muses of the moment

January 13, 2011

New interview with John Williams

Click here for an excellent read, an interview with John Williams from on The Gold Report.

Groovygirl completely agrees with everything John says in this interview.

Some snippets, but make sure to read the whole interview.


The problem is we have a solvency crisis and an economic crisis that are ongoing simultaneously. If you go back to when the crisis broke in late 2007 and the panics in 2008, Treasury and Fed actions were aimed at preventing a systemic collapse. They have not solved the banking system’s solvency issues. Short-term credit to consumers and business from banks is still declining, both month-to-month and year-to-year. That’s a sign of a banking system in trouble. In the last five or six months, there may have been a bit of an uptick in M3, but it looks like that’s turning down again. That’s another sign of an unhealthy banking system.

Weaker-than-expected economic activity not only will intensify this systemic solvency crisis, but also has all sorts of other implications. It will increase the federal budget deficit, with a lot more spending than people have been anticipating. At the end of the year, for instance, we saw some of this in more bailouts for the unemployed. Going forward, we easily could see some potential failures in a number of states and municipalities that are in serious trouble. I suspect that the Fed and the Treasury will continue to create whatever money they have to spend to prevent a systemic collapse, but the process builds up inflation, and we’re already beginning to see that.

And this:

TGR: In fact, many people call gold “the insurance.”

JW: It is. Insurance against a financial Armageddon. Gold’s over $1,400 an ounce as we speak. When it gets up to $5,000 people will say, “Oh my goodness. I bought it at $1,400. I can sell it at $5,000 and make a lot of money.” That profit may be there, but the way to look at gold is that it anticipates the inflation ahead and preserves the purchasing power of your paper assets. Even if gold gets to $100,000, it’s not that you’ve made $98,600 profit, it’s just that you still have the purchasing power you did with your $1,400 gold.

TGR: You’re looking at gold as a wealth preserver. Do you see any way to accumulate or increase wealth during these inflationary times?

JW: People always see opportunities and, again, are very creative. But I see this as a time to batten down the hatches, buy your insurance and lock in your wealth and assets in terms of purchasing power. If you come out of the storm, you’ll have some of the greatest investment opportunities that anyone will have ever have seen. If you can get through the difficult times with your assets and maintain liquidity, you’ll be able to take advantage of those opportunities.

Along the way, unusual circumstances certainly will arise. You can expect a lot of volatility; but, generally, you’d also expect gold to at least maintain its value so that you could take advantage if an unbelievably good opportunity came along.

Wise advice.

“Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.”

Norm Franz, Money and Wealth in the New Millenium

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