James Turk interviewed Jim Sinclair recently at the GATA conference in London about his successful gold price predictions, the U.S. debt problems, how to ride the second phase of the gold bull and the gear change from arithmetic to exponential growth as public perceptions about the safety of the US dollar changes. Below is a heavily edited and paraphrased version of the interview to provide you with a fast and easy understanding of its contents. Words: 1318
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money) presents below a heavily edited and paraphrased version of James Turk’s (www.goldmoney.com) interview* of Jim Sinclair (www.ismineset.com) to provide you with a fast and easy read. Their views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. The interview went as follows:
James Turk: At the GATA conference…you discussed the importance of $1,764 gold [see here for an earlier article (1) on this] saying that gold could go exponential. Can you explain some of your thinking behind that?
Jim Sinclair: The trend in gold has changed 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: 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: Yes, as a result of 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. The absolute embarrassment of the compromise that allowed the debt ceiling to rise in the U.S.. Anyone who had any part in that arrangement should be embarrassed. It’s becoming clear to the world that we react to circumstances in the U.S., without any plan whatsoever for what they might be.
James: So policy makers don’t have the political will to do the right thing, 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. [For another article on his views read this (2) article.]
James: We’re talking about the world’s reserve currency here so what you’re suggesting is that this is going to have a profound impact, not just in the United States, but everywhere?
Jim: Yes, for exactly that reason. The reserve currency, the currency upon which other central banks have taken comfort, that reserve currency is broken. That reserve currency has debt that can’t be controlled. That reserve currency is going to transmit its problems throughout the Western world.
The reality of our situation was brought home 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. 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: What are the implications of the dollar 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 with the fiat currency of the entire Western world. It’s not simply what is Greece going to do today or tomorrow. It might be what is New York state, or Illinois or California, going to do today and tomorrow.
The 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 U.S., but to the world.
James: 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: Yes, 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: Yes, 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 and 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?
All of this is 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. 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: Yes, the ultimate protection for yourself is to own it and be your own central bank and being your own central bank would be the first step of owning gold, rather than the reserve currency.
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.
Title and Link to Article Referenced Above:
The idea that an increase in the debt ceiling is a solution to anything is nonsense. The event would be simply a can kick forward for a very short period of time. Increasing debt is not a solution to a debt problem. It actually makes the problem worse. It is an act of extending your Federal credit card borrowing line so you can use it to pay your mortgage. Words: 590
I wrote a piece recently called “Could America be Pushed over the Economic Edge?” about how Libya, Japan or even covert economic warfare from America’s enemies could push the U.S. into another financial meltdown. I received a one sentence email from my friend Jim Sinclair that said, “We are way over the edge right now.” His message gave me a sinking feeling. [Let me explain.] Words: 923
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.