Monday, June 20, 2011

Turk - Confidence in Fiat Currencies is Beginning to Collapse

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With riots in Greece, gold at new all-time highs in British Pounds and confidence evaporating in paper currencies globally, today King World News interviewed James Turk out of Spain.  When asked about the escalating situation in Europe Turk responded, “The big news in Europe this morning Eric is that the EU politicians have once again tried to come up with a solution to the Greek dilemma, but there is nothing new.  The politicians fail to recognize that Greece is suffering from its debt burden, just like Iceland was suffering from a similar fate. 

The Icelandic people had the good sense to default and maintain their sovereignty.  Hopefully Greece will follow the same pattern and kick out the IMF and other organizations who are working for the banks and not the best interests of the Greek people.”

James Turk continues:

“Ironically, by trying to solve the Greek problem with more debt, EU politicians and the ECB are threatening the very existence and credibility of the Euro.  As we discussed last time, one has to question whether the ECB is solvent given all of the questionable sovereign debts it has purchased.  What’s clear to me is that the basic principle of sound money is being thrown out the window because politicians are using the Euro as a political tool rather than what money is supposed to be, a neutral tool in commerce.”

When asked about the action in gold and silver Turk stated, “I think Gold’s strength last week was very important, and even though silver was down for the week, it showed good relative strength by holding $35.  We may have one or two more frustrating days of sideways movement, but it looks increasingly likely that by the end of this month gold and silver will be heading higher, further confirming the point we’ve already discussed which is this correction is over.” 

When asked about the mining shares Turk had this to say, “I know there is a lot of emotional sentiment building Eric with regards to the mining shares.  Many people are worried about how the mining shares are underperforming bullion, but the emotional sentiment is typical when you approach an important low, which I think is what is happening here.

You have to look at the mining stocks in relation to the big picture point of view as to what is happening with the stock market overall.  The Fed is threatening to stop its quantitative easing program at the end of this month.  As you and I have discussed before....

Continue reading James Turk’s interview below...
“I think it is just a bluff because the US government is relying heavily on Fed monetization for all of the debt the US government is borrowing.

What I am reminded of is the similarities today with a year ago when the Fed ended its first round of quantitative easing and the stock market started to tank.  Over the next few weeks, as investors start to realize QE3 or whatever the Fed calls it is inevitable and starts in August if not before, the stock market will turn around and head higher just like it did last summer in anticipation of QE2. 

In fact Eric that is what I think the gold market is telling us by its relative strength.  People who own the mining shares are looking in the wrong direction.  Don’t focus on the shares weakness, instead focus on gold’s strength.  This is not only why you should hold on to your shares, but look to accumulate more on your steady dollar cost averaging program, and don’t pay so much attention to the price.  I expect the shares will come around in due course for the simple reason they are so undervalued.

If KWN readers and listeners haven’t already tuned in to the Nigel Farage interview, I highly recommend they listen to what it is he has to say because he so clearly explains the political dimensions of what is happening here in Europe.  We are very close to a major crisis here in Europe Eric, it could erupt any day. 

When this crisis breaks out there will be a tremendous flight to safety that I expect will send gold to my $1,800 target.  The thing that people need to understand is that it ($1,800 gold) can happen in the blink of an eye. 

Most people don’t recognize what can happen to precious metals prices when confidence in the fiat currency finally breaks, which seems to be happening with gold at all-time highs in British Pounds and gold ready to make a record high against the Euro.  The rise in gold is a clear sign that confidence in fiat currencies is beginning to collapse.”

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