Gold Research Videos
Subscribe to our newsletter at http://www.goldmoney.com/goldresearch. James Turk, Director of The GoldMoney Foundation, talks to Jim Sinclair, host of www.jsmineset.com/, about his successful gold price predictions, US debt problems, how to ride the trend and the second phase of the gold bull. It's a gear change from arithmetic to exponential growth as public perceptions about the safety of the US dollar changes. The debt ceiling debate is a wake up call for people all over the world. The video was recorded on August 5 2011 at the GATA conference in London.
James Turk: I'm James Turk. I'm a director of the GoldMoney Foundation. I'm here with one of the legends of Wall Street, Jim Sinclair. Jim, it's really pleasure to speak with you.
Jim Sinclair: It's my pleasure to be with you.
James: Thank you. I'd listened to your brilliant presentation here at the GATA conference in London. I'd like to talk to you about it a little bit. I want to focus in on this $1,764 number. How did you come to this $1,764 number on gold?
Jim: The angels that I've published, the numbers that I've suggested and to a large degree been successful with, actually come from a formula that Jesse Livermore used. And he actually used it for new issues, but it applies to gold. It was published in 1923 in The Wall Street Journal, and it's called the square of the numbers.
James: OK. Now the significant thing in my mind is that when this $1,764 number is breached to the upside you were saying that gold could go exponential. Can you explain some of your thinking behind that?
Jim: Well, we've been through two phases in gold in my opinion. In other words the first phase was rather arithmetic. It had a nice angle of appreciation, but not a great angle. When we cross the $524.90, I suggested to people that possibly trading wasn't the best idea. That real money is made by holding a position that's right and holding it for the duration of that period of correctness.
James: Riding the trend.
Jim: Just riding that whole trend without the need for leverage.
James: Yeah, I agree with you.
Jim: Without the need for catching every interim top. $1,764 has the same implications as $524.90 had. It's mathematical. But what it would indicate would be that the trend had changed now from arithmetic with certain periods of a geometric rise into a period of time where exponential rises are possible. $1,764 is the loss of confidence. $1,764 is the king has no clothes. $1,764 is the transparency of the depths of our problems and the duration of our problems.
James: Well, you hit the nail on the head not only explaining why gold is going up, but something to me that's very important. You know, the sentiment indicators. For something to go exponential, there has to be a change in psychology of various participants around the world. So you're implying that sentiment is going to change negatively for national currencies and positively toward gold in such a way that it will just keep running.
Jim: Lack of management. Something on its own. Situations developing without any plans on how to handle them, but rather just reacting to circumstances as they come.
Jim: The absolute embarrassment of the compromise that allowed the debt ceiling to rise in the US. Anyone who had any part in that arrangement should be embarrassed. It's becoming clear to the world that we react to circumstances in North America, in the US, without any plan whatsoever for what they might be.
James: Yeah. Understand completely. So policy makers are, they don't have the political will to do the right thing. They don't have the political will to turn around and get back on the right road and stop this train wreck that looks like it's going to happen?
Jim: This is a slow train wreck. It's going to go on, in my opinion, right through 2015. This train wreck is circumstances creating decisions reactively. This train wreck is an out of control economic circumstance. This train wreck is exactly the same as if you and I spent everything we had, borrowed on our credit cards and lost our job on a national basis. Credit is gone wild and it's coming home to roast.
James: But, you know, this is something different. You know, I've gone to countries like Argentina in 1991 to study the problems with the currency and hyperinflation. But, you know, we're talking about the world's reserve currency here.
James: So what you're suggesting is this is going to have a profound impact, not just in the United States, but everywhere?
Jim: For exactly that reason. The reserve currency, the currency upon which other central banks have taken comfort, that reserve currency is broke. That reserve currency has debt that can't be controlled. That reserve currency is going to transmit its problems throughout the Western world.
James: You know, you probably remember from the 1970s when John Connally was President Nixon's secretary and we were having one of the many crises, probably 1973, with regard to the dollar. And Connally said, 'Well, the dollar is our currency but it's your problem,' speaking to the rest of the world. Is that still the same attitude today?
Jim: That madness still continued, but I don't think continues anymore.
Jim: I think that madness has been brought into the light of reality by the increase in the debt ceiling based on nothing whatsoever. On a very poor compromise. On doing nothing. On just making a piece of paper. Of just doing theatrics for TV.
James: Well, this is interesting because what you're basically saying is the debt ceiling process, where they finally did increase it after all of this political posturing and whatnot. That was sort of a wakeup call? Not only in America, but also the rest of the world as to...
Jim: It was a total shock.
Jim: I don't think any economic event in modern history has been as embarrassing as the so-called compromise, the so-called bill and the so-called lauding of that accomplishment. And the market the next day looking at it and defining it as totally fallacious.
James: Are you comfortable talking about the euro and what the implications of the dollar are going to be on the euro?
Jim: It's not just simply the dollar on the euro or the euro on the dollar. That's day to day trading. Our problem is not a problem of just the US dollar. It's in the entire Western world.
James: Fiat currency?
Jim: Fiat currency of the entire Western world. What we lose others gain.
Jim: There was a time when we had it all and there was a time when we gave all of that back.
Jim: It's not simply what is Greece going to do today or tomorrow. It might be what is New York state going to do today and tomorrow.
James: Or Illinois or California.
Jim: And media, media has focused on the euro and our rating agencies are totally euro-phobic. While if they were to turn the mirror around and look the other way, they'd see the exact same thing. The trading that will take place between the euro and the dollar are purely mirror images reflecting whatever the flavor of the day is. It's an entire Western world currency problem that is endemic because of the dollar, which transmitted the problems of debt not simply from the US, but to the world.
And they all went nuts on the derivatives. And they've created this pseudo money going around the world. Which before the Bank of International Settlements changed their measure was quadrillion. Not trillion. And that specter is still in cyberspace, waiting for any opportunity to surface again.
James: Yeah. So they've all been bitten by the fiat currency disease and, you know, we can't just talk about the dollar...
James: We've really got to talk about everything.
James: That's human nature, right?
Jim: But human nature to the extreme. Who needs enemies when we have the financial leadership we have?
James: Yeah. Understand completely. So if gold goes exponential against the US dollar when it clears $1,764, by implication it's going to go exponential against the British pound, the euro and pretty much everything else?
Jim: And every single currency to the differential of how that currency trades against others. But in all currencies.
James: Unless the central bank in that particular country wakes up and adopts sound money policies?
Jim: But how can you now? How can you adopt sound money policies when the adoption of those policies will open Pandora's Box of this enormous amount of derivatives still floating around the world? Will open a Pandora's Box of the lack of balance sheet integrity in the US banking system. When you're allowed to value your asset at anything you think it's worth, how can that be balance sheet integrity?
Jim: All of this, we're coming to a point now where all of this is just waiting to explode from underneath the contraction that's taking place around the world in the second dip, or the double dip that we're having in this recession. Or maybe the beginning of a depression.
James: I see.
Jim: What comes out in the next few weeks from the central bank will be a great determinant of whether 1,764 is breached.
James: One thing you also said in your presentation is that one of the best ways right now is to own physical gold. And you continue to own it, because it's still relatively good value?
Jim: The ultimate protection for yourself is to own and be your own central bank.
Jim: And being your own central bank would be the first step of owning gold, rather than the reserve currency, dollars.
James: You've taken the words right out of my mouth. I couldn't have said it better.
Jim: Well, that is ultimate.
James: Yeah, I agree. Any parting comments that you'd like to share with the viewers? This is going to be seen by thousands of people, you know, all around the world.
Jim: Well, we're on the, we are right on the cusp of what I believe is going to be a very difficult and serious situation. I can't conceive of how the balance sheets of the international banks, which they've developed themselves through their ability to value their assets at whatever they pleased to value it at, can remain camouflaged. With the contraction now public in world business.
I would expect to see central banks move to further liquidity. I'd expect to see currencies move to further worth-less, rather than worth more. And those that have protected themselves now, I think will benefit from that protection. But I think it's at a point where it's almost too late.
James: Yeah. It will benefit and help them get through the valley and be in a much better position when we finally work our way through this problem that we're facing.
James: Yeah. Jim, thank you very much. This has been a real pleasure and I appreciate your sharing your thoughts.
Jim: It's my pleasure to speak with you.
James: Thank you.
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