Mike Maloney: The Rollercoaster Crash

Precious metals sank to 5-year lows during this past week. The long painful price decline that began at the end of 2011 still continues unabated. Holders of gold and silver are understandably wondering if their faith in precious metals has been misplaced.

In this week’s podcast, we invite Mike Maloney back on the podcast. Mike is the owner of one of the largest bullion dealers in the US, GoldSilver.com, and one of the top minds we know of on monetary history. In this wide-ranging interview — which announces the release of a new educational video, The Rollercoaster Crash, which kicks off Season 2 of GoldSilver’s excellent video series Hidden Secrets of Money — Mike lays out the rationale for an approaching global reset of the existing fiat currency regimes, and why asset-backed currencies are highly likely to return in our lifetime:

History shows that whenever there is a problem with the currency, whether it is big inflation, hyperinflation, or deflation, people go back to safe haven assets. And we should be going into a deflationary episode that is overreacted to that causes big inflation or hyperinflation, which causes a breakdown of the current global monetary system, the global dollar standard that is now the longest-lived of these artificial monetary systems and has developed a bunch of stress cracks and is in the process of imploding right now. There is going to be before the end of this decade, most likely, another emergency meeting of a bunch of finance ministers and economists to try and hash out another world monetary system. It is just history repeating, and it is a natural consequence of a man-made, artificial manipulation of the free market.

But if this debt-based currency system has to evolve, switchover to some sort of asset-based currency system or currency system that is a free market thing, I am fine if the free market selects Bitcoin or if it selects gold or silver again like it has for the past 2500 years — it keeps on selecting gold and silver as the optimum money. I am fine with whatever the free market picks. And I believe it will lead to greater prosperity. But we are in for some short-term pain. The good news is that for somebody that is properly positioned, it can be the best thing that ever happened to you because of this enormous wealth transfer. If currency a fails, its price measured in gold goes to infinity.

Today, there is about $200 worth of gold, investment-grade gold, per person. And there is about $40,000 worth of other liquid financial assets that compete in storing purchasing power. And so those liquid financial assets such as cash, stocks, and bonds, the problem with them is that their purchasing power can evaporate. It is something that is just based on trust. And if just 10% of those liquid financial assets come chasing gold, gold’s purchasing power has to rise 20-fold.