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Chris Martenson:     Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. It is August 24^th, 2016. Well, listen the monetary experiments, or should I say, the madness just continues. Here we are in August. We are looking at stock markets around the world either near highs or in the United States case hitting all time highs or near it. This morning, here we are August 24^th and what do I see this morning, but gold took a big shellacking by one minute resolution on my screen. It is not nearly enough to detect what happened, 10,148 contracts dumped in that one minute window. Probably took 100 milliseconds to actually execute if I had the resolution – meaning, we’re still looking at shenanigans in the gold markets, but we are seeing shenanigans in all kinds of markets. And it starts here. 180 billion dollars of freshly printed liquidity courtesy of Japan and the European Central Bank now coming into the market on a daily basis.

In the case of Europe we are seeing the European Central Bank preferentially printing up money and now handing it to corporations through direct private placements, meaning money gets printed out of thin air and a corporation that has a bond they would like to sell, doesn’t even have to go to the open market it just goes straight into the European Central Bank. This is direct helicopter money from the European Central Bank to select preferred corporations. Who knows how they get picked, but if you believe it is an open, free, fair transparent process I have a bridge to sell you.

Here we are, we are living under regime of extreme financial repression. It’s global. It’s larger than any attempted before. Pensions are suffering really badly. Savers are getting killed; endowments are bleeding but speculators and big trading outfits with insider connections – the closer the better – they have advantages and they are having a field day. But how do we protect? How do we protect our financial wealth during such times? Now that is always one of the bigger questions I field. It is a really large one and I am glad to have us have an expert today to help us make some sense of this. I can think of nobody better to invite back to the program than a good friend of mine, Mike Maloney the founder and owner of GoldSilver.com. He is the man who funded and produced the absolute gem of a series called The Hidden Secrets of Money. Let’s just get started.

Mike, it is so good to have you back on the show.

Mike Maloney:         It’s great to be back, Chris.

Chris Martenson:     Alright, Mike.

Mike Maloney:         Thanks for having me.

Chris Martenson:     Oh, it’s great to have you. Hey, here is a softball. How much do you trust what the Central Banks are up to?

Mike Maloney:         Well, I think that laugh says it basically that you know, the thing is what they are doing has never worked and they keep on trying – you just hit that nail a little bit harder each time because it isn’t working. They have these theories and they think that the theory is correct that this – and no matter what the results are, they say well, we just didn’t do enough of it. Japan has been trying this for 30 years now and it hasn’t worked. These people are just absolutely dangerous. They are going to drag the entire world economy down. You talked about the helicopter money that is now happening in Europe and so on. That is going to be coming to the United States soon. Coming to a Central Bank near you.

It always has damaging results. They don’t look at this. It is a huge wealth transfer. The immorality of an entity, and everywhere I go I take a look at – when I would go speak in Singapore or Australia, New Zealand, Malaysia, Colombia, Peru, doesn’t matter – Russia – everywhere I go I take a look, I go on the websites of the central bank for that country and I start gathering information. I haven’t found a central bank that is part of the government. They are all private. Here is a private entity that is allowed to create currency, and now they are buying bonds from corporations? If you look at the – what they are allowed to do, they can buy stocks. They are actually buying up – -if you look at the Fed balance sheet very large portion of the assets that they purchased to be able to create currency – that is how they create it. They buy an asset. When they write a check and they buy something currency is created and it enters circulation. A very large portion of it is Fannie Mae and Freddie Mac stuff. It is the mortgage backed securities. And so that means that they own real estate. This private corporation is able to counterfeit and purchase real estate legally. The morality of this —  there is insanity going on.

Chris Martenson:     The point I try to make – that the largest land-owner or real estate holding entity in the United States today is a private growing concern that prints money out of thin air and now owns about $1.3 trillion worth of US residential real estate.

Mike Maloney:         Yes. It’s crazy. This is insane. The average person – this stuff does come out on mass media, but the average person can’t connect the dots. They don’t know it is this corporation that is owned – the stock in the Federal Reserve is owned by the world’s largest banks and so –

Chris Martenson:     Wait, wait, wait, wait. The average person might be catching on. I know you produced a video about this I loved. The Federal Reserve did something crazy foolish. Even as foolish as the money printing they started up a Facebook webpage – I loved the comments that showed up under that. I loved it.

Mike Maloney:         Aren’t’ they great? I mean the jig is up, basically. Everybody knows that the Federal Reserve does more damage than good. Yea, the comments – one of them was, “Quick question – I am trying to take over a country through enslavement and currency debasement. Have you got any pointers for me?” I loved that one.

Chris Martenson:     I posted my own under there, and I said along the lines of, “Hey, guys at the Fed. I’m sure you know this, but you are attempting to create infinite exponential expansion of monetary claims on a finite planet. I know you have done loads of studies to show how you can do this sustainably. I haven’t been able to find them. Could you please point me to them. Thanks in advance. Anxiously awaiting your response.

Mike Maloney:         Excellent.

Chris Martenson:     I haven’t heard from them yet. I am waiting.

Mike Maloney:         It is a question they can’t answer. Keynesian economics isn’t even remotely plausible. This is what is taught all over the world. But you know, there is a fundamental – the purchasing power that is contained in currency is basically the agreement that we have as a society that we are all going to use that currency, and we trust that currency and we store hours of our lives. We trade hours of our lives for currency. We work. That is the purchasing power. Then that currency measures the goods and services in existence in a society. The true wealth. They think that they can actually type wealth. When they type new units of currency the only way it can get purchasing power is the moment that it is spent in the circulation it has to steal it from somewhere else because it is empty when it comes into existence. There is no work that went into it. There are no hours of life traded for it. There is no product or service that it represents until it is spent in circulation, and then it steals that purchasing power from all other units of currency. It is fraud. It is theft. They can’t actually stimulate an economy. All they can do is warp it. They can steal purchasing power from some areas of the economy and transfer it to another area of the economy, pushing that area into a bubble. And so, it is very, very disruptive.

They don’t understand fundamental economics. This is the problem that we have. All economies on the planet are being run by economists that don’t understand economics.

Chris Martenson:     It is absolutely true. The shorthand version and I love what The Hidden Secrets of Money does for this and anybody who watches that or takes a tour through the Crash Course hopefully you come away with the mechanisms of money creation because it is all gobbled gook until you strip it away. Then we can say things like you can’t print your way to prosperity. And so that is shorthand for the idea of what is under that is what you are suggesting and eluding to and stating even more directly is that when monetary printing happens you literally take from somebody and you give it to somebody else. The Soviet Politburo Crop Reports and command and control economy said, hey that doesn’t work having a small committee of people deciding who should win, who should lose and how much investment should be made in a specific area. Turns out that is not the right way to go about that. We reject that when we call it Communism, but we accept it when we call it the Federal Reserve. I don’t understand why. Let’s look at it simply.

Central Bank –

Mike Maloney:         We reject it when it’s called Communism, but we accept it when it is called Keynesianism.

Chris Martenson:     Here it is – it is simple. Like Japan, Japan says oh we got a – we need a weaker currency because that will help us somehow. We got to keep this Ponzi scheme going so weaker currencies could. So they debase their currency badly, starting in November 2014 and they jam it down about 26, 30% compared to the dollar. Next thing you know stock price of Sony or other exporters is going up. Right? The problem is that all the people of Japan who rely on imports, and it is an importing for a lot of its food, all of its fuel, etc. they were just getting killed by this process. It was really just saying all of you people of Japan, we are going to take purchasing power out of your pockets and we are going to give it to Sony. We like what Sony is going to do with it. That is what the transfer was. It is as direct as that. Every tick down in the yen helps somebody down in Japan let’s call it a corporation and it hurts somebody else, we will call them an elderly person on a fixed income who has to live off of imported food and fuel. It’s just a transfer. How does anybody think that a transfer is helpful to the system?

Mike Maloney:         Well, it’s beyond that transfer the government their whole existence is redistribution of wealth, right, through taxation and so on. You have got the central bank doing this evil think basically – warping the economy creating bubbles and taking through fraud and theft; they are stealing purchasing power from the average person like you said, transferring it to Sony and making exports a little bit more attractive, but making all imports to Japan a whole lot more expensive. It has nothing to do with the free market balancing imports and exports so one day it will crash. When you look at government redistribution of wealth it is a little bit more efficient for a central bank to do this redistribution of wealth that you can’t see. A smoke and mirrors redistribution by printing currency. Devaluing currency and so on. When the government taxes and spends they have to run it through all of these frictional layers where there is lots of purchasing power. There is no possibility that there is anything that the government can do for anybody that is a net positive society because there is a whole bunch of people that aren’t producing something that you would open your wallet and purchase. When you pay the IRS, all the people at the IRS have to get paid. They have got to make a living. They have to eat. They have to support their families and they all get a little tiny fraction of what you have paid. Then it goes to the Treasury. Then Congress votes on some bill. By the time they create a department and everybody in the department gets paid – then finally there is somebody that teaches your kid; that comes at an expense that is twice as high as if you can just pay the person directly, the teacher directly the way the free market would do it.

Everything the government does for us comes at a net loss for society and the redistribution there is frictional forces that absorb this economic energy on the way there. I mean the people at the Fed have to get paid. Not only does it just redistribute the wealth, there is a loss in that redistribution. Not letting the free market work actually it shortens life spans. It makes us all poorer. It makes for a dirtier environment. If you look at economicfreedom.org or – economicfreedom.com or freetheworld.org you will see that the reports on economic freedom clearly show that the less regulation you have, the smaller the government is, the greater the integrity of the court system, the protection of property rights and the soundness of money – the soundness of the currency that they  use, whether they manipulate it or debase it or not if they just leave it alone when you have very little regulation, small government and sound money, it creates maximum prosperity. The countries 157 countries annually now. The results go into a spreadsheet. When they sort the spreadsheet, the countries that have the greatest economic freedom that flowed up to the top the people lived 20 years longer than the countries where they are trying to take care of everybody, where they are trying to redistribute everybody’s wealth. Where they are trying to – it is –

When you do these manipulations – the central banks – they are not committing murder because they don’t know that they are shortening people’s life spans. But they are committing manslaughter.

Chris Martenson:     That is certainly very direct. Now I want to – listen, in this podcast I would love to direct people to – the systemic issues are really well laid out in the Hidden Secrets of Money. I have got some in the crash course. Those are the two best ones I know of. Yours is hands down I think the best description of the monetary process that exists out in the world today. It is just fantastic. The quality, the detail, the level of insight that went into it. Without going into it now I want to direct people to that because you took the time to really look at how it is playing out worldwide and also historically how it has played out in the past. The  summary, if I could be so bold as to say, this time is not going to be any different. We have tried this thing many, many times as humans. We want that free lunch. We want to think we are clever enough to sit around a mahogany table with a dessert trolley nearby and make a command decision that will play out for everybody. It just doesn’t really work that way.

The systemic issues they are out there they are recorded. I want to turn now to why the jig might be up. We know the jig is going to be up sooner or later. And we know that every time the jig is up for different reasons. The crash of 29 happened for a very different set of reasons than the land speculating crashes that have happened throughout or the railroad crashes or the housing bubble that started bursting in 2006 and 7. This time, what is different this time the central banks have printed all these giant gobs of money – 16, 17 trillion dollars at last count. Handed it over to the speculators in the top end of the financial markets. They pretended to be confused by why there is this amazing wealth disparity that popped up. No surprise to anybody who understands that that is how these things work. It is a feature, not an accident. So, I think my theory here Mike is that we have to look at the tippy, tippy top. Not the 1% but the .1% because they were the major recipients of this largess. That is where we need to look for the first signs that the jig might be up. I have recently noted that the Aspen real estate markets have rolled over. The Vancouver market, London property prices, Trophy in particular, New York City. We are seeing now some signs that say the tippy, tippy top, for whatever reason, is retracting its horns. Are you seeing this?

Mike Maloney:         It is very different. Every bubble pops differently. The manipulation that the world’s central banks did after the crisis of 08 has caused extreme bubbles. The bubbles this time the first bubble that popped this century was the NASDAQ bubble, so stocks. The next bubble was stocks and real estate. This bubble is stocks, real estate and bonds, because for the central banks to create currency their major purchase is some sort of bond, some sort of debt instrument. When they purchase something, like I said, it creates currency. They have been doing this extraordinary stimulus, and when they purchase bonds they are adding to a market. So, that pushes that – that is one of the mechanisms that pushes a market into a bubble is when a central bank gets involved in that market, starts buying.

And so, now we have got bubbles in stocks, real estate and bonds. This is going to be one hell of a crisis. What was the question again? I went off on a tangent.

Chris Martenson:     Well about how we might be detecting the jig is up.

Mike Maloney:         Yea, I did a report on the New York real estate recently and I think the Vancouver dropped 20% in one month. This is the peak – we have passed the peak of the bubble. It is now deflating and, the thing is, there is usually a little tiny roll over and then a huge crash. And the little tiny roll over is just starting right now. But we are seeing it in the top end as you said where the currency that was created by the central banks went, to that .1% And we are also seeing some problems in China. You know I went to China to film an episode for Hidden Secrets of Money that is not out yet. I hope to get it out before the bubble pops because the bubble there was a government mandated bubble. Those bubbles can persist a lot longer than a bubble that comes from a manipulation of the free market, where the free market is still allowed to exist. When it is a government directly creating the bubble and they were creating – the building that was going on, government mandated building, was creating a real estate bubble there that was just unlike anything you have ever seen.

We are going to see in the – -within the next few years you are going to see probably the greatest crash in history. I have often said that the crisis of 2008 was just a speed bump on the way to the main event. Yes, you are right. It has gone to the top 1/10 of 1% we are in the process right now of seeing this unwind.

Chris Martenson:     I agree. I think that a lot of people get their signals from the stock market. I believe in my heart of hearts that the US stock market and many others are fully manipulated at this point in time, meaning that because of the overt level of computerization it is really child’s play to get into a leveraged market, say, through futures or options and throw a few million, 10s of millions maybe 100 million and really stop the direction if the market is falling or put a bid under it or really goose it the other direction. It is really child’s play and I know that in my heart of hearts these are being manipulated, because that is what I would be doing if I had created these frankenmarkets. They really can’t fall at this point in time. They are really not a good place I think to look for the early signals. I think the stock market ends up falling on its own at some point, because it is going to have to. The early signals, that is the question – where do you look to see that the jig is up. For me, I connect my anecdotes – collect them. One is going to these big wealth conferences with you know high end pension, endowment and family office money. They are nervous. They get it now. I used to a contrarian at these things. Now, I am uncomfortably not. I am just another guy going yea, this monetary stuff is crazy, right?

That is where I am starting to collect those anecdotes in the real estate market. This is going to come in a completely different way. If what you said is really critical here this isn’t a stock bubble. This isn’t a real estate bubble. It is not a bond bubble. It is all free. It is really an experiment that began somewhere in the late 70s that is coming to its final conclusion. This is the mother of all bubbles.

Mike Maloney:         Yes. Another one of the warning signs that tip off – right now, the stock market is up. But I am looking at a chart of the Dow Jones Industrial Average divided by the price of gold. The Dow Jones – one share of the Dow was worth 17 ounces of gold at the end of November of last year. Today it is worth about – let me see it is 13.78 was the close yesterday. It has gone from 17 down – -the Dow has gone from 17 ounces of gold to 13 ounces of gold. You got an invisible crash going on. Everybody thinks the stocks are rising. Stocks are not rising in all forms of money. In precious metals stocks are falling, because precious metals have been rising at a faster pace than stocks. Now during some forms of economic collapse, the stock markets appear to be doing very well. But if they are not rising at a faster rate than the inflation rate, it is called an invisible crash, because you can be invested in a stock market and it can go up 100 fold, but if prices go up 200 fold you have lost 50% of your purchasing power. That is exactly what happened during the Weimar Hyperinflation. We have seen it. It is happening now in Venezuela.

Venezuela – I did a video back in 2013 showing some of the problems of Venezuela and I wrote an article in 2013 or 2014 about Venezuela – that the medical care is breaking down. The middle class is gone, and the next steps are hyperinflation and revolution. In the Hidden Secrets of Money you know, we interviewed Max Kaiser one time. He was talking about the risk reward of revolution. When it comes to not being able to feed your family; when the price of food and the scarcity of food gets to a point where you can’t feed your family the risk of being killed in a revolution, the reward of having a revolution and potentially being able to feed your family again is greater than the risk of being killed.

Chris Martenson:     And that is Venezuela today, certainly.

Mike Maloney:         Venezuela today what worries me is we are going to be seeing this in a lot more economies. This next – this bubble that is going to pop; I sure hope that people eventually see. What is going to happen is the Keynesians are just going to continue doing what they do. The only thing that they can do is print currency and try and manipulate interest rates. They are going to continue doing that. It is going to become more and more extreme.

When I updated my book one of the things that I found recently when I was on the Fed’s website; I looked at the tax revenues that come into the government. I saw a chart that looked to me very similar to the stock market. I started comparing them. I discovered that before the year 2000, when the stock market fell, it did not really affect tax revenues in the United States unless you go all the way back to the Great Depression. After the 29 crash tax revenues fell dramatically. This time we have all these tremendous levels of debt, the Federal debt. There is private debt and everything else. We are so leveraged out that deflation – they just cannot allow that to happen. And during this next crash, the amount that tax revenues are going to fall is going to threaten the survivability of our own government. At that point, the Federal Reserve has to print and print and print to try to get – if the tax revenues follow the stock market, which they do now since the year 2000, in order for the government to survive the Fed has to come to the rescue.

Well, you know, they had to create about I can’t remember 3, 400% more base currency than existed before the crisis of 2008 to get us out of that crisis. Well, now we have base currency, instead of .8 trillion, we got around 4 trillion. So you know, you quadruple that and now we have 16 trillion of base currency, and that is about equal you know, you are talking about printing as much currency for base currency that currently exists in M2. We are up to about 18 trillion dollars worth of debt, and 18 trillion dollar currency supply – something like that. I haven’t checked in the past few weeks.

This is what the Keynesians, the trap they have gotten us into.

Chris Martenson:     Right. For those following along at home – the theory involved here is that well we have this crisis. We have to fight it, but the trajectory is that the story is it was a little crisis met with a little significant response. I will call that 1994, 95 and then there was a 1998 crisis a little bit larger. So a little bit larger response 2000, bigger yet. 2006, 7 bigger yet. So here we are. The responses that we are getting are larger and larger. The trajectory of the story is, and I think you would agree with this, Mike, they are going to keep doing this until it just breaks on them. When it breaks we would agree it is going to be fast, furious, a little bit ugly. A little nasty brutish and short. We get to this part which is well how do people protect themselves. You and I agree that gold is a way to do that. It is really a hedge against monetary madness and systemic risk.

Mike Maloney:         Gold, silver, emergency food.

Chris Martenson:     Yea, those are the basics there. But, this is something you and I have talked about I would love to get here recorded, because that is also proven risky or really close into the business and risky because there have been some notable failures in the gold and silver dealer network, and so this is something I want people to buy gold and silver, but I don’t want them to be exposed to either scams or just inadvertently poorly run businesses that they get caught into. Let’s talk about that a little bit. I think it all began with Tulving going under a while back. I know some people who got caught in that.

Mike Maloney:         You know, the problem here is there is a whole lot of people, when they first learn about gold and silver they try to find a dealer. They go around and they shop. They are looking to save that last one quarter of 1%. The problem with that is all of the dealers purchased their precious metals at very, very close to the same price. This is – if it is bouillon, if it is not collector coins, if it is bouillon, there is a worldwide spot price. You pay a premium for physical. The spot price is determined by paper contracts that are traded on the exchanges. There is a little premium for physical that the dealers have to pay. Then they have to make enough, not only to survive, but to ensure that they have a well run business. There are certain insurances that they have to purchase. There are certain accounting methods. If you are not spending 20 to 50,000 dollars per month on your website to make sure that it stands up to industry best practices, that it is not likely to be hacked and such, you are putting your customer in danger. You have to have a certain amount of cash flow, and you have to have a certain profit margin.

There are dealers out there that a merchant account, when people make a credit card charge, the merchant services from the bank takes about 3% if you are a bullion dealer. That is what the bullion dealer pays for anything that is charged on a credit card. Well, if you – people – a lot of retail people do not know, the customers do not know, that when there is fraud on a credit card, they get to look at their credit card statement and say oh these charges weren’t mine and they don’t have to pay anything. Well, the bank doesn’t lose any money. It all comes out of the vendor’s pockets. The dealer that has sold the merchandise is the one that ends up taking the loss. If you don’t have insurance to cover that, which is another 1%, then you are exposed to those potential losses. And what happens is you go along and everything is fine for quite a while. Then the fraudsters, all the internet the thieves on the internet the people that buy stolen credit card information, they figure out some new scam. Suddenly, there is a flurry of charges that go bad. The thing is, as a dealer you don’t find these things out for 60, 90 or even 120 days. Because you don’t find out that somebody charged gold on a credit card and you shipped it to them until after the person that had their credit card number gets their bill 30 days later and then catches that there is a fraudulent charge on her bill and disputes it. They got time to do that. You find out when the bank comes and rips that currency out of your account. If you don’t have the insurance to cover that, it can put you out of business because these fraudsters discover a new method and suddenly there is a whole bunch of charges that go bad.

I know there are dealers out there that aren’t making – we have gone through a period of margin compression right now. What happened was when gold was going up toward $1900 and silver going up toward $50 back in 2011, a whole bunch of people jumped into the business. A lot of them are small and they are run very lean. And running lean is a good thing unless you are putting your customers at risk because you are not running it properly. It takes a certain amount of profit margin to be able to have all the security that a properly run business needs.

Through this period of margin compression we went through some periods where there are shortages of precious metals. The spreads rise, the dealers are allowed to make a little bit more. Then through a period that we have been through through the last couple of years here there has been – there is supply, the dealers start fighting for market share and they do that by dropping prices. If you are not buying from one of the big dealers out there, you can be putting yourself at risk, and shopping to try to save that last half percent – between Tulving, Bullion Direct and Northwest Territorial Mint you are talking about more than $50 million worth of gold that people paid for that never got delivered. So people got hurt to the tune of $50 million. You want to make sure that you are not exposing yourself to that. You got to choose a large, strong dealer. And it