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Sunday, January 26, 2014

James Turk: We're Living Within A Money Bubble of Epic Proportion

On par with the South Sea & Dutch Tulip bubbles
by Adam Taggart
Saturday, January 25, 2014, 4:46 PM

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 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 Weimar, 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):

Chris Martenson: Welcome to this Peak Prosperity Podcast. I am your host, Chris Martenson, and today we have the distinct privilege of speaking with James Turk, founder of GoldMoney and whose experience in markets and precious metals spans more than four decades. He is also Director of The GoldMoney Foundation, a not-for-profit, educational organization dedicated to providing information on sound money.
SOURCE peakprosperity