Book Review - The Money Bubble

Jan 10, 2014·Alasdair Macleod

The Money Bubble, by James Turk and John Rubino

In reviewing this excellent book I should first declare and deal with vested interests. James Turk with his son founded GoldMoney, and as GoldMoney's Head of Research he and I are co-writers with similar views. Those who think we have a vested interest in promoting gold would be right, but not quite as they would think. Our common theme is an understanding of the importance of sound money, from an economic perspective. Turk has never minced his words on the subject, so you could say that he founded GoldMoney as a bet that Western governments and their central banks would not heed his warnings and eventually destroy their currencies.

This view, which I share, has been confirmed by GoldMoney's success. The book, co-authored with John Rubino, is partly a follow-up to their previous work, The Collapse of the Dollar and How to Profit from it published in 2004, and it brings the reader up to date following the Lehman Crisis in 2008. This was the crisis the authors foresaw four years ahead of the event in their earlier book, expecting it to lead to the dollar's collapse. The collapse didn't happen that time, but it was a close-run thing, requiring unlimited financial support from the central banks for the banking system.

Five years on and the financial world has so far avoided another crisis. The common perception is that the problems of the US's housing bubble and the rescue of AIG, which were central to the massive expansion of increasingly complex derivatives, are now behind us. But as the authors point out, since the Lehman Crisis many of the problems they identified in their earlier book have actually intensified.

The Money Bubble brings us up to date with the over-leveraged banks and the alarming growth in derivatives and government debt, as well as the money bubble itself. In a nod towards Hayek they chronicle government intrusion into personal freedom and choice. They warn us that governments are increasing capital controls, and through bank bail-ins confiscation of money in bank accounts could become commonplace. The trend is already there, with desperate governments even confiscating pension property, as they did in Poland recently. They cover the widespread manipulation of markets by central banks, and take us through the inevitable consequences of supressing interest rates.

The book brings us up to date with developments in gold and silver markets as you would expect, given the authors' views about the desirability of sound money. But you would be wrong to dismiss this as little more than the work of gold-bugs. The authors' background knowledge of economics shines through. And yes, while there is a preference for precious metals, the book is refreshingly free of the institutional bias in economic analysis that today masquerades as progressive thinking.

Above all, the book is written so that complex subjects, such as the creation of bank credit, can be readily understood by the layman. And for those readers seeking a vade mecum on precious metals markets as they operate today, they will find it here.

I recommend this book to all financial experts as well as the layman.

The Money Bubble (What to do before it pops) by James Turk and John Rubino, available from Amazon now.