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Holistic Survival #24 – The Dollar Meltdown

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Jason Hartman interviews writer and talk show host Charles Goyette. He is a libertarian commentator, who is noted for his outspoken anti-war views, his opposition to the war in Iraq and his economic commentary. Listen in: https://www.holisticsurvival.com/category/audio-podcast/. He is the author of the book The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments, which Congressman Ron Paul calls “a must read,” and investor Peter Schiff describes as “…a sensible plan to protect your wealth.”

Charles and Jason describe the next and most difficult phase of America’s financial turmoil – the coming currency crisis. A currency crisis is not a pleasant event for anyone, but I have outlined simple steps people can take to protect themselves and their families.” You’ll learn about the governmental errors that led to the current economic crisis and the bumpy road ahead. The signs are clear: Federal debt is compounding while growth has stalled, and America’s foreign creditors are questioning the dollar’s reserve currency status. Meanwhile, the “hidden” federal debt, much larger than the official debt, makes things even worse.

In clear detail we’ll discuss alternative investments — from gold and silver to oil and agriculture and income property — that will remain strong in the face of mounting inflation. Goyette will join Congressman Paul, author Thomas Woods, and others, speaking at the 2009 Freedom Summit in Phoenix, Arizona. The Freedom Summit conferences offer a stimulating periodic update on the current status of freedom in our world by a highly distinguished assortment of the leading figures in the freedom movement. “People need not get left holding the bag after decades of government irresponsibility, said Goyette. “But they must understand where we are, how we got here, and what happens next. America’s debt is a powder keg ready to blow. The fuse was lit by the mad rush of bailouts and stimulus spending.”

Narrator: Welcome to the Holistic Survival Show with Jason Hartman. The economic storm brewing around the world is set to spill into all aspects of our lives. Are you prepared? Where are you going to turn for the critical life skills necessary to survive and prosper? The Holistic Survival Show is your family’s insurance for a better life. Jason will teach you to think independently, how to understand threats, and how to create the ultimate action plan. Sudden change or worst case scenario, you’ll be ready. Welcome to Holistic Survival, your key resource for protecting the people, places, and profits you care about in uncertain times. Ladies and gentlemen, your host, Jason Hartman.

Jason Hartman: Welcome to the Holistic Survival Show. This is your host, Jason Hartman, and this is show #24 where we are talking about how to protect the people, places, and profits you care about in these uncertain times. Today we’re going to talk to Charles Goyette. He is an American talk show host and author with a Libertarian stance on things and the author of the dollar meltdown. And this is a new book that congressman Ron Paul calls a truly must read. And I think you’ll really like what he has to say. He’s a very interesting guy. The dollar meltdown, again, is about surviving the impending currency crisis with gold, oil, and other unconventional investments. And remember, as we talk about investing in income properties, we think that is really one of the very best ways to survive this. Why is that? Because when you buy an income property, what are you really buying? A set of commodities. And you’re buying it with long term 30 year fixed rate debt. So this is what we call the double inflation arbitrage. And if you’ll apply this to all of the people who are the commodities, bugs, the gold bugs, I think you’ll find that something like housing that has absolute universal need is something that makes a lot of prudent sense. If you’d like to know more about this, be sure to listen to my Creating Wealth show. Go to JasonHartman.com for that. It’s free. Or type “Jason Hartman” in the ITunes store and all of my shows will come up. Without further ado, let’s listen to Charles as he talks about The Dollar Meltdown.

Interview with Charles Goyette

Jason Hartman: It’s my pleasure to welcome Charles Goyette to the show. He is the author of The Dollar Meltdown, a hot selling book that is endorsed by Ron Paul and several other famous people that we’ve talked about or had on the show. And we’re going to hear some interesting insights and investment strategies from Charles today, and glad to have him on the show. Charles, welcome.

Charles Goyette: Jason, it’s a great pleasure to be on your program today.

Jason Hartman: Well, tell us what your outlook is for the almighty, or I should say the formally almighty, dollar.

Charles Goyette: Well, the faint of heart will want to buckle their seatbelts for this purpose. The great economist Louis Vuitton said that government is the only entity that can take a valuable commodity like paper, slap some ink on it, and render it totally worthless, and that is effectively what they’ve done to the dollar. It’s actually worse than a shame in my view. It’s a crime what they’re doing to the purchasing power of the dollar, what they have done to the dollar over the last almost 100 years. And I suggested to somebody else’s the other day that they ought to spare George Washington the indignity of it and take his picture off the $1 bill and put Bernie Madoff on there, which would be more appropriate.

Jason Hartman: Or maybe we can put Tim Geithner or Hank Paulson, Ben Bernanke, Alan Greesnpan.

Charles Goyette: Well, you want to be careful, because every time Tim Geithner’s face is seen in public, the dollar sinks again.

Jason Hartman: That’s for sure. Well, I am holding in my hand something one of our listeners sent me, a few different Zimbabwe dollars, and there are four bills here, Charles, and they total 180 trillion Zimbabwe dollars. I think these are worth about $12 on eBay. But is this what’s in store for the US dollar? I mean how bad is it going to get?

Charles Goyette: Well, Jason, I did a book signing at one of the big book stores the other night, and I took in there a number of German Marks from the great German inflection, and I showed them midway through the great German inflection, the German Mark was still a pretty large piece of paper. I suppose it was about 4 by 6 on a nice stock and printed in colored ink and so on. And the people watched as the size of the bank notes grew from 10,000 marks to 50,000 marks to 100,000 marks. And then I pulled out the late marks from the late stage of the inflation which were 5 and 10 million mark notes. They were half the size because they were turning them out. They literally had two dozen printing presses running day and night around the clock. They were half the size so they could conserve on the paper, and they began as a hallmark of great German efficiency to only print on one side.

Jason Hartman: When they reduced the paper from half the size, that must have really bothered the people that were burning the marks to use for heat.

Charles Goyette: Yeah. Along that line, though, I always liked the story of the fellow who stopped by the tavern on the way to do his shopping with a wheelbarrow full of marks. And he carefully parks the wheelbarrow full of marks outside the bar, goes in, has a quick beer, he comes outside and the marks are still there, but the wheelbarrow has been stolen.

Jason Hartman: Yeah, the value of the wheelbarrow was the important part. Yeah, it’s amazing.

Charles Goyette: It’s impossible to say how bad it will get here in the United States, because of course these things are contingent on the decisions that the people make of the fates aren’t always decided. Part of the fate I would insist is decided, that the nation’s debts are very, very real. The money has been spent. The debts have been created, and the laws of economics will not be repudiated, and in one form or another, those debts will be settled. But how mad, the extent of the madness that will prevail on the part of the monetary authorizes and the fiscal authorities during this developing interlude, and how far they will take it I don’t know. The further it goes, the longer it goes, the more destructive it is to all of the lasting, the permanent components of a rich commerce and the social nature of the American people, it is this veneer of freedom and prosperity and civilization is very, very thin and the monetary authorities can destroy it with a few years of severe inflation. I don’t know how far they will go with it, but I try to warn the reader so that they’ll be able to judge as decisions are made down the road.

Jason Hartman: Yeah, it’s good that there are people, like the two of us out there, with this message. And you know, Charles, it’s sort of getting kind of easy, at least for me, to be snarky about it. Look at history and all of these historical examples of how paper currencies ultimately reach their intrinsic value which is paper and ink. But to be fair to the dollar or to the game that is being played on the global economic stage nowadays, don’t we really have a different set of circumstances? I mean the US has the reserve currency. We’ve had that for decades. Now of course the dollar I believe is losing its reserve status and you probably agree with that. Do you want to talk about that before we kind of go on? Because I’ve got sort of a follow onto that.

Charles Goyette: Sure, let’s start with the reserve currency status. And I don’t know if we need to back and fill, but you let me know if we do about what that means, but for the typical listener, they will want to know that the US dollar is held by countries and central banks all over the world. And they issue their own currencies against the dollars much as they once held gold and issued their currencies as a claim checker or warehouse receipt for gold, much as we did. But much of the world has become accustomed since World War II to holding US dollars as their central bank reserves. And it goes a little further than that on petroleum is priced in the global market in terms of US dollars for the most part. Oobleck oil is priced in dollars. So when the Japanese for example purchased oil from OPEC, typically they will have dollars that they’ve earned in foreign exchange to spend on it or they will acquire dollars or at some point in the transaction the dollars will be acquired for the purchase of the oil. This has provided a subsidy to the American people, this global world demand for the usage of dollars and to buy dollars that are then stored in central banks effectively instead of bidding up the price of goods and services throughout our economy. It has inflated the purchasing power of the dollar. A lot of world demand for US dollars has made the dollar more valuable, go further, and purchase more than it otherwise would. Well, the central bankers of the world from the Chinese who are the largest holder of US dollar debt to the Japanese to the Russians to many others are eying one another nervously because they see the United States printing these paper dollars effectively, metaphorically printing paper dollars at virtually no cost, either the cost of an electronic bookkeeping entry or the cost of paper and ink and without restraint. There is no restraint upon our doing so and so they know they know that the more of these that we create or that we print, the less the ones that they are holding are worth. And so they are wondering how to protect themselves. Nobody wants to be left holding the old maid or without a chair to sit in when the music stops. And so they’re beginning to look at ways that they can shift out of the US dollar and into other tangible real assets. Chinese are aggressively buying resources around the world. But a real Hallmark in my view, Jason, was last week when the central bank of India in one fell swoop, in one transaction, purchased a pile of dollars, a pile of gold, a pile of dollars, a pile of gold. Which one do you think they wanted? They wanted the pile of gold and took down 200 metric tons of gold for billions of dollars in the largest central bank gold acquisition in I would say 30 years.

Jason Hartman: Yeah. Couldn’t agree more that India purchase was a big deal. When I heard about it last week, I thought boy that is a real slap in the face against the dollar, isn’t it?

Charles Goyette: I guess the short answer then is that the dollar status as the reserve currency of the world is shaky. It cannot last. It has lasted probably longer than anybody would reasonably have expected. But there were fortuitous events during the intervening years that kept it in that status, but it is very, very shaky now. And for a number of reasons, countries and central banks around the world have become increasingly weary of the US dollar for political and geopolitical reasons beyond economic reasons alone and are seeking ways to begin to lighten up their holdings or divest themselves or diverse away from the US dollar as the reserve currency of the world. And that will impact every household in America.

Jason Hartman: Okay, so before we get into that impact, couldn’t we have some fortuitous event in the future that will strengthen the dollar again? I mean we’ve had them in the past. What could they be?

Charles Goyette: Well, in the past, a couple of them, certainly the breakup of the evil empire was a fortuitous event and helped the United States and helped prolong just the global status of the dollar. So there are things like that. There’s not another equivalent evil empire that can break up. So that may be off the table. I think we’ve got a few years of reprieve by the invention of the internet, and the boom that was fueled by the creation of this wonderful new device worldwide and all the amazing inventive and entrepreneurial works that went into that, so that helped us. And I mean if somebody came out with a new sort of free energy, some Tesla device or something that could help power the earth and it sparked a new entrepreneurial boom that was, if not centered in the United States, at least largely participated in by us, it may help prolong this. But otherwise, and of course you can get a bounce at any time too, and I always caution people as they see the dollar charts now, I was looking at one this morning, it looks like a waterfall. It looks like it’s over the cliff, but even as they say, even as a dead cat will bounce dropped from a high enough window, the dollar will bounce too. So you can of course expect saw tooth action up and down and up and down and up and down like any financial chart, but the long term trend will remain down and the long term trend of the dollar has been down for almost 100 years.

Jason Hartman: Right. It’s worth about 6% of what it was worth in 1913 when the Federal Reserve was established, right?

Charles Goyette: Well, I think you’re generous, but I’ll go with that.

Jason Hartman: Yeah. Well I’m going by the official figures. We can trust the government, can’t we?

Charles Goyette: Yeah, of course. Those are sound figures.

Jason Hartman: We should tell the listeners I think you’re being sarcastic, right?

Charles Goyette: They sure have a propensity to cook the books. We see it all the time, and of course people done great studies about how they from time to time changed the Hallmarks and the statistical base upon which a number of these government numbers are reported. They always seem to change them at a time and in a manor that will make the political authorities performance look better, never worse.

Jason Hartman: Yeah, of course, just like they do with unemployment as well and everything else. Let’s go down this path just for another moment if we can, Charles, of what the US can do to get out of the mess. And I’ve identified six ways that I want to run by you, and I’m sure we have common thinking on some of these at least, probably most of them. The first way is the government could just default on the debt and say to the Chinese “Look, we’re not going to pay you, sorry.” Or to the entitlements, the Medicare, the social security obligations, just “Sorry, we’re broke”, which the government is insolvent basically, but that’s just too harsh. That’s politically unpopular of course. I don’t think that’s going to be the way they do it. They could raise taxes, number 2, but there’s just not enough money to get by raising taxes. And of course we both know that the tax increases has been proven over and over, and I don’t know why everybody keeps trying it the other way, that when you raise taxes you suppress economic activity and ultimately suppress tax revenue oddly enough. Reagan proved that fairly well. So raising taxes I don’t think will solve the problem. But the third one that’s kind of interesting is a yard sale, selling the ports to Dubai, selling military equipment to Libya, toll roads that are owned by foreign countries, I mean the US does have a lot of assets that it could really sell. You probably have a comment on that one and I’d love to hear what you think about that one especially.

Number 4 is that the US could use its military to basically steal resources from other countries. And of course Napoleon did that very well and many military “heroes” have done that throughout history. And then the more subtle way of stealing is to use the economic hit men method. So that’s number 3, the stealing item. And number 4 which you already mentioned, which is good news, this is a good way out of it, is technological innovation, energy, biotech, nanotechnology, whatever, something that’s America centric, that is a new thing like our industrial revolution was that really put us ahead of the game.

And then the 6th way which I think is the most likely is just inflation, keeping promises in nominal dollars while the real value of those dollars is almost worthless. Those are the 6 things I can think of is what we’ve possibly got in store. It’ll probably be a blend of them. But what are your thoughts?

Charles Goyette: I think that you’re right, that it will probably be a blend of them. Let’s see, a default, yeah, they default effectively every day when they changed the terms of the contract, when you’re told that your retirement age is 62 and it becomes 65 or 67.

Jason Hartman: Right, yeah.

Charles Goyette: That is effectively a default in my view. I mean a private company, a private pension company that did something like that, the officers, somebody would go to jail I trust. So if you bought a retirement vehicle or an annuity that promised to pay you at 65 and they said “Well, we’re going to pay you at 67” I think there would be an outcry. They can raise taxes, you’re right. That would be in my view a counterproductive…Richard Fisher, the chairman of the Dallas Fed says to begin to get a handle on it, it would take 97% of all the current revenue, of all the current revenue, leaving 3% leftover for discretionary spending. So I guess we’re of like minds that that’s not productive. In fact, as you point out, it’s actually extremely counterproductive. A yard sale, I don’t think so. Usually I hear the terms of the yard sale talked about with respect to the real estate in the western states. I think the federal government in maybe the 9 western states or 11 western states is said to own almost 90% of the land.

Jason Hartman: Yeah. And the BOM does sell land off occasionally to developers and so forth. They usually make trade deals and things like that, but maybe they have to do that in a big way to prop up the problem.

Charles Goyette: Yeah, but of course it has the perverse impact of tanking the real estate market.

Jason Hartman: Well, does it?

Charles Goyette: Well, if they sell bits and pieces it’s not a problem.

Jason Hartman: Yeah.

Charles Goyette: But if they were to sell enough to make any kind of a meaningful dent in the fiscal problems that we have here in the country, that’s a massive about a real estate that they’d have to sell and I think it does taint the market. You start putting that much more land up for sale…

Jason Hartman: Oh, right. Because there would be a lot of inventory all of a sudden flooding the market.

Charles Goyette: An enormous amount of inventory. It’ll exacerbate the real estate calamity from which we have not begun in my view to work out yet. Stealing the resources, I think that we’re kind of at the end of our rope about that. It’s becoming clear to a lot of people this military Keynesianism and the extent of our military spending and so on has become counterproductive. I read in my book about Chalmers Johnson asking a Japanese official one day, he said what happens when an oil tanker filed with oil for Japan is blown up by somebody and you have no Army and you have no Navy? What do you do then? And the Japanese official say we call Lloyds of London and they replace it. And his point was there are other ways to protect your energy supplies than to go around the world and try to secure it with this perversed militarism. And I think we saw a good example of that, even in Iraq. You know that the first foreign oil rights in Iraq after the fall of Saddam Hussein were sold to China. The entire world is China’s target of opportunity in securing the petroleum rights and the natural resource rights and development around the globe. I mean I wrote in my book The Dollar Meltdown that the United States, at the same time China was going like a house of fire tying up natural resources and energy rights in Africa, Bush went to Africa at the same time. And it was as though he was Rockefeller giving away dimes to little children. You know, it was little aid packages here, little giveaways there and so on, I suppose to enhance his reputation on a global basis before his retirement. But it’s all counterproductive and meanwhile the Chinese are acting, behaving like capitalists, like real businessmen, and making deals that pay dividends. So at least that’s my thought on stealing the resources, and I think we’re like minded about that. And we’ve talked about some sort of technological thing but it would have to be something mighty. And even then, I’m not sure it forestalls the problem for a while, but it doesn’t solve it or drive the bums out of office that are responsible for these childish myths, these economic myths that have taken the republic down this road. And then the sixth one, I can’t remember Jason, what was it?

Jason Hartman: Well, it’s the one I think you’re going to say is the most likely inflation. Keep the promises in nominal dollars and the real value will be meaningless.

Charles Goyette: I think that’s the only way out for them. And of course it’s very destructive to the social fabric of the country. It creates a country in which nobody speaks the truth, in which every transaction, every deal…People in in a free economy enter into deals on a non-coercive basis for mutual benefit, a contract requires me [00:19:59] but in a culture that has been corrupted by this kind of inflation that could be instituted to effectively answer this debt issue. Under those circumstances no body speaks the truth. Everybody is trying to out-sharp one another. Everybody is making deals that they hope to only be honored in nominal terms. Nobody expects or makes a commitment to repay real value. The weak and the naïve and the innocent and the inexperienced are preyed upon by the sharp and the sophisticated and the knowledgeable, and it really destroys the fabric of a nation. And see this, as you know, in the prior inflations in history, the Weimar Republic inflation that paved the way for well the discontent and the destruction of the German middle class and the smoldering resentment of the people after what they had been through and the cynicism with which they viewed the government paved the way for the National Socialist Workers’ Party just as the collapse of the reign of terror in France with that awful nightmarish inflation led to a dozen years or 15 years of Napoleon and dictatorship and empire and war and death for millions.

Jason Hartman: Right, right. The connection there is that a battered population gives rise to a potentially tyrannical nationalistic leader like you have with Hitler, because that country was just so devastated during the inflation of the Weimar Republic that the sort of national self-esteem was gone. And someone comes along with this sort of fervor and charisma and can really marshal people in perverse ways, can’t they?

Charles Goyette: Yes. And it’s an understandable phenomenon because then the future arrives unprepared for. I mean the people that had believed the old homilies about the grasshopper and the ant and you work hard and you prepare for your future and so on and so forth, everything they do is upended. I mean, you know, people find that they’ve been paying into a retirement or an insurance plan for their entire life and when it’s time to redeem it the stamp cost more than the value of their insurance plan. I mean entire families that have scrimped and saved forever are wiped out. And so the future does arrive and people who had prepared for it or thought they had find it unprepared for, and somebody comes along saying lay your freedom at my feet and I will take care of things for you.

Jason Hartman: Right, right.

Charles Goyette: But you know, I wrote a piece. If I could take a quick detour here for just a second, I wrote a piece for one of the Wall Street websites, TheStreet.com, just published yesterday, because they bugged me and bugged me about this same question. You know, Charles, what is the answer, what do we do about this? Do you have any other thoughts? And I reluctantly wrote them that while it is my view that generations of fiscal and monetary responsibility can’t be just wished away, there are a couple of things and one of the things I suggested was that they could make a massive dent, at least to cushion the landing, Jason, they could make a massive dent in the burden on the economy by enormous widespread and deep cuts in the regulation, that the regulatory load in this country…Well, the Competitive Enterprise Institute had a report earlier this year that said business has spent $1.17 trillion on federal regulation compliance in 2008 and another almost 50 billion spent by the bureaucracy enforcing these regulations. So how are you going to get tax hikes through congress that will do no good and are counterproductive anyway? How are you going to get spending cuts through a congress that actually thinks that it can increase the look, continue to dig us in deeper. So the only thing, and I’m certainly not suggesting that it’s feasible, but it requires no tax cuts and no spending cuts. The only cost is the jobs of tens of thousands perhaps of regulators and bureaucrats, but the country’s losing 10,000 jobs each and every day since Obama took office. So that’s nothing. And then of course we put in the empire and our military Keynesianism and saved trillions.

Jason Hartman: You know, just before you go on, I want to just ask you to explain that because you’re the first person I’ve heard talk about it and I heard you talk about it before, Military Keynesianism. John Maynard Keynes, of course most listeners know, is the famous economist who believes in priming the pump. And we’re all Keynesians nowadays, unfortunately.

Charles Goyette: And they are by the way.

Jason Hartman: No question about it. I mean Obama and Geithner and Bernanke, total Keynesian event there. But what do you mean by military Keynesianism?

Charles Goyette: It’s a deficit spending to maintain a military empire.

Jason Hartman: In the sense that that primes the pump? And the military wars have the worst multiplier effect ever, because the Keynesians believe that when the government spends they can sort of jumpstart an economy because there’s a multiplier effect through fractional reserve lending which is a terrible idea in my opinion but that’s sort of another discussion. But what are they doing with the military? I mean people think World War II rescued us from the great depression. Well, sort of, but war is not a good investment in my opinion.

Charles Goyette: No, it’s not. Well, the governing classes really tried to avert their gaze from the part of the military Keynesianism that has to do with young men in foreign lands being shot and killed and crippled and so on, but they look at the military jobs in their districts. The manufacturing jobs for military hardware, I mean it’s shameful to watch contracts awarded for new purchases of helicopters and the fight that goes on between whether it’s manufacturer A or manufacturer B. And so they split the difference so that it’s manufacturers A and B and more congressional districts and therefore more congressmen are on board.

Jason Hartman: Sure.

Charles Goyette: Because it means jobs in their district. So you’re talking about public policies that are focused on huge expenditures on weapons, ammunitions, and of course, yes, standing armies as though this is a substitute for the industrial base of the country that’s actually vanishing.

Jason Hartman: Yeah, yeah. The comment you made earlier, Charles, that was really interesting is about how inflation sort of makes liars of the whole economy, the whole basis of a business transaction. Inflation just maligns it. The value of the dollar is a moving target and you said it transfers money from the less sophisticated and the less aware to the smart and the sophisticated, and when I think of that I just think of Wall Street, I think of Goldman Sachs, I think of the elite, the government elite that are running around, just sort of destroying the middle class because these people understand that the people at Goldman Sachs, they get it. They know how to use that lever against the middle and the lower middle classes. It’s so unfair. People have just have to become aware of this.

Charles Goyette: Well, I watched during the last severe inflationary episodes, the state inflation of the 70s. And I’m hearing in Scottsdale, Arizona, across the valley of the sun from us is Sun City, a big retirement area, and watch these people, you know, year after year after year knowing nothing better than putting their money in certificates of deposits throughout the 70s.

Jason Hartman: They were getting killed, yeah.

Charles Goyette: They were murdered. It was cruel. And they were afraid and then the sharpies come out to prey on them and offer them all kinds of nonsense and separate them from their money so they become…Because of their insecurity and their fear, at least intuitional understanding that something is wrong and they need to do something differently, they become prey for all kinds of fast buck artists. It’s really a hideous thing.

Jason Hartman: It really is. Well, what can people do about it? I mean what is the recommended plan to at least limit the damage here?

Charles Goyette: Well, my book The Dollar Meltdown is written in three parts. The first part is how we got here, the next part is where we are, the next part is what happens next, the final part is what you can do about it. And everybody likes to cut to the what you can do about, but I really think, and this is a response to your question, I think the part about what happens next is the most important part because there are no specific investment suggestions in that section of the book what happens next, but I want people to understand, yes, even the little old ladies in Sun City that are being victimized, that people can profit and protect themselves from this thing if they understand what typically happens in a monetary crisis. Because the authorities will come out and they will effectively lie to the people as they seek to divert the attention from their own malfeasance. They will try to find scapegoats for what’s gone wrong and try to blame somebody else when it is they themselves who are destroying the value of the dollar by their fiscal and monetary policies. So people need to understand the steps that begin to unfold in sequence and I think that that is absolutely crucial in protecting yourselves. And I think understandably, that is more important than even the specific investment strategies that I recommend. So I take a minute spin on how these things typically unfold, and they’re certainly not unfamiliar to you. But in an inflationary environment, when prices start to rise, household budgets don’t work. Housewives and mothers and fathers start to scream. They go the grocery store, you know, the incredible shrinking grocery bag and so on. And in their desperation they ask somebody to do something and the politicians are always willing to avail. So typically the politicians will institute wage and price controls. They will try to artificially hold down prices that are rising as a result of their prior malperformance. So in doing so, and the people applaud this, so help me even sophisticated businesspeople applauded Nixon when he instituted wage and price controls in 1971.

Jason Hartman: That’s amazing. I mean that’s just amazing.

Charles Goyette: It’s astonishing how little they know about what’s going to happen. But when it unfolds, it’s just like clockwork because of the wage and price controls. I mean if I can only go back to the 70s, the wage and price controls start to have really severe impact on the economy and the production. Best example maybe is the cattle ranchers quit bringing beef to market, and they quit doing so because the cost of feeding and caring for cattle and transporting them to market was greater than the return that they would get in selling them at the new higher prices, at the new fixed prices. The same thing in all kinds of other products. Chickens were drowned, little baby chicks were drowned. The farmers could not afford to feed them because the price at which they could sell them was fixed and that price was below their cost to rent….

Jason Hartman: You’re saying they drowned the chickens because they couldn’t afford to continue their chicken farm? They couldn’t feed them. This is pure evil that you’re hearing about here. This is what centrally planned economies do to people. Government regulations, no matter even if its well-intentioned, usually it’s I guess I’ll say well-intentioned with some special interest constituents even their pandering to. This is what can happen to health care. Just get the government out of the damn way. It’s unbelievable.

Charles Goyette: I tell the story, Jason, in the book. I tell the story about a lady who goes to the supermarket. She goes up to the meat counter and she’s shocked that the butcher is selling this cut of beef that she wants to buy that’s higher than what Nixon and his minions and his minions and myrmidons has fixed. It’s higher than the mandated government price. And she says $0.99 a pound? This is supposed to be $0.89 a pound. She says it’s $0.89 a pound across the street. And the butcher said well why don’t you go across the street and buy it now? And she says because they don’t have it.

Jason Hartman: Yeah, exactly.

Charles Goyette: And he said ma’am, when I don’t have any, mine’s $0.89 a pound too.

Jason Hartman: Right?

Charles Goyette: So they create massive shortages throughout the economy and so how our shortage is rationed in the view of the republicans and the democrats that are responsible for offering all of this misfortune, well shortages are rationed with more of the medicine that got us into the trouble so they start to ration goods and surfaces.

Jason Hartman: Yeah.

Charles Goyette: And this leads to influence pedaling connections.

Jason Hartman: In a grey market, in a black market. Yeah, it’s just disgusting.

Charles Goyette: The illegal economy starts to boom at the expense of the legal economy and everybody becomes a criminal. And it’s an absolute nightmare that gets even worse from there, so people need to be aware of that because the government authorities will come out with new plans. And I think the biggest pitfall for investors and people planning for the future is seeing these new plans and thinking…And the media will cheerlead the new plan.

Jason Hartman: Right, of course.

Charles Goyette: They’re well we have a solution here. Okay good, well we’re going to be on a new good course now. Everything will be alright. You people keep on moving. There’s nothing to be seen here.

Jason Hartman: People need to understand the media is part of the elite inner circle. Okay, just like the government, I mean these people…Their lives aren’t affected by this. They don’t have to be affected. They’re part of the inner circle. And you know what? Listen. Communism is great as long as you’re part of the inner circle. I mean that’s the best deal going. It’s much better than being a regular person in the middle class, but most of us aren’t, right?

Charles Goyette: Yeah, because the middle class disappears and the middle class is always the great bull work of human liberty. And so I guess the logical syllogism doesn’t need to be filled in here. But anyway, that is simply understanding that process, and I walked through some historical examples of that, I think that is the most important investment advice in the entire book The Dollar Meltdown, more important than anything else because then people will be able to…You know I can’t sit here today and tell anybody the day and hour of events, but people having read this book will be able to judge these events as they unfold. They will know the historical precedence and they will know what some of the typical political solutions that are advanced will mean and they’ll be able to move accordingly. But, you know, Jason, I’m glad you mentioned the media, because I write that America has become nothing but a piñata. And the politicians are elected by interest groups, demographic groups, and so on. And they promised everybody a swing with the big stick at the piñata and they preside over the piñata party and they pass the stick around to their favorite constituencies. And everybody gets a crack at the American piñata, and everybody gets some goodies. And the media are like the mariachi band that tries to keep festive spirits high while everybody’s taken the swing and down on the ground scrambling for their share of the goodies. Still, America has become nothing but the American piñata but the problem is that the piñata does not survive the bashing of the party.

Jason Hartman: Yep, that’s true. What else did they do? My blood pressure is rising as you’re talking. Either talk to us more, Charles, about what else they do or what we need to do in response?

Charles Goyette: Well, I suggest a couple of simple strategies. There are things that people can do that have not been available in the past. There are ways that they can participate in some of the markets that they have not been able to in the past. I suggested every American family should have some gold or silver. So there are things that people can do that actually, I should be clear, I walked through the mechanics of the gold and silver markets so people can understand how they work and what they can do because their best interest may not be the best interest to the guy that has the infomercial on late night TV about buy this stuff. So that people can make informed decisions and wise decisions for themselves, I walked through that, but I’ve divided my recommendations into four basic parts, kind of like the four basic food groups or something, the world’s most enduring form of money, the form of energy that makes the world go around which is petroleum and there are ways that people can invest in these markets now without the kind of leverage of the commodities markets that they once had to employ that even though they might have been correct in their investment over the long term, they could get wiped out next week. So they can avoid all of that kind of heartache and do these things sensibly in a way that they can be what we call position traders so you make an investment and these sorts of things, natural resources and agricultural products and more that they can invest in these things and put it away for the long haul and not worry about it. And our friend Jim Rogers says that in the future, instead of 29 year old investment bankers driving Maseratis, it’s going to be 29 year old farmers.

Jason Hartman: I love that quote.

Charles Goyette: He’s trying to make I think an important point that the world can live with a lot less so called investment banking, but everybody needs to eat. You have a growing global population. You have some of the third world now that seeks to join in the prosperity of the rest of the world. You got 3 billion more capitalists around the world. You have children in China now or at little at least in the cities, they’ve effectively wiped out malnutrition in the cities. The children are taller by a couple of interests than they were a generation ago. Obesity is actually becoming a problem. More secondary foods like milk and meat cost more than just an arithmetic increase in the amount of food used because they require more foods to produce than just the milk or the meat would suggest in terms of calorie based. All this is huge growing market demand on the agricultural production of the world, natural resources and more. So those are some of the simple strategies that I’ve described in the book to I hope people’s advantage so they can protect themselves and profit from this mess, this currency crisis that in my view, Jason, is confirmed by the global price of gold and the global price of oil.

Jason Hartman: Yeah. And by the way, we should say gold is around $1100 an ounce as we’re talking just to give people a benchmark. But I want to ask you about well first make a comment and then ask about gold and silver, okay? The first comment is the Jim Rogers quote I think is so telling because what it really means and what I tell my investors is have as little of your life as possible involved in what I call the virtual economy. That’s the BS if you will economy of investment banking and Wall Street and manipulations of things and it’s stuff that isn’t real and have as much of your life involved in real things. See, everybody needs to understand that dollars are not real. Nobody really cares ultimately about having a bunch of pieces of paper with dead presidents on them. They do care about having a home to live in, having products and resources and things. Things matter. Resources matter. And when you look at what you mentioned before about how so many other countries are just buying up resources all over the world, resources are real. That’s important. That’s the real economy. The farmer driving the Ferrari, the farm is the real thing. People need it. So the real economy concept over the virtual economy, the manipulated Wall Street type economy. But the other thing is on the gold and silver subject…

Charles Goyette: Sure.

Jason Hartman: I think gold and silver are okay. I think they’re mediocre. I think they’re money. And I think that 6 billion people agree that they’re money and they have for 2000 years or more. But the problem with it is this, most people are sort of promoting them as an investment as it were. And I think it’s just a store of wealth. It’s money, fine, money is good. There’s no downside of money certainly. But it’s not the way to sort of win the game. It’s just the way sort of not to lose the game, which is important – it’s a defensive strategy. And here’s why I don’t think it wins the game. Number one, no financing. So an investment that I like has financing and leverage available to it because that debt becomes cheaper to repay as the inflation starts to hit. We both understand that. Number 2, life’s largest expense is taxes. And there are no tax benefits in the gold and silver world.

Charles Goyette: Effective tax penalties.

Jason Hartman: Tax penalties, exactly. Well, the government doesn’t want you to own gold and silver because it flies in the face of their fake fiat currency, right? And the other thing is it doesn’t produce an income. So you can bury it in the ground, you can stick it in your safe deposit box and put it in a safe and it’s a store of wealth. But there’s no income. It’s just money sitting there like money in your mattress type idea, although better than paper for sure, doesn’t produce income.
Number 4 is it’s subject to confiscation and yet people say well hey that can’t happen in America. Well it already did happen in 1933 when the government round dup the gold and confiscated it. Number 5, and maybe most importantly, is it’s subject to manipulation by central banks around the world. Gold and silver are the enemy of governments and central bankers, because they want you to buy their paper. They want you to buy their fiat currency. And they don’t want you owning gold. They’ll tolerate it, but they don’t want you to do it. And so you might say as an answer to that well they can’t manipulate forever. Well, you’re absolutely right. The house of cards eventually is exposed and I think some of it’s certainly being exposed here in the past year and a half or so. But the question is they can manipulate a lot longer than maybe we can wait. So those are the five things that make me just view it as a mediocre investment. It’s money. It’s just not an investment. It’s kind of like these people out there are trying to sell life insurance as though it’s an investment. I think life insurance is life insurance, that’s all well and good, but it’s not an investment.

Charles Goyette: Well, I don’t really take issue with you about that. It is the world’s most enduring form of money. And if you’re going to have money, then I guess you should have some money in [00:42:13], but I understand your objections. Somebody wise once called gold capital on strike. And in normal times, and in honest economy in which the currency isn’t being debauched and in which the debt load hasn’t reached unsustainable proportions at which it’s beginning to compound, the capital doesn’t have to go on strike, and capital is safe. I mean the developing world was unsafe for capital for many, many years. And smart capital didn’t go into some of these banana republics that it flows to now because something was always on the verge of being nationalized. So in an honest and a stable environment, I agree with you that people shouldn’t need to hold gold, clearly not as an investment and an honest environment. It becomes a little dicier, though, when you see that the financial institutions are composed of counter party risk and deceit and fraud and governmental fraud and so on and capital starts to move on strike. In terms of confiscation, I know that gold sales have been used in the confiscation story a lot to sell high markup numismatic coins on the assumption that they’re not subject to confiscation.

Jason Hartman: They can just change the rule.

Charles Goyette: I actually don’t view confiscation as an enormous threat. I was reading Solzhenitsyn’s Guglag Arcapeligo again recently and he described when things get bad enough, of course it is when he described Soviet citizens being tortured in the Stalin regime for their gold. And if they gave some up, then they were tortured more with the authorities assuming they were withholding some. And if they didn’t give any up, they were tortured more because they hadn’t given it up. So I suppose in a very, very dark world, confiscation could be a problem. But my view is that the confiscation in the 30s was more about devaluating the dollar. The administration wanted to devalue the dollar for the same reason the current administration wishes to do so and is doing so but they devalue the dollar now without a tie to gold or redeemability and so it’s not an impediment to them. And the amount of gold that they called in would be nothing compared to the size and scope of our government’s fiscal problems today. It doesn’t really make a dent in it.

Jason Hartman: They couldn’t find it all. They have to find it first.

Charles Goyette: Back in the 30s, Jason, when they called it in, only 22% of it was turned it. I mean the reason people have all these double eagles that they’re selling on the television these days is because the American people, three months before the confiscation was announced, people began withdrawing their gold from the banks and so on. I mean everybody sensed what was in the wind. And so even back then it wasn’t really turned in. But it’s my view that at least under quasi-normal circumstances that they will seek to achieve their purposes with goal by punitive taxation. It does represent an alternative or a threat to the fiat money. And they will resent it. The governing authorities will resent it for that and a punitive taxation I think. Look, the tax structure is already in place. The tax agents already exist and so on. I think that’s more likely, but I suppose it could come to confiscation. As far as manipulation goes, I understand your point about that. And there’s clear evidence of a great deal of manipulation in the markets, but somebody pointed out the other day that all of the gold ever mined, all of the gold mined in history, in teeth, in jewelry, lost in the bank vaults, the central banks and the people’s gold coins and so on, all the gold ever mined at today’s market price is only 5 trillion dollars worth of gold. You know, the government has spent 2 and a half times that just in the bailout since the mortgage meltdown. I mean they committed, what, 14 trillion dollars to that. So today’s market price is not very much. And then the other thing about how it performs in a crisis or currency crisis is just revert to the wisdom of Louis Vuitton [00:46:10] who said you get in a period that he called the crackup boom when people become almost desperate. It’s as though it happens overnight. They become almost desperate to exchange paper money. Everybody comes to the same realization at the same time that the purchasing power of the paper money is deteriorated and will continue to do so ad infinitum and they’re suddenly emerged as a scramble to begin to convert paper money to something hard and something tangible. And in that case, predictably it’s understandable that things like gold and silver go up far, far faster than the relative degree of the increase of the money stock or the credit stock would suggest.

Jason Hartman: The gold bugs will say, and I’m sure you’ll agree, that sometimes it’s not really that gold or silver is going up in value. It’s just that everything else around it is going down in value, every other paper currency. So you’re holding your own with it. And that’s why I think it’s kind of a defensive strategy. And certainly, you have to have a defense. I don’t mind that at all. I’m just saying that a lot of the world seems to promote it as though it’s an offensive strategy. So I kind of take a middle ground on it.

Charles Goyette: Yeah, I didn’t have any interest in it. I remember sometime back in the late 90s somebody asked me about gold and I said well to understand gold you need to understand the value of the dollar. And the value of a dollar is really, really high, and that doesn’t look particularly attractive. But you know at that time the Berlin Wall had come down and there were a lot of other things going on and we hadn’t embarked on the degree of foreign adventurism that we had now that’s bankrupting the country and looked like there would be a peace dividend from the ending of the cold war and so on and so forth. And so it wasn’t of much interest, but there was a tectonic plate shift in my view taking place in the economy now and the dollar. So it’s a different time. And in different times, I think it becomes more appropriate.

Jason Hartman: Yeah. I certainly agree with you that we are in a tectonic shift, no question about it. Well Charles Goyette, fascinating discussion with you today. The book is The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments. You’ve really outlined this well. You’ve just done a great job at it. What would you like people to know in closing and tell them where they can get the book too.

Charles Goyette: Yeah, they can get the book at any bookstore. It’s gone into its second printing in two weeks. I mean it’s only been out two weeks and it’s gone into its second printing. All the major bookstore chains have placed huge new orders about which I’m really pleased, foreign rights are being purchased now. You can find it at all the usual places, your local independent bookstore or any of the chains like Borders and Barnes & Noble. You can find it on Amazon.com. If you go to TheDollarMeltdown.com, there’s a page there. You could click on it to have it delivered to your house. You just order it from your favorite book deal, local or chain. And the only thing I’d like people to know is I’ve outlined simple things that people can use, strategies that they can adjust and fit. In fact, unlike a lot of people, I don’t recommend any portion of this percentage or that percentage of your asset. I recommend that people adjust according to their own needs and their own inclinations within this broad framework. But there are things that people can do to understand the nature of the crisis as it is likely to unfold and seems to be unfolding now. So they will understand going forward how it works so they can protect themselves and their family and profit from this situation. And I think the more people that are prepared, the better we come out on the other side, Jason, so you’re doing good work.

Jason Hartman: Yeah, you too, Charles. Keep up the good work out there and thank you so much for talking to us today. Really, really great interview, really appreciate it.

Charles Goyette: It was a pleasure. I appreciate you very much.

Narrator: Thank you for joining us today for the Holistic Survival Show, protecting the people, places, and profits you care about in uncertain times. Be sure to listen to our Creating Wealth show which focuses on exploiting the financial and wealth creation opportunities in today’s economy. Learn more at www.JasonHartman.com or search Jason Hartman on ITunes. This show is produced by the Hartman Media Company, offering very general guidelines and information. Opinions of guests are their own and none of the content should be considered individual advice. If you require personalized advice, please consult an appropriate professional, information deemed reliable, but not guaranteed. (Top image: Flickr | Images of Money)

The Holistic Survival Team

Transcribed by Ralph


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