Paul Tustain: Gold Is Sending A Signal That The Monetary System Is In Grave Danger

Why we're currently experiencing inflation & deflation at the same time: our monetary policy is pushing more and more money into short-term investments, driving up the price of the things we use today (food, fuel, etc) and and lowering prices of the things we finance over longer periods (like houses)

 That was probably one of the most important points I got from the interview... I think the "quantity theory of money", is only a 1 dimensional view... there's a "temporal theory", and a "tangible vs virtual" theory in there as well..

 Nervousness increases the premium on liquidity... options...

 and also the demand for tangibles.. something real.. no default risk.

 Gold is benefiting from both of those forces, but silver even more so... if gold is a metallic proxy for land (also limited and doesn't grow even at 1% pa (only problem - lack of portability..), then silver (or copper) is a metallic proxy for oil, consumed, depleting...

Nice interview..thanks Chris

great video today on CNBS with Mar Faber.

http://video.cnbc.com/gallery/?video=3000015563

 The Federal Reserve's money-printing policies continue to make gold an attractive investment even though it has hit a succession of new highs recently, Marc Faber, author of the Gloom Boom & Doom report, told CNBC.

AP

Faber, sometimes called "Dr. Doom" for his contrarian investment perspectives and often dour views on the economy and stocks, rejected the notion that gold is in a bubble even as it begins to approach $1,500 an ounce.

In doing so, he related a story from a conference he attended this week where he asked the investment professionals in attendance if any had more than 5 percent of their personal assets in gold. No one raised a hand.

"If it were a bubble a lot of people would have gold. The whole world would be trading gold 24 hours a day," he said. "But I don't think it's really a bubble. I think gold is maybe cheaper today than it was in 1999, when it was $252.

What makes gold such an attractive investment is due in part to the Fed's move to keep the US dollar cheap as a way to boost asset prices and stimulate a recovery.

Gold is denominated in US dollars, so a decline in the greenback makes the metal—along with most other commodities—cheaper to buy on the global markets.

Investments in hard assets will be good buys in the future as Chairman Ben Bernanke and the rest of the Fed continue the liquidity-friendly policies, Faber said.

However, that also will mean bad news for consumers, who will pay more for food, energy and a broad spectrum of other goods as inflation accelerates.

That will occur, Faber said, even if the Fed enacts incremental interest rate increases. That's because small raises won't be able to keep pace with inflation and thus won't slow down the hike in prices in real dollar terms.

"One day they will increase it by a quarter percent. But what does it mean when commodity prices are going through the roof, energy prices are going up, health care costs are going up, insurance premiums are going up?" he said. "Everything is going up. Only at the Federal Reserve is there no inflation."

In that environment, cash and bonds will lose value. Other good choices besides gold, he said, are "commodities, real estate, art, collectibles and so forth, anything that essentially cannot be multiplied at the same rate as paper money, that is subject to the printing presses of Mr. Bernanke."

+1

This interview needs another listen. My brain needs to defrag to allow the new data in. He truly cuts to the bone on gold and debt to GDP, etc. 

SS

Excellent interview. Especially liked the explanation of the bond markets and the Portuguese cement guy story at the end.

Man this was a eally helpful interview!

Money moving out of long term to short term was really insightful in terms of why commodities are so nuts.

I hadnt understood the whole Gold Bullion storage abroad vs having it trapped within ones own country dynamic.

I really learned a lot WRT use  of a PM holding as a way of normalizing value while the rest of the currency world dropped --- the portugal investor story.  That was an illuminating story about how to protect an asset.

In regards to the story of the Rich Man from Portugal:

I kind of have a different feeling about the debasement that we are in the midst of currently in the fact that Portugal in the 70s would have been

an island of trouble sitting in a world of relative stability.  In that regard, there was a place to sidestep the problem.

WIth the comming issues as I see them, the troubled island has become the economies of the entire world. 

I think one can potentially sidestep the problem (perhaps) by going to gold and waiting for things to stabalize, or by becoming more self reliant in terms of Land, Food, Water and the like.

If one goes to Gold, then the play would appear to be a bet that after 10-20 years of riding it out, the world will stabalize and there will be cheap investments to be had by converting the gold.  Another assumption is that things are stable enough in general to live while the transition is taking place.

If one goes to Land and self sufficiency, the play would be more along the lines of a belief that things may not transition to recovery mode for a long time and that a different way of life is needed.  With this case, a way to hopefully survive the transition is needed.

Of course, one can persue both strategies as a hedge.  :-)

Very good interview! 

Thanks

John

Very nice interview, thanks Chris.

From Turd Ferguson today, with gold approaching $1500 and silver approaching $41...

"We should all be very enthused by the action today....a little sad and apprehensive, too. Days like these just make it more obvious that we are correct. Yes, the current economic system is ending. Fortunately, there is still time to prepare but prepare we must. Hard times lie ahead."

I couldn't agree more.  I've hated to see what the PMs are doing for the last 6 months, because it means we've understood the situation correctly (while hoping we were actually wrong.)

Very nice interview!!

Carl

Great interview Chris!

This is best explanation I've heard about inflation and deflation happening at the same time. If you haven't seen Paul Tustain's presentation about how he calculated the $3,844 price for gold, here is the link again (it has been posted already a couple of weeks ago):

http://gold.bullionvault.com/How/GoldValue

Agree......very informative and useful. This interview series was good to begin with, but now it is superb.

Two questions:

1. Anyone care to share any perceived negatives or potential problems with the BullionVault model?

2. Is there any way for the prototypical Fidelity/ Vanguard 401K/ 403B retirement account holder to utilize BullionVault? Anyone else feel trapped?

Rob 

1. I opened a BV account a few months ago and so far it has worked well for me. Being new to PM, I thought it was a great model since I didn't have to worry about the quality of the product, insurance, Vault etc... The gold (or silver) is allocated but at the same time you can get in cash instantly 24/7 so it's a great model I think.  I was actually happy to hear that Chris also has an account, it reinforces my opinion about BV.

2. My self-directed 401-K owns a BV account so that is possible for sure. So if you have an old IRA/401-K you would need to roll over them first to a self-directed one, otherwise I would think you can't open a BV account in a regular 401K