Gold & Technology Stocks
New York, U.S.A.
By Jay Taylor
12 June 2001
On December 3, 2000, The Sunday Telegraph, which is one of London's leading newspapers, wrote about the launch of GoldMoney. This new company owns a patented 21st-century technology that makes gold the most efficient medium of exchange possible in ecommerce. GoldMoney is potentially revolutionary for ecommerce because it enables anyone to make instantaneous, 24/7 non-repudiable payments anywhere in the world, which is something even the big banks can't do. Here is what the Sunday Telegraph had to say in part about GoldMoney:
'The oldest medium of exchange moves online with the launch of GoldMoney.com, an internet currency provider that will allow users to pay for products anywhere.
'GoldMoney, based in the Isle of Man, says it has developed an e-commerce payment system that enables global buyers and sellers to make and accept instantaneous payments in weights of gold called GoldGrams. A GoldGram represents a gram of gold held in vaults with the system working on the principle that users transfer gold from buyer to seller without it leaving the vault.
'The current price of a GoldGram can be checked on the web site in various currencies. The system, aimed at corporations and cross-border traders, is designed to eliminate payment risk as there is no possibility of default on payment and it uses high strength encryption software. Payments are processed in real time and funds transferred instantly. It also offers low transaction fees that are much lower than bank fees for wiring currency.'
I count James Turk, the founder of GoldMoney as a personal friend, having known him now for ten years or so. James is a modest, but very bright and knowledgeable proponent of gold as money. However, James' goal for GoldMoney is anything but modest. What is that goal? He aims to make GoldMoney the common currency of global commerce. If James were a hot-air artist, I would discount that statement simply as self-serving promotional hype. But knowing James as I do, I know he is completely serious about building a business that restores gold's historical role as international money. I would also say that knowing James as I do, I would not bet against him pulling it off.
I have been itching to interview James Turk over the past two or three years to ask him about GoldMoney as it was being developed. He always asked that our interview be delayed until GoldMoney began commercial operations. Now that this business is up and running, you can use gold as a unit of account and medium of exchange with just a few convenient clicks of a mouse. So the time has finally come for James to explain how GoldMoney can change e-commerce by combining the oldest medium of exchange, gold, with current technology. After you read my interview with James, let me suggest you visit www.GoldMoney.com so that you can begin using the monetary system best suited for the 21st century.
Taylor: James, I understand you have been developing the concept of Gold Money for about twenty years. Can you tell me what sparked your imagination and foresight to develop this product, long before the Internet was even a twinkle in the eyes of futuristic visionaries?
Turk: The story begins in 1974 with the failure of Herstatt Bank in West Germany. I was working at the time in the Bangkok, Thailand branch of a big New York bank, and I saw first hand the devastating repercussions to the international monetary system from Herstatt's collapse. I was shocked. I asked myself how could the failure of a medium-sized West German bank wreak such devastation worldwide, including bringing some banking giants to their knees. I therefore decided to study what had happened in order to see if I could develop a solution to this problem of what thereafter became called 'Herstatt risk'. It took 4½ years, but in February 1979 I had the idea that is today embodied in GoldMoney.
Taylor: What is the essence of that idea?
Turk: It required a basic change in the nature of what was being used for money, and there were two elements to it. First, some tangible, physical asset would need to be used as money. The unit by which this physical asset was measured - in other words, a certain, recognized quantity like grams of gold - would provide the basic unit of account. Second, to be effective as money this asset would need to circulate efficiently as currency, which I envisioned could be done electronically by instantaneously transferring the ownership of that asset even while the asset itself remained in safekeeping. But let me quickly add that while I thought it was a good idea, I did not think back then that GoldMoney would ever happen in my lifetime because I never thought the technology to make it possible would develop as quickly as it has.
Taylor: When did you realize though that the technology was indeed developing rapidly enough to make GoldMoney a reality?
Turk: By the late 1980's. By then it was becoming apparent to me that within a matter of years the technology would be available to make GoldMoney possible. I therefore began studying how to carve out the intellectual property to develop and protect my idea. I filed the first patent application in February 1993, but even then the Internet and ecommerce were more a vision than a reality.
Taylor: I understand two patents have been awarded to you. What are they?
Turk: Yes, we have two US patents, and a third patent is pending. The details of the patents are available through links at our website if anyone wants to read them, so I won't get into any details here. But basically, the patents were granted because we advanced what in patent law is called the prior art. In other words, we created a new and better currency.
Taylor: Better in what way?
Turk: GoldMoney does not have any Herstatt risk.
Taylor: I understand that banks have spent hundreds of millions of dollars in an attempt to eliminate Herstatt risk. Yet unlike GoldMoney, they have not been able to solve this problem. Can you explain why GoldMoney can do it, but the commercial bankers, with all their resources have been unable to do so?
Turk: Over the years banks have been able to lessen Herstatt risk, but they will never be able to eliminate it. The reason comes from understanding the nature of the dollar and the other national currencies. They are all bookkeeping money. In other words, every national currency is a liability of some financial institution. For example, the dollars in our checking and savings accounts are liabilities of the bank where that money is deposited. The fact that dollars are a liability of some financial institution is the reason that Herstatt risk exists. GoldMoney is fundamentally different. GoldGrams, the unit of account of GoldMoney, are an asset-currency, not a liability-currency. The difference is as great as night and day, or perhaps more to the point, between gold coins and paper money. GoldGrams are the electronic equivalent of gold coins.
Taylor: So the fact that GoldMoney has no Herstatt risk gives you your competitive advantage in order to build and grow your business?
Turk: Yes, but Herstatt risk is only part of the bigger picture, which is that our competitive advantage comes in a very important way - namely, that gold circulates very efficiently in ecommerce. In fact, it circulates much more efficiently that any national currency. So while in the physical world national currencies have the advantage because they circulate more efficiently than gold, in the world of the Internet and ecommerce, the reality is that gold has the advantage because it circulates more efficiently than national currency.
Taylor: What do you mean by that? What is so efficient about the currency of GoldMoney?
Turk: People anywhere in the world can use GoldMoney to make instantaneous non-repudiable payments 24 hours per day, 7 days a week. Banks cannot offer the same service with their national currencies. So GoldMoney is a more efficient currency in ecommerce than anything the banks have to offer.
Taylor: But can't banks improve their efficiency by using the same new computer and communications technology that you have used to create GoldMoney?
Turk: Good question because it gets right to the heart of the matter, and the answer is no, the banks cannot match what we do. To explain why, we have to go back to the point I made earlier that the banks use what I called a liability-currency, whereas GoldMoney uses an asset-currency. Let me give you an example to explain the importance of this point. Aside from the Herstatt risk issue, liability-currency also has some practical hurdles to overcome, particularly in the area of funding. If I wire $1000 to you, my bank needs to get $1000 from somewhere else to fund its assets, or in other words, to make sure its assets always equal its liabilities. Banks do this by borrowing or lending dollars in the Fed Funds market. As a practical matter, that arrangement works fine because banks agree to settle their balances through a once a day clearing process, but how could a bank settle these countless transactions instantaneously? The point is that they can't. It's impractical to try to balance their assets and liabilities in a continuous clearing process, every second of the day. But that is what ecommerce requires. The Internet makes new higher levels of efficiency in business transactions possible, but the banks cannot deliver an efficient payment mechanism with their existing liability-currency.
Taylor: So while today's technology can be used by the banks to make their clearing and settlement process more efficient, your point is that this process itself is ill-suited for ecommerce.
Turk: Yes, exactly. Bank settlement and clearing systems have their origin in the 18th century. They are more efficient today than they were back then, but the clearing process itself is - as you say - ill-suited for ecommerce, which requires instantaneous, 24/7 payment. It's also important to recognize that payments made in GoldMoney are non-repudiable. Once a payment is made, it cannot be reversed. It's like paying cash to someone. Non-repudiable payments are essential to global ecommerce.
Taylor: Is that why there are so many problems with credit cards on the Internet?
Turk: Credit card fraud is a major problem in ecommerce. When the Internet began it was natural for people to try using credit cards in ecommerce because it is such a popular and efficient payment mechanism. But what works well in the physical world does not necessarily work well in cyberspace, particularly when one considers that the Internet opens up the whole world to anyone selling things in ecommerce. Merchants are not just selling to the neighbor down the street. They can now sell all over the world, so merchants need the certainty of a non-repudiable payment. As an example, if a merchant sells data through his website, he allows the buyer to download content. The merchant doesn't want to worry about getting a charge-back from the credit card company that cancels the sale because his product is not retrievable. With GoldMoney, payments are non-repudiable, so there are no charge-backs, enabling merchants to completely avoid this risk inherent in credit cards.
Taylor: But doesn't this arrangement favor the merchant to the disadvantage of the consumer?
Turk: No, because there are limits as to how much protection is afforded to the consumer when he uses a credit card. Consumers have a lot less protection when they use a credit card than many of them think they do. So in reality, credit cards do not offer fail-safe protection. And they cost consumers a lot of money. Though the merchant pays the fee, the costs of credit cards are built into the merchant's product.
Taylor: So using GoldMoney is a lot like using cash?
Turk: Yes in some respects, and in addition to being non-repudiable, there is another similarity. Just like cash, one can make micropayments with GoldMoney. That's not possible with credit cards, which require a minimum transaction of $10 or more. But with GoldMoney payments can be as small as one mil, which is 1/1000th of a GoldGram. In other words, there are one thousand mils to a GoldGram. At current rates of exchange for GoldGrams to the Dollar, one mil (0.001gg) is less than one US cent. Thus GoldMoney is highly divisible, another attribute that makes it an efficient currency for ecommerce.
Taylor: Why did you say that GoldMoney is like using cash 'in some respects'?
Taylor: So by eliminating Herstatt risk and by enabling instantaneous, 24/7, non-repudiable payments, there are reasons for companies to hold gold for the purpose of making payments. Are there any other reasons why companies would want to own GoldGrams with Gold Money?
Turk: We all need to hold some money in order to provide ourselves with liquidity. Consequently, the objective is to hold that money which is increasing in purchasing power relative to the other alternatives. For example, if you are holding dollars, and you earn 4% on your dollar balances, you are actually losing purchasing power if the Swiss Franc climbs by more than 4% against the dollar. GoldGrams give you another choice of currency to preserve your purchasing power.
Taylor: In effect, you are returning gold to its traditional, classical role as international money.
Turk: Yes, that's right. We are enabling gold to fulfill its historical role as international money, which actually brings up a couple of interesting points. First, given that the Internet is global and non-national, why shouldn't there be available to its users a money for use in ecommerce that is global and non-national? Why should dollars or pounds or Euros or any other national currency be made the money of the Internet? The point is that while each of these currencies has some global recognition, none of them are international money in the same sense or to the same extent as gold, which brings up the second point. Why shouldn't the Internet have a common currency, just like any national economy has a common currency? Ecommerce will benefit from a common currency just like the fifty States have benefited economically from a common currency. Given its historical role, gold is the logical choice to be the first choice as money in global commerce, but gold until now has had a problem - it does not circulate efficiently. It's bulky, heavy, costly to move and so forth. But 21st-century technology enables us to overcome these problems. With GoldMoney the gold remains in the vault at all times, and just the ownership of that gold changes instantaneously as it is used as currency to make payments.
Taylor: Oh, I see where you are going with this. GoldMoney is essentially repeating what happened when paper currency was first invented. You are achieving with today's technology those same benefits of overcoming the difficulties of using gold as currency. The paper circulated in commerce because it was easier to use and therefore a more efficient currency than gold, which remained in the vault for storage and safekeeping. With GoldMoney, the gold still remains in the vault, but circulates electronically.
Turk: Yes, exactly. The paper only had value because it was redeemable into gold. From the creation of paper currency 400 years ago until the last couple of decades, paper was never considered to be money; it was only a money-substitute because gold was always considered to be the money that gave paper its value. Paper currency was just a substitute for gold. That definition of paper has been forgotten since the Gold Standard was abandoned in 1971. But the point is that GoldMoney is going full circle back to the essence of why paper currency was created in the first place. Though gold is excellent money, it is cumbersome to use as currency. So the gold remained in the vault, while the paper circulated in its place. With GoldMoney, the gold remains in the vault, and the ownership of that gold changes instantaneously when used for payment. There's no longer any need for any paper. This instantaneous transfer of ownership is of course only made possible because of today's computer and communications technology.
Taylor: So GoldMoney is using today's technology to enable gold to circulate efficiently in ecommerce, which is not unlike what the medieval goldsmiths did in 17th century England when paper currency was invented, but this observation leads to some related questions. The goldsmiths started issuing more paper than there was gold in their vault, creating what has come to be called fractional reserve banking. Am I correct in assuming that GoldMoney is not lending out in a fractional reserve banking business any of the gold in the vault?
Turk: You are absolutely correct on that point. Under no circumstances will GoldMoney ever extend any kind of credit. GoldMoney is not a bank; we are just a payment provider. GoldMoney is an enabler. All we do is enable people who own gold to use their gold as currency in ecommerce.
Taylor: I noticed that when establishing a business relationship with GoldMoney, it is not by an account, but with a Holding. Could you explain why you use the term 'Holding' rather than an 'Account?'
Turk: First of all, we do not want people to mistakenly believe that GoldMoney is a bank, because we are not. So we have taken care to call things differently from standard banking terminology. And we believe that the word Holding accurately describes what you have. It is a record of information and the quantity of GoldGrams held at a vault for a GoldMoney user. Remember, the gold in the vault is not GoldMoney's gold. Rather, it is gold owned by the users of GoldMoney. There is no deposit relationship as is the case when you put dollars in your bank account. Banks loan out those dollars, but in GoldMoney, you are not depositing GoldGrams into GoldMoney. Rather, GoldGrams are created by users when gold bars are placed into the vault. This distinction gets back to the important point I made earlier that GoldGrams are asset-currency, compared to the dollar and other national currencies, all of which are a liability-currency.
Taylor: Is that why I've heard you say that GoldGrams are not 'backed' by gold; rather, they ARE gold?
Turk: Yes, with GoldMoney the person who owns the Holding is the person who owns the gold in that Holding. This is an important point in accounting and in law. For this reason we do not say that GoldGrams are 'backed' by gold, because in reality they are not 'backed', which is an adjective that explains the real meaning of national currencies and the term bookkeeping money that describes them. As a liability-currency the dollar has value because it is backed by assets in the financial institution where those dollars are deposited. Therefore, GoldGrams are not 'backed' by gold; they are gold. It's just like a gold coin. That gold coin is not backed by gold; it IS gold.
Taylor: But it seems to me that I would rather have a gold coin in my hand because it has a higher degree of certainty than any gold in my Holding, which I cannot touch.
Turk: That may be true for some people if they have the expertise to determine that a gold coin is in fact not just some gold-plated lead. But in any case, you can always take delivery of the gold represented by the GoldGrams in your Holding if you want to touch it, provided you have enough GoldGrams to take delivery of a London Bullion Market Association bar. Over time we expect that people are more likely to question whether they have a counterfeit gold coin in their hand than to have any uncertainty about the GoldGrams in their Holding. It is our primary objective to build confidence in GoldMoney so that users can use GoldMoney with complete certainty and assurance.
Taylor: How do you intend to build confidence in GoldMoney?
Turk: There are several components to attaining this objective, including a reliable operating system and good customer service. But most importantly, we have a well-defined governance policy. We have already taken many steps to ensure that our governance of GoldGrams is without equal, including several important representations that are explained at our website. But there are more actions planned, all of which will continue to provide users with assurances of integrity about GoldMoney.
Taylor: Can you give us some examples of these governance policies that aim to build assurances of integrity in GoldMoney?
Turk: Sure, for example, GoldMoney does not actually increase or decrease the quantity of GoldGrams in circulation. A commercial trust firm, Euro-Dutch Trust Company, makes these changes. What we do is supervise the process to ensure that it is done correctly, thereby providing prudent checks and balances on this important function. Also, the system itself should provide users with assurances of integrity because it was built by Dimension Data, one of the largest software companies outside the US and a London Stock Exchange listed company that has built many highly secure and reliable online systems for banks.
Taylor: Where is the gold located that is owned by people and companies with Holdings at GoldMoney, and how can we be sure it is actually there?
Turk: The gold is stored in London at the vault owned and operated by VIA MAT International, a subsidiary of MAT Securitas, the big Swiss armored car and secure storage firm. The system is built on the principle that the grams of gold in the vault are always equal to the GoldGrams in each user's Holding in the aggregate, and our governance policies provide the assurance that the gold is there in the vault.
Taylor: Is there any reason for individuals to open a Holding at GoldMoney, or is your focus solely on B2B transactions?
Turk: Our target market is cross-border transactions, regardless whether individuals or corporations complete them. Cross-border transactions are where the real inefficiencies exist today in ecommerce, and that is where we believe the real growth opportunities will be.
Taylor: How would either an individual or a corporation get gold into their Holding at GoldMoney, and how much might it cost to accomplish that?
Turk: There are three ways to obtain GoldGrams: (1) as payment received from another GoldMoney user, (2) by storing in the vault a minimum of one London Bullion Market Association bar, or (3) by exchanging dollars or other national currencies for GoldGrams at a exchange provider, which are exchange providers that help users move between GoldGrams and national currencies. Some exchange providers also accept gold coins and bars in exchange for GoldGrams. The exchange providers already participating in GoldMoney are listed at our website, and we hope to continue adding to this list. In fact, I would encourage your readers to tell the dealer where they buy gold to become a exchange provider so they can buy GoldGrams from the same dealer. Buying GoldGrams usually costs no more than - and often costs less than - buying gold coins.
Taylor: Given that GoldMoney was developed by a company in the Isle of Man, which is considered a tax haven, are there any tax advantages to holding gold as GoldGrams in GoldMoney rather than, say in the United States or another taxable jurisdiction?
Turk: I'm not a tax expert, so I can't answer that question. But I would like to make an observation. In contrast to gold bullion, GoldGrams are not an investment - they are money. GoldGrams are acquired for spending, and in some cases are only held for minutes before they are spent in some ecommerce transaction. So I don't see how GoldGram transactions can have taxable consequences. For example, if you are going to Britain and buy at $1.48 the British Pounds you need, but the exchange rate is actually $1.52 when you arrive in Britain and spend those Pounds, is there a taxable event because you now have more purchasing power than if you had waited to buy those Pounds? I don't think so.
Taylor: Some people, including me are worried that when paper money finally collapses - which history suggests is an inevitable event for fiat currencies - and when people will inevitably move the bulk of their national currency into gold, that the U.S. government, as occurred in the Roosevelt Administration, and perhaps even other governments around the world will make it illegal to own gold. Do you believe government officials will be able to force people to give up their gold?
Turk: I guess you are actually asking two questions, the first of which is whether another gold confiscation will occur or some type of exchange control will be imposed. I don't know. No one can predict the future, but I do think it makes sense to plan for the worst while always hoping for the best. Regarding the second question, we have built GoldMoney to be non-national. To be useful as international money, GoldGrams must be seen as a neutral tool in commerce that is not subject to any government's political agenda. In fact, because governments often use national currency as a tool to achieve political aims, we believe GoldGrams have a unique advantage because they are outside the control of any one government in the global company we have built. In other words, while GoldMoney was built by an Isle of Man company, the operating subsidiary is in The Bahamas, the servers are located in the British Channel Islands, which are monitored and supported by Dimension Data from South Africa, while the gold is stored in London. We are truly a global company that enables users of our system to make and receive payments in the world's only true international money - gold.
Taylor: You have said that with the currency of GoldMoney, namely GoldGrams, you are creating the currency of the 21st century. Can you explain why you made such a bold statement?
Turk: It comes down to one key point - the Internet has been and will continue to be a powerful force of change. Its impact already has been profound, but as people around the world begin using this tool in different ways, it is inevitable that the Internet will make electronic commerce - ecommerce - the center of commerce worldwide. But to achieve this end, ecommerce needs a global currency well suited for use on the Internet. GoldGrams meet this need, but national currencies do not. In fact, the potential of ecommerce cannot be fulfilled by national currencies. Or to state that observation another way, the use of national currencies on the Internet is an impediment to the growth of global ecommerce.
Taylor: I am somewhat familiar with another ecommerce company involved in using gold as currency on the Internet named e-gold. Can you tell our readers how GoldMoney differs from e-gold?
Turk: While the core business of GoldMoney and e-gold are the same - we both enable gold to circulate as currency - there are some important differences. GoldMoney is an open system. Anyone can deliver gold bars into the vault, provided those gold bars meet our established chain of integrity standard, or take delivery of a gold bar from the vault, provided of course they have GoldGrams in their Holding at least equal to the weight of one bar. Second, with GoldMoney, the user owns the gold in the Vault recorded as GoldGrams in the user's Holding. With e-gold, a third-party owns the gold. This is an important distinction between the two systems, and along with our well-defined governance procedures, should provide users with a much higher degree of confidence in our system's integrity. Also with regard to this issue of system integrity, GoldMoney has been built by Dimension Data, an established name in ecommerce, which has built online systems for banks and other businesses that require demanding standards for accuracy and security of financial data; e-gold does not disclose who built their system. Finally, the fees for GoldMoney are generally less than those for e-gold. The storage fee is one-half the fee charged by e-gold, and the payment fee is less, except for large value payments. There are more differences. I have just highlighted some of the main ones.
Taylor: How much money does a person need to open Holding at GoldMoney?
Turk: No money is needed to open a Holding, and there is no monthly fee or minimum balance requirement to keep a Holding open, which by the way is very convenient to open. A Holding is opened online by simply logging on to the www.GoldMoney.com website and completing the online application.
Taylor: How does GoldMoney expect to earn a profit?
Turk: We charge a fee for our services, so in the broadest sense, GoldGrams are the only currency the management of which is driven by profit considerations. Our view is simple. If we provide a service which people and businesses find useful, they will use it and pay us a fee for providing this service, thereby enabling us to earn a profit and stay in business. National currencies don't work that way. They are imposed by government edict, and the national currency stays in commerce regardless how well or how poorly the government manages that currency.
Taylor: What are your fees?
Turk: We work on the principle that we charge a fee only if you use a service, of which there are basically two. We earn a payment fee that is 1/10th of 1% (0.001) of the amount paid, up to a maximum of 1gg. For example, to make a payment with the equivalent value of $100, the fee is 10¢. There is also a storage fee of ½ of 1% (0.005) per annum. Thus, if during the course of a year a user keeps an average balance with the equivalent value of $100, the storage fee would be 50¢ per annum, paid prorata monthly.
Taylor: Can you explain the size of a gram vis-a-vis the unit much more familiar to Americans, namely the ounce?
Turk: By ounce you are referring to the troy ounce, which is about 10% heavier than the ounce generally used in household measurement. There are 31.1034 grams per troy ounce. So at the current gold price of $278 per ounce, one GoldGram exchanges for $8.94, and one mil therefore exchanges for less than 1 cent.
Taylor: At the present time, who are the owners of GoldMoney, and do you expect to take GoldMoney public at some time in the future?
Turk: We have seventeen shareholders, from nine different countries. I don't know whether the shareholders will decide to take GoldMoney public at some future date. But if we do, I'd like it to happen on an electronic exchange that trades equities in terms of GoldGrams, not any national currency.
Taylor: I am very familiar with your excellent newsletter, namely the Freemarket Gold & Money Report. I understand that you now accept subscription payments in GoldGrams.
Turk: Yes, we've taken my newsletter into the growing gold economy, in other words, where goods and services are sold for GoldGrams instead of any national currency. This year is a transition year, so we are giving subscribers the choice to pay in GoldGrams or Dollars. But eventually, we will stop accepting Dollars, and accept GoldGrams only.
Taylor: Are there any interesting websites you recommend looking at in order to see how GoldGrams are being used in ecommerce?
Turk: Yes, but because we have just launched earlier this year, there are only a limited number of websites using GoldGrams at this time. But as an example of what GoldGrams make possible, look at www.xodds.com, where you can use GoldGrams to take trading positions in various national currencies to try gaining from currency fluctuations.
Taylor: Thank you so much for providing our readers with all this information on GoldMoney. But before we say good-bye, given your very thorough knowledge in the gold markets as well as your involvement with the Gold Anti-Trust Action Committee, I would like to ask you a couple of questions regarding the gold market. To begin, do you think the twenty year bear market in gold is about over?
Turk: It's been two years now since the low was reached, so I think there is a very good chance that the low is finally behind us. Fundamentally, gold is very cheap and undervalued, but unfortunately, no one can predict the future. So the best we can do is take the Warren Buffett approach, accumulate assets when they are good value, waiting for that value to be unlocked in the future. There is a lot of value in gold to be unlocked.
Taylor: Do you think the message of GATA is finally getting through to the establishment?
Turk: More important than getting through to the establishment is, I think that GATA's message is getting through to the broader market. People everywhere are beginning to understand that gold has become undervalued not because of some defect or deficiency in gold, but rather, because of unusual factors, such as the big short position of certain commercial banks that have used gold to fund their dollar portfolios. The analysis presented at the www.GATA.org website is detailed, extensive and in my view, rock-hard solid.
Taylor: What is your read on the U.S. economy? Do you still think inflation is a major threat and will that inflation finally be transferred into major increases in consumer prices?
Turk: I would not characterize the long-term threat to the dollar as one of inflation, which by the way seems to be building. Rather, the scenario I see unfolding is one that I call a 'flight from the dollar'. In that situation prices will rise, but not because of huge increases in the money supply, which is the precondition that causes inflation. Rather, these price rises will result from a decline in the demand for dollars. The point is that money, just like any other good or service, has its own supply and demand, and people mistakenly assume that demand for the dollar will always continue to grow. But even a cursory reading of monetary history shows that it doesn't always work out that way. The demand for any money can decline if people lose confidence in it. So when this major dollar event occurs, prices will be rising because too many dollars will be chasing too few goods, but I expect a declining demand for dollars rather than a rising supply of dollars will be the reason for rising prices.
Taylor: Given the scenario you have just described, what is your forecast for the price of gold?
Turk: Gold is more undervalued today than it was at $35 per ounce. When the Gold Standard was abandoned in August 1971, gold rose nearly three-fold in about eighteen months. I expect history to repeat, so some price over $500 per ounce seems to be a reasonable expectation for the next bull market.
Taylor: If a collapse of the dollar causes an economic crash, what is the scenario for gold then?
Turk: Gold will do what it has always done throughout history - serve as money. But this time gold has the added advantage that we will also be able to use it as currency through GoldMoney.
Taylor: James I want to thank you for your kindness in sharing your valuable time and expertise with our readers. I wish you the very best possible success with GoldMoney and hope to update on an ongoing basis our subscribers about your efforts and GoldMoney's progress. I also want to thank you for your well-reasoned analysis of the markets and for sharing those thoughts with our readers in this and hopefully in future issues of J Taylor's Gold & Technology Stocks. All the best to you and your family.
Turk: Thanks Jay. I've enjoyed this opportunity to talk about GoldMoney. It is my first extensive interview since our launch, and it seems particularly fitting for it to be with your newsletter because GoldMoney really does combine the two pillars upon which your newsletter is based - gold and technology.
For subscription information about the Gold & Technology Stocks newsletter, contact Jay Taylor at Taylor Hard Money Advisors, Box 770871, Woodside, New York, 11377 or email Jay Taylor at: email@example.com.