show a positive return to the lender. After all, lenders expect as a matter of course to gain purchasing power when lending their dollars to compensate them for putting them at risk while foregoing until the future the purchasing power it represents.

Clearly, it was going to be a Herculean task to convince lenders – and indeed, the ‘market’ – that inflation was not as bad as people were experiencing from their everyday purchases. But it was a task that had to be undertaken to postpone the projected 1995 bankruptcy and currency collapse.

So the federal government formed the “Advisory Commission to Study the Consumer Price Index”. It of course concluded that inflation was not as bad as everyone believed. Even though the federal government in the early 1980s had already changed the calculation of the CPI to report an inflation rate that was lower than the true rate at which the purchasing power of the dollar was being eroded, it did so again[iv].

This pernicious sleight of hand by the government significantly distorted the means to perform accurate economic calculation with the result that for decades, precious accumulated capital earned from hard work has been misallocated and wasted on countless follies. What’s more, currency debasement has taken purchasing power out of the hands of savers and diminished the value of one’s wages. Even if the amount of the wage increased, “keeping up with inflation” requires cost of living adjustments above the CPI. [v]

The federal government’s fiddling with its calculation of the dollar’s inflation rate is without a doubt the biggest swindle of all-time. The result has been increasing friction across the US and throughout all levels of society. As Lenin correctly observed, to destroy society you simply debauch the currency.[vi]

I have presented this background information purposefully in order to ask the following question. What if “Bankruptcy 1995” was written twenty-five years too early?

- Source, James Turk

Friday, March 16, 2018

James Turk: The Gold Bull Market Enters Phase 2

The gold price has been in a rising uptrend from its low of $1050 in December 2015. This climb has occurred within a multi-year base during which gold has been accumulated because it was and still is undervalued. With gold’s breakout this year above $1300, its 2-year base should now be viewed as a launching pad that will take gold much higher in the months and years ahead as phase 2 inevitably morphs into phase 3. How much higher depends on what central banks do.

Right now central banks want more inflation, and they are getting it. In 2017 crude oil – the price of which is a reliable forecast of rising inflation – rose by 12.5%. This year it has already risen 6.4%.

Central banks are actively pursuing their more-inflation goal with a variety of policies that weaken the purchasing power of the national currency each bank is managing. So to protect their wealth from the ravages of inflation and other policies that debase the currency people need to hold and use in everyday commerce, they protect their purchasing power by buying gold and silver, which as history has demonstrated time and again is the logical response.

If central banks continue their policies that debase national currencies, then expect a much higher gold price. But again, how much higher depends on how badly every central bank eats away at the purchasing power of each national currency.

It also depends on one other basic element. What is gold’s fair value?

I use mathematical models based on historical results to calculate gold’s value. These models are explained in my latest book, “The Money Bubble: What To Do Before It Pops”. Using these models we can calculate that gold’s fair value presently is about $11,000 per ounce.

An 8-fold increase in the gold price to reach that level may sound shocking. However, it is quite modest when compared to gold’s 24-fold increase from $35 to $850 in gold’s 1968-1980 bull market. That historic price rise is also greater than the 10-fold increase if we were to use $1050 as the base of our calculation for that $11,000 calculation of gold’s fair value.

In Congressional testimony in 1912, JP Morgan, the leading financier of the day, said: “Money is gold, and nothing else.” From his insight we can conclude that the dollar is a money-substitute that circulates in place of money, which is gold. The ‘Money Bubble’ pops when gold reaches phase 3.

- Source, James Turk

Thursday, March 8, 2018

James Turk: The Precious Metals Shorts Are in Serious Trouble

The shorts are struggling to try finding physical silver to deliver. The smart money is asking the shorts to turn the short’s paper promises into the real thing, which is a trend that I expect will continue throughout this year, not only because of inflation but also as a result of rising counterparty risk because banks are sitting on a growing stack of bad debts.

As a consequence, both gold and silver will continue much as before. The prices of both metals will trend higher as the year progresses. Importantly, the uptrend will accelerate as the group of smart money buyers accumulating the metal gets bigger as more and more people begin to understand that the debasement of the dollar is accelerating.

The second important point, Eric, is what happened after the CPI was released. Both gold and silver climbed back after the big hit they took on the release of the CPI.

After the CPI was released, the price manipulators took the metals lower to clean out the sell stops under the market looking for more physical metal. To their surprise, the backwardation didn’t disappear. It got worse. And then both precious metals completed a very bullish outside reversal day.

So the shorts are in real trouble. The central bank price manipulators who have been shorting gold and silver to keep prices under their control are contending with a toxic mix of a collapsing dollar and rising inflation. Both of these reasons mean that the precious metals are destined to continue climbing higher this year.”

- Source, James Turk via King World News

Sunday, March 4, 2018

James Turk: Two Different Roads

The first is the prevailing sentiment. Before the CPI was released, commentary on the precious metals took two different roads.

If the CPI was worse than expected, the Fed would raise interest rates which would be bad news for gold and silver. If however, the government’s inflation report came in less than expected, it would be bad news for gold and silver because no one would need to buy the metal to protect one’s purchasing power from inflation.

So there you have it. Conventional wisdom had it that gold could not win. No matter what CPI was reported, gold and silver would get hit, and they did. But here’s the important message from this conventional wisdom.

When sentiment gets so bad that there is no reason to buy an asset with a 5000-year proven track record of protecting one’s wealth, you know the price of that asset is extremely undervalued and ready to move higher. When it comes to markets, conventional wisdom is usually wrong, and today was not an exception.

- Source, James Turk via King World News

Thursday, March 1, 2018

This Is What Really Triggered The Massive Spike In Gold & Silver Today

"Today was a very important day for gold and silver, Eric. The reaction in their prices to the CPI released earlier today provides us with some very valuable insight into the state of the precious metals market. And this insight is bullish for both precious metals…

The CPI number came in higher than expected, which shows that even by the government’s own calculation, inflation is worsening. And we all know that inflation is a lot higher than what the government reports, so the purchasing power of the dollar is being stealthily eroded even more than what is reported.

But there are two things that I found to be the really interesting about this CPI report. "

- Source, James Turk via King World News

Saturday, February 24, 2018

The Inflation vs Deflation Debate Never Ends

Robert Prechter of Elliott Wave International discusses inflation and deflation with GoldMoneys James Turk in this podcast. They also talk about GoldMoney, and the advantages of owning allocated.

Monday, February 19, 2018

The Biggest Money Bubble in History

My guest in this episode is James Turk, the founder and lead director at Goldmoney. James began his career at Chase Manhattan Bank where he worked on assignments in Thailand, the Philippines, and Hong Kong. Since, he has been the manager of the Commodity Department of the Abu Dhabi Investment Authority and held various advisory roles in money management. In 2001, he co-founded Goldmoney with his son Geoff Turk and remains an active board member and advisor today.

- Source, Cashflow Ninja

Thursday, February 15, 2018

James Turk: You don't invest in gold, gold is money

James Turk, globally recognized expert on precious metals, joins Kuzman Iliev and Vladimir Sirkarov in the Boom and Bust show on Bloomberg TV Bulgaria to discuss a wide range of investment topics - monetary policy, the new reality of negative nominal yields, investment strategies for wealth preservation, what to consider when investing in gold and how to prepare for turbulent times.

- Source, Brain Workshop Institute

Friday, February 9, 2018

Josh Crumb: Its All About the Gold

MacroVoices and fund manager Erik Townsend welcome Josh Crumb as this week's guest to discuss everything gold.

- Source, Josh Crumb via James Turk Gold Money

Sunday, February 4, 2018

Bitcoin: Boom or Utter Bust Ahead?

In this special edition of Real Conversations, Goldmoney Co-founder Josh Crumb puts Bitcoin in perspective during an in-depth discussion with Hedgeye CEO Keith McCullough. Delving into the fundamentals, Josh dissects the topic of “Money vs. Currency vs. Cryptocurrency” with an incredibly thought-provoking discussion on investing in Bitcoin, the future of cryptocurrencies, and its implications for gold and the economy.

- Source, Josh Crumb via James Turk Gold Money

Tuesday, January 30, 2018

Why Gold is the Only True Money

Goldmoney CEO Roy Sebag shares how he came to peace with the idea that gold was the greatest form of money.

- Source, Gold Money

Thursday, January 25, 2018

James Turk: Using Goldmoney to Preserve your Wealth in the Next Crisis

James Turk, founder and chairman of GoldMoney, explains how owing gold with their system works and gives details on how you can preserve your wealth with gold.

- Source, Jay Taylor Media