Saturday, November 30, 2013

Ron Paul Could of Turned The Ship Around

It’s going to take someone with the vision, and a political leader, to turn the ship of state around. I think Ron Paul could have done that. But, unfortunately, he did not get elected as President. And, as a consequence, we continue to move, or the country continues to move, in the wrong direction.

- James Turk via Sprott Money:

Thursday, November 28, 2013

The Government HAS Defaulted Before

The government has defaulted several times before. It defaulted in 1933 when it refused to honor its debts by paying in gold. It defaulted in 1965 when it took silver out of the monetary system. It’s basically been defaulting all along by allowing the dollar’s purchasing power to be eroded through inflation and debasement year after year, after year.

So, given the fact that they’ve defaulted so many times before, can they default this time? Yeah, sure they can. And it won’t mean anything to the politicians, but it’s going to mean a lot to anybody who has debt with the US government. It’s always sort of amazed me that, after the government takes 30 to 40% in taxes of what you earn, why you would ever lend money back to the government with the rest of it. Because once you lend it to them, they’re in control, you’re not in control.

And this is a good example of that attitude. The government is in control of the situation. If they default they might say, “well, we will pay everybody who has a $10,000 T bill. But we’re not going to pay individuals who have a million dollar T bill because they can afford a loss of a million dollars. Where somebody with only 10,000 may not be able to afford a loss.” They can do all kinds of crazy things like that.

The reality is that they don’t have to default. They can prioritize their bills. They get money coming in all of the time for taxes, so they can use that money to pay interest on the T bills and T bonds that the government owes, so there’s a lot of theater in claiming that there’s going to be a default on October 17th. It doesn’t have to be that way.

I think the ramifications to the world is really a key question here though. Because it’s just part of the erosion of American credibility in the rest of the world. Everybody outside of the United States, and I think a growing number of people in the United States, recognize that the US is on the wrong path. That what has been happening to the dollar, and the continual increases in the debt are the wrong path.

And the US, given its role as the world’s reserve currency, has a responsibility to the rest of the world to maintain the dollar as a sound unit of account. And the US government has hopelessly failed in that responsibility. So it’s not surprising to me to see other countries around the world taking steps for a post-dollar world reserve currency situation.

In other words, you see China building up trade relationships with various partners, trading partners, where goods and services are paid in terms of Yuan, the Chinese currency. You see Germany pulling gold out of the United States. These are types of things that confidence in the US government is eroding. And the concern here is that it could erode very, very quickly, given the fiasco that’s going on in Washington right now.

I think that the debt limit is extremely important. It’s the last form of discipline that we have in terms of controlling government spending. But at the end of the day I think the politicians are going to increase the limit, and when they do it’s going to open another tidal wave of money printing by the Federal Reserve.

- Source, James Turk via a interview with Sprott Money:

Wednesday, November 20, 2013

Everything is in Place for Another Crisis

The locomotive is the market, and in the end markets are always more powerful than government intervention. The locomotive is gaining momentum for the reason that I have been making since May, which is when the tipping point was reached. Since then there have been more investors willing to sell government securities than the Fed or other central banks are willing to buy. The consequence has been rising yields on the 10-Year Treasury Note.

But interest rates are not rising in spite of QE, instead, since May they have been rising because of QE. Interest rates are just way too low and do not offset all of the risks associated with holding Treasury paper. Therefore, Treasury paper is being sold, meaning that its supply is greater than the demand for this paper.

The reason why all of this so incredibly important is that everything is now in place for another crisis as we approach the February debt ceiling limit. As a consequence, it is extremely critical that investors understand that they should absolutely not be holding dollars or Treasury paper. They are incredibly overvalued and therefore they will be the ultimate losers here. Physical gold and silver are the place to be, and can continue to be picked up at prices that reflect severe undervaluation.

- James Turk via King World News:

Monday, November 18, 2013

Don't Keep Your Gold in the Bank

Money in banks is not safe. I would not keep any precious metals in a bank, first of all. Keep your precious metals in a non-bank depository. There are a number of vaulting companies around the world. We at GoldMoney use four different vaulting companies. VIA MAT, which is a Swiss company. Brink’s, which is a US company. We use Brink’s in Canada. We use Malca-Amit in Asia, and we also use G4S, which is a British company, we use their vaults in Asia as well.

None of these companies are in the business of lending, like banks. They’re all in the business of storing. The aim of banks is to keep their vaults empty because they’re in the business of lending, they’re not really in the business of storing. They make more business by lending gold than they do storing gold. So don’t keep your gold in a bank.

And as for currencies, just like I was saying before, in the short term to a certain extent, we’re reliant upon the banking system and having to use some national currencies to pay bills. But I would keep that to a minimum because at any moment in time, your bank which you think might be safe, may in fact not be safe.

- Source, Sprott Money:

Saturday, November 16, 2013

Keep Your Liquid Wealth in Precious Metals

Everybody to a certain extent has to hold some national currency, because some bills have to be paid in the national currency in the country where you live. So you cannot avoid national currencies, but you don’t have to keep much of your liquidity. The liquid part of your wealth, you don’t have to keep much of your monetary needs in national currency.

You’re better off keeping the liquid part of your wealth in a precious metal than you are in any of the dollars. But this relates to the issue of, is your objective short term, or long term. From a short term point of view, holding gold and silver may not look like the best alternative because you do get movements of its price down, as well as up, for that matter. And that volatility can upset people in terms of what their requirements are for living expenses from month to month.

But from a long term point of view, you’re much better off owning any precious metal than you are owning any national currency. Because you don’t earn enough interest income on national currencies to offset the risks of holding them, to maintain your purchasing power in that national currency. Or to overcome the counter party risk that you have. That your bank might ultimately go under, and just like [happened] in Cypress earlier this year, you might lose 40, 50, 60% of your money in a bank bail-in.
- Source, James Turk via Sprott Money:

Thursday, November 14, 2013

The FED is NOT Going to Taper

I've been of the view that they’re not going to taper. And the reason is that, once you get on this treadmill, or down the rabbit hole, you’re stuck. It takes a real leader to say that we went the wrong direction, and we’re going to stop and go back the other direction. This is the exact same thing that happened in Weimar, Germany in the 1920s. The German Reich’s bank was buying government paper in Germany and turning that into currency. It’s the exact same thing that happened in Zimbabwe a few years ago. It’s the exact same thing that happened in Argentina. The central bank there was buying Argentine government paper and turning it into currency. And that’s what QE is all about. It’s turning government debt into currency. And ultimately it leads to the destruction of the currency.

So I really don’t think they’re ever going to taper. And the Fed will continue to do what they’ve done very effectively. For a long time they’re going to just propagandize, they’re going to protect the purchasing power of the dollar, but they never do.

Since the Fed was established 100 years ago, the purchasing power of the dollar has gone down by various estimates: 97 or 98%. And it’s going to continue to go down. And the only way to protect yourself against that is to own physical gold and physical silver. And any other tangible asset that represents real wealth.

- Source, James Turk via Sprott Money:

Tuesday, November 12, 2013

The Dollar is Our Currency but Your Problem

Just before Nixon closed the “Gold Window” in the 1971 dollar crisis, Treasury Secretary John Connolly, speaking to the world, said "The dollar is our currency, but your problem.” To paraphrase him today, he could be saying "Treasury paper is our debt, but your problem."

- James Turk via King World News:

Saturday, November 9, 2013

Yields Are Rising and it's Relentless

My expectation is that that QE will be increased in Q1 of 2014. She, like most of the FOMC members, believes that they can control long-term interest rates with QE, and that low rates help the economy. So even though it is clear that neither of these objectives are being achieved, I expect that she will try to keep the yield on the 10-Year Note below 3% with even greater amounts of Treasury paper being gobbled up with massive Fed buying.
The really important thing is that the yield on the 10-Year Treasury Note is inching back up. The yield dropped slightly after last week’s FOMC announcement, but that respite was short-lived. Yields have been in an uptrend since May, and this trend is likely to continue. 

It is interesting to note that yields are following the same pattern that started with the May FOMC meeting. Despite all the bond buying by the Fed which should create demand and therefore lower yields, the opposite is happening. Yields are rising, and it is relentless. It is happening slowly, but surely, like a powerful locomotive chugging away, which I think is a good way to describe what is taking place.

- James Turk via a recent King World News interview:

Thursday, November 7, 2013

Spending Cuts and the Debt Ceiling

"The reality is that Bernanke had his chance to taper in September and fumbled that opportunity. So it looks increasingly unlikely that there will be any tapering before he leaves office. And when Ms Yellen takes over, it’s a whole new ball game. She will be working with an economy that is rolling over, and confronted with a big divide in Washington regarding spending and the debt ceiling."

- James Turk via a recent King World News interview, read the full interview here: