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  • i2m5 i2m5 Nov 12, 2010 8:20 PM Flag

    Richard Russell - All Fiat Currencies Will Fail


    From Richard Russell 11/12/2010

    With gold near record highs, in his latest commentary, the Godfather of newsletter writers Richard Russell stated, “It's obvious that Bernanke with the help of QE2 wants to drive longer-term interest rates down and at the same time push asset prices (particularly stocks and real estate) higher. Because of the sheer size of Bernanke's new spate of money-creation, some analysts are describing QE2 as "a whole new ball game."

    Russell continues:

    “Over the coming eight months the Fed will buy $600 billion of US Treasuries, but that's not all. The Fed will also buy up to $300 billion of agency debt which will be coming due. That means that roughly $900 billion of new money will be entered into the system, all of this new money created via computers and out of thin air.

    So the question I'm asking myself is this: Will Bernanke (in the face of international criticism) back down on his strategy of defeating the forces of deflation by printing money?

    My immediate answer to this question is that Bernanke will NOT back down. Bernanke is a true, dyed-in-the-wool Keynesian, and he's already apologized on the part of the Fed for allowing the money supply to shrink during the Great Depression of the 1930s.

    To back down now would mean that Bernanke, in effect, was conceding that his whole strategy of quantitative easing has been misguided. To back down now, would mean that Bernanke was giving in to the forces of deflation. I can't see that happening. I think Bernanke would quit his chairmanship at the Fed before he gave in to the discipline of Austrian economics.

    The second question I have been thinking about is whether fiat currencies, and I mean all of them, are going to survive? As subscribers know, I believe currencies created by government fiat are a fraud, and that they are both illogical and immoral. I believe that ultimately, fiat currencies, all of them, are doomed. Every fiat currency in history has died, and today's fiat currencies will be no different.”

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    • unfortunately, if you keep shorting, in the long run, you will take very nasty losses again.

      That you are short gold tells me all that I need to know about you.

    • no worries CD. I'm quite familiar with Buffett and Graham. Graham is the man for value investing no doubt. Have his book on my bookshelf.

      Just curious, did you ever read Buffett's dad's paper on fiat & gold?

      In terms of modern monetary systems, I guess one just has to understand Keynes theory and how politicians distorted it. It's all slow motion, but we saw the ramifications with Real Estate and of course, after the Bear Stearn Hedge Funds blew up and the subsequent aftermath.

      Hope to chat with you more later. Have a good night.

    • I'm a finance major, but the best things I've learned were on my own. I've put away about 40 finance books in the last half decade or so, pretty much all related to market behavior. The Benjamin Graham shows the most clearly in the decisions I make, and I have made a lot of effort to study Warren Buffett too. I've taken some economics courses in college. From what I can gather I have a Keynesian viewpoint on government finance.

      I get sort of bored with the political side of it all, but I believe strongly that the value of any money lies in what you can create with it. Nothing I have to say would change the world, so I focus for now on improving my accounting skills, and finding well run companies that sell for low or even fair prices to their future worth in some cases. I think I have a small gift in that very little frightens me, so I can make clear decisions even while others are in a panic.

      Above all else, I'm still fairly new to the game. I started buying stocks in 2003, two real awful companies, Sirius Radio and Krispy Kreme Donuts. I sold after taking nasty losses, but I got ahold of Ben Graham, and haven't made a bad investment since that day. In 2008 I jumped in headfirst to the financial collapse and made huge returns buying great companies for super cheap.

    • thats strange Robert precter says it will cause deflation. You should listen to his debate with Peter Schiff

      • 2 Replies to erulccmgoud
      • Precter is an idiot. He's been dead wrong about everything. His EW views are absolutely backwards. Look at the back of his book for his little "e" term (i.e. error term in any model..... he picks gold if the dollar or fiat sucks).

        His advice would make you broke... he's only worth anything b/c people are still amazed he called the 87 crash. If you call a crash 1000 times and get it right once... what does that make you?

        How about his double short in August 2009?

        He's not as retarded as Lil Willy, but close.

      • Gold Bug versus Social Mood.

        That has to be an interesting debate unless they just talk past each other. Got a link to it?

    • >>My immediate answer t0 this questi0n is that Bernanke will N0T back d0wn. Bernanke is a true, dyed-in-the-w00l Keynesian, and he's already ap0l0gized 0n the part 0f the Fed f0r all0wing the m0ney supply t0 shrink during the Great Depressi0n 0f the 1930s.

      B0th a shrunken m0ney supply and an inflated m0ney supply are danger0us. This is why a g0ld standard is needed. T0 restrict it t0 the c0rrect m0ney supply.

      Bernanke is using the shrunken m0ney supply argument t0 justify an inflated m0ney supply which is equally as bad. ITS A TRICK, A DECEPTI0N, A STRATEGY T0 DUPE us int0 thinking an inflated m0ney supply will keep us 0ut 0f a depressi0n, which it w0n't.

      This w0uld be laughable if it wasn't s0 tragic. Bernanke ap0l0gized. What a j0ke.

      10s 0f milli0ns 0f Americans in dire straits f0r a decade and all they get is an ap0l0gy. The 1930s depressi0n was deliberately d0ne by the fed 0wners that they might buy up everything at dirt cheap prices and rule 0ver us all.

      >> I believe currencies created by g0vernment fiat are a fraud, and that they are b0th ill0gical and imm0ral. I believe that ultimately, fiat currencies, all 0f them, are d00med.

      This is the reas0n f0r m0st 0f the c0rrupti0n 0n the planet.

      There is a very very very small percentage .001% wh0 have taken full advantage 0f this t0 set themselves up as the rulers. This is their g00se that lays the g0lden eggs. This is the funder 0f all the wars and war pr0fits.

      He wh0 c0ntr0ls the currency 0f a c0untry rules that c0untry.

      And we are all t0 blame t0 all0w this t0 happen.

      And there is an0ther huge percentage wh0 d0n't even have a clue that fiat m0ney is the r00t 0f all evil. N0t 0ne clue. R0cks kn0w m0re.

    • Gold currency, highly deflationary. Gold falls 3% and some think it's the end of the world and have to "cash out". It's not the end, so you should hurry and buy more, don't follow the crowd, all fiat currencies will fail so you must hurry. XS

    • the last step in this game will be to create one new and final currency

    • whats gold good for besides being shiny?

    • Yes. But it doesn't have to be backed.... gold $5000 or $2000 or $8000 or whatever # you want to use makes the FED have more "assets" valued at a much higher #. Of course, as long as the US owns what they say.

    • CD, I don't think the public has a clue about our monetary system or "money" in general based on a credit backed system that is unsustainable without massive austerity (which we had the chance back in 2008, but blew it imo). Are you familiar with Greenspan's book from 67? His most recent comments? I know he isn't the most popular these days, but he was our FED chief for a very long time!!!

      Have you read Bernanke's paper from 2002 (perhaps 2001, I can't remember the exact year and too lazy to look it up)?

      Are you a monetarist? Just curious who you follow in terms of fund managers, economists, etc. That would be helpful in understanding a little bit more about you. I'm guessing you are a value investor (which is fine in my book).

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