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What can the lessons of history teach us about currencies and gold?

Paul van Eeden, David Morgan, Doug Casey, Richard Russell, James Turk, Glenn Dobbs
January 6, 2004
Video Transcript

Host: The lessons of history are quite clear on this point, all paper currencies throughout recorded history have been rendered worthless when they are created out of thin air by governments and not supported by something of real intrinsic value like gold.

Paul van Eeden: Let's think back, Brazil between 1992 and 1994 the real went to zero. Between 1994 and 1995 the Mexican Peso dropped by 50%. In 1996, the yen dropped 25%. In 1997, the Southeast Asian currencies dropped dramatically. In 1998, the ruble dropped 70%. Now in all those cases, if you lived in any of those countries and you owned gold, your gold holdings would not have declined in purchasing power. So if you own gold, it protects you from something going wrong with your currency in respect to where you live.

David Morgan: All these inflationary environments have had bad consequences, because as you keep increasing the money supply it becomes worth less, and less, and eventually it becomes worthless the game is over. No one wants that to happen, least of all the government, because the currency isn't accepted any more then you really could have a situation of panic or near panic. Will that happen? I doubt it, but we'll get close enough to where people will perceive it in that manner and they'll be very glad at that time that they do have precious metals in their portfolio.

Doug Casey: I think we've had an artificially high standard of living for the last couple of decades, because we've been exporting dollars at almost zero cost. In return, those nice foreigners give us Mercedes, Sony, and all kinds of other good things, coffee or whatever. That's very nice; it's like writing checks that are never cashed. In the future, these foreigners which have these trillions of dollars are going to ship them back into the U.S. As these dollars come in, inflation is going to explode in the U.S. and interest rates are going to go through the roof. It's going to be rather catastrophic. The United States is like that character in a roadrunner cartoon, it runs out over the valley and doesn't realize it's going to collapse until he looks down. That's where we are. I call it the, "Greater Depression." It's going to be much worse, but I think, very different from the unpleasantness of the 1930's.

Richard Russell: The last two generations are the only two generations in American history that have never seen hard times. People don't realize that. What worries me is that when they see hard times it's going to be very hard. They're going to get a correction that's going to knock you off your chair.

Mike Maroney: We're seeing exponential growth in debt, because once the government starts to spend, the one thing that never happens is they don't stop. If they don't stop, what will eventually happen is the value of the paper that they print will become worthless. This isn't something that's new. This isn't something that maybe will happen for the first time. This has happened every 100 or 200 years for the last 2,000 years. It's a classic situation that will happen time and time again. Unfortunately for us here in the United States, it's our turn. What we're seeing is the masses today seem confident that the problem is really going to be fixed here in the near term. They think the government has everything under control, because that's what they're being continuously being told on a regular basis, "Don't worry we'll print more money." "We'll use a stimulus package." "We'll find a way to fix this problem." Really, all we're seeing today is an escalation of the problem.

Richard Russell: One of the great tragedies that people, not that they are saving today, but the few people who are saving will find out 5, 10, 15-years from now that the savings they put together laboriously may be worth nothing. If we go into anything resembling a deflation or recession, the Fed is just going to open the spigots. They're going to inflate as much as they can. Of course, the more dollars in the world the less a dollar is worth and purchasing power goes down.

James Turk: The problems today are much deeper than they were back in the 1970's. Back then we were the world's largest creditor nation. Now, we're the largest debtor nation. What's going to happen in the future is that the demand for the dollar is going to collapse. It's already collapsing, which is why the dollar is falling on the foreign exchange markets. As people flee from their currency, I call this a, "flight from the dollar" or "flight from currency" the purchasing power of the dollar is going to decline. It's similar to what actually happened in Argentina a few years ago when they had that monetary crisis. It was an overnight collapse that over a period weeks and months that caused the Argentine peso to collapse. It's easy to look in a country and see what's going to happen. It's imponderable what this means for the world's reserve currency when it collapses.

Doug Casey: The reason that you want to own gold now is because none of the world's currencies are trustworthy, the least of all the dollar. The dollar is basically an IOU nothing from the U.S. government; it's backed by nothing, they can print up unlimited numbers of them. One thing I like about Bernanke of the Federal Reserve is he has a sense of humor, he's got a very awry wit, he said that if there is ever any crisis, deflationary crisis in the U.S., they can print up dollars by the car load and dump them from helicopters. I have no doubt that he's willing at making good with that threat.

Glen Dobbs: I think there has to be a sense of urgency in preparing economically for a crisis that lies ahead, because the crisis that's in front of us today is going to be with us for several years to come and we're not going to like the outcome.

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