James Grant and James Turk discuss gold, the Fed and the fiscal situation of the USA

James Grant of Grant's Interest Rate Observer (http://www.grantspub.com/) and James Turk of the GoldMoney Foundation discuss the history and mission of the Fed, how mission creep has taken it wildly beyond its initial purpose into the territory of QE, ZIRP and other fiat currency experiments.

They talk about who benefit from zero interest rates and how savers are penalized by this easy money policy. They explain that the US have been off the gold standard since 1913, Bretton Woods being only a shadow of the classical gold standard. In the last 40 years low interest rates have encouraged leverage and speculation, which have reached incredible levels.

They discuss the fiscal profligacy of the US government. A solution to debt levels could still be found if the political will existed. US strengths and positive momentum could still be harnessed to save the dollar if people's eyes could be opened. However they conclude that every paper currency in history has eventually gone to zero.

James and Jim also talk about ZIRP and the absence of the bond vigilantes after over 30 years of bull market in bonds. How traders no longer care about fundamentals, like balance sheets, but rather focus on very short time horizons and the spreads between funding costs and yields. How this situation is unsustainable.

They see gold still as a very under-owned, misunderstood and marginal asset still shunned by institutional investors, with a few notable exceptions which indicate that the tide could be turning. They see a gold standard in the future, although timing is always uncertain.

At the end they talk about the history of US post civil war specie resumption and parallels to a return to the gold standard in the future. Private alternatives and competing currencies are a possibility; if politicians are too slow to provide solutions the market could do it for them.

Category:

Education

Tags:

• gold standard
• 1913
• fiat money
• James Grant
• James Turk
• video
• fiscal crisis
• paper currency
• debt

[livfreeordi3]

"like" if Ron Paul's fed chairman pic brought you here. (primarily because i was surprised he'd even had one in mind...)

[packoo]

@JimbobOMG

He is 65? I would guess 40

[TWSceptic]

@packoo Incredible how good he looks for his age, he must take some anti-aging supplements.

[livfreeordi3]

@tjtomkins You do not have to watch a youtube video. Just pick up "End The Fed" and read how it'd need to be phased out. In order to phase it out, you would need an active fed chairman.

[tjtomkins]

@tjtomkins

Just to clarify - After Civil War, fiat-money didn't die because National Banking Act of 1864 had a govt-backed cartel-system but this time we can have private banks issuing their OWN gold/silver-certificates for deposits made with them; as we know, govt-backed cartels don't work out too well......for ordinary citizens that is (cartelists seem to be do fine as expected)

[tjtomkins]

@TheSecretGuru

"My question is that if gold goes to $2,500 and a gold standard is bought back in what will happen to the value, will if drop and who will set the standard"

It won't be done in a day, as Ron Paul has said & as it happened Civil War when gold-standard was restored, it takes a while, gold & silver can be legalised as tender by getting rid off taxes on them & allow it to compete with toilet-paper (ahem, fiat money) & fiat-money will wither & die

[tjtomkins]

@ford88sw

"end the fed now"

Nobody can end it overnight, it'd cause financial chaos, globally; what Paul will do is allow gold & silver as legal tender & repeal taxes on their sale & thereby gold & silver will compete with fiat-money & obviously, gold & silver will win out because people will realize that they retain purchasing-power better than fiat-money & people will simply stop using fiat-money

[tjtomkins]

@Strav777

"what scares me about Grant and Paul is not admitting one key truth. The USD retains it's power because it *is* backed by something. That something is oil"

USD is NOT backed by anything, NADA; unless you think "full faith & credit of US govt" is worth sh!t

The reason people use USD to buy/sell oil is because US is (has been) seen as most powerful country & therefore most stable among the sea of toilet-paper-currencies India & China are already looking to use gold to buy oil

[tjtomkins]

@livfreeordi3

Well, he'd have to appoint someone so it's just an appointment just for the heck of it; he says - "he(Grant) would quit printing money" >>> watch?v=u6KjGBWror0#t=11m41

[tjtomkins]

@packoo

Same here, look at his Wiki & VERY surprised to know he's 65, yes, he does look in his 40s :)

Ron Paul 2012

[pretorious700]

@deadballo supposedly clever, but ultimately stupid remark...wtf does this have to do with the discussion?

[SherkanerUnderhill20]

1913: the year that Newtonian rationalism was thrown out the window together with Lockean natural rights and Thomist just war theory. Thank you president Woodrow Wilson!