James Turk, a renowned authority on gold and the precious metal markets and co-author of The Collapse of the Dollar, is founder and chairman of GoldMoney®, a patented gold-based electronic money, transferred over the Internet. GoldMoney.com stores in vaults in London and Zurich about $350 million worth of precious metals owned by its customers and is the largest digital gold currency (DGC) in the world. In Part I of our Gold Report interview, Turk gives us his outlook on the economy and the prospects for gold. In Part II he discusses how GoldMoney works, and why it’s better than storing physical metal in a bank or purchasing an ETF.

TGR: You’re a big proponent of owning gold. Do you think that’s the best course given the current state of the economy?

JT: Yes, for two reasons. Gold is an inflation hedge because it preserves its purchasing power over long periods of time by keeping up with inflation, and inflation is a growing problem. But gold is also a catastrophe hedge, because it is money that doesn’t have counter-party risk. In other words, you’re not reliant upon someone else’s promises for the value of that wealth, which is becoming increasingly important given the perilous state of the banking system and growing possibility of a financial meltdown. But don’t try trading gold. Accumulate it. You really should take a long-term view and steadily accumulate gold month in and month out. In other words, dollar-cost average your purchases. Sometimes you might buy at a higher price, but sometimes you’ll be buying at a bargain, which I think describes the present situation. We’ve been in this set of circumstances many, many times before over the past eight years, but obviously at lower prices. The market runs up to a level and ends up getting hit. The speculative element comes in near the top; they then get forced out, as the market reverses and goes through a correction. But if you have a steady program of accumulation, sometimes you might be buying at a higher price, sometimes you might be buying at a lower price, but the key is that you’re riding with the major trend, and the major trend is still up. And the reason why the major trend is still up is because of all the monetary and financial problems that we’re confronting.

TGR: What do you see is causing the downward pressure on gold after breaking through the mythical $1,000 mark?

JT: I think there are a couple of factors. I think number one on the list is the gold cartel. They’re still trying to keep gold capped in order to make the dollar look worthy of being the world’s currency, when, in fact, we all know the dollar is not. Gold is the barometer that tells whether central banks are doing a good job or not in managing the currency. And by keeping gold lower than it otherwise would be, it makes the dollar look better relative to its major competitor, which is, of course, gold.

Another factor is speculation. There are really two gold markets. There’s the physical gold market where bullion trades—the actual physical metal. Then you have the paper gold market—futures, options, and that type of thing—where you get a lot of speculation. And from time to time, the paper market can drive the physical market, but ultimately, it’s the physical market that determines whether gold is in a major bull market or not. The paper market can drive the short-term swings, both on the up side and the down side, we’ve seen over the past couple of months.

But the physical market drives the

MarketWatch

Last update: 10:13 a.m. EDT May 20, 2008

This update of a story originally published May 19 fixes the title of Kevin Phillips book “Bad Money: Reckless Finance, Failed Politics & the Crisis of American Capitalism.”

ARROYO GRANDE, Calif. (MarketWatch) — Remember that big ah-ha moment in the 1939 classic “The Wizard of Oz?” Dorothy wants to see the Wizard. His voice booms: “Do not arouse the wrath of the Great and Powerful Oz! Come back tomorrow!” Afraid, Lion, Tin Man, Scarecrow shake. Dorothy’s dog runs up, tugs on a curtain. She chases Toto, pulls curtain open:

“Who are you?” Dr. Marvel stutters: “Well, I - I - I am the Great and Powerful, Wizard of Oz.” Dorothy: “You are? I don’t believe you!” He replies: “No, it’s true. There’s no other Wizard except me.” Dorothy’s miffed: “Oh, you’re a very bad man!” Wizard: “Oh, no, my dear. I’m a very good man. I’m just a very bad Wizard.”

2009 Sequel: Script exposes diabolical cover-up conspiracy

Flash forward: Real life, Washington, new leaders, a new Congress, old wizardry. Be forewarned: No matter who’s elected president, America will soon see a massive statistical curtain pulled back, exposing a con game of historic proportions. And when that happens, you and I will suffer another ear-splitting global meltdown, bigger than today’s housing-credit crisis, dragging us deep into a recession and bear market for years.

Cast: New ‘leading man’ from old Nixon political machine

Yes, the lead character pulling back the curtain is none other than Kevin Phillips, a former Republican strategist for Nixon, and today America’s leading political historian. Phillips just published “Bad Money: Reckless Finance, Failed Politics & the Crisis of American Capitalism,” everything you need to know about today’s credit meltdown.

Scene 1: Numbers racket hiding behind Washington curtain

Opening shot: Phillips pulling back the curtain, exposing charlatan Wizards in a brilliant Harper’s Magazine article: “Numbers Racket: Why the economy is worse than we know.” Far worse. Buy it, read it — this is essential reading if you really want to understand the depth of today’s political as well as economic impending meltdown, and the harsh realities facing Washington, Wall Street, Corporate America, and Main Street in 2009 and beyond … harsh because we cannot cover up the truth much longer.

Scene 2: Statistics, Washington’s new WMDs, a time bomb

“If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it really is. The corruption has tainted the very measures that most shape public perception of the economy,” especially three key numbers, CPI, GDP and monthly unemployment statistics.

Scene 3: Backflash, ‘It’s always the cover-up, stupid!’

As I read further I couldn’t help but think about similar traps politicians get themselves (and us) into. Remember nice guys like Scooter Libby and Bill Clinton: The crime wasn’t their original stupidity, but their lying during the cover-up. Here, Phillips reviews endless statistical cover-ups since the 1960s and concludes there was no “grand conspiracy, just accumulating opportunisms.” I call it plain old greed. And every step of the way the media went along with the con game played by politicians and economists.

Scene 4: Real numbers torture us … like water-boarding!

How bad is it? “The real numbers … would be a face full of cold water,” says Phillips. “Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9% and 12%; the inflation rate is as high as 7% or even 10%; economics growth since the

Burdened by the Weight of Inflation
Standards of Living Are Challenged
By Jon Cohen and Steven Mufson
Washington Post Staff Writers
Wednesday, May 14, 2008; D01

Nearly seven in 10 Americans are worried about maintaining their standard of living, as concern has spiked higher in just the past five months, according to a new Washington Post-ABC News poll. Soaring consumer prices are a major challenge, with many people struggling under the weight of the rising costs of fuel, food and health care.

The poll shows that the weak economy and rising prices are high among voters’ concerns, and contribute to a souring national mood in this presidential election year. More than eight in 10 said the country has veered pretty seriously off-track, and a separate poll released yesterday by ABC showed economic anxiety at its highest level on record since 1981.

Overall, 68 percent of people surveyed in the new Post-ABC poll said they were concerned about their ability to keep up their lifestyles, a jump of 17 percentage points since December. The increase cuts across party and income lines, spreading rapidly among Republicans, people from rural areas and those from middle- and upper-income households. If you owned gold, a fraction of GOLD today (ie;1/10th of an ounce) would equal to $90.16 as of 5/16/2008. That would be able to purchase a minimum of 22.50 gallons of gasoline at a price of $4.00 per gallon. Call The Superior Gold Group today at 888-969-6465 and acquire more information on how to preserve your hard earned and overworked dollars today.

Nearly six in 10 of those from households with annual incomes of $100,000 or higher said they were worried

Correction in Gold Near End

By Jim Willie CB May 15 2008 2:23PM

The springtime corrections are really about done. They have gone on for a couple of months. The extent of the pullbacks have been tested and retested. The long-term trends are just about ready to asset themselves again. Grand deceptions have resumed to attempt to fool the public and the investment community that the worst is over for banks, housing, and mortgage bonds. That is not even remotely true. The deeply wounded banks, the sharply corrected home prices, and the badly damaged mortgage bonds have much more pain ahead. Nothing has been fixed. Many mortgage resets have yet to take place. The New Resolution Trust Corp to facilitate secondary mortgages, to bury dead mortgage bonds, and to renegotiate home loans is not even agreed upon, let alone installed. Its operation will be sometime in 2009 at the earliest. Until then, the system burns as foreclosures mount, inventory bloats, and home prices come down much more, guaranteeing another ugly storm of bank losses in mortgage bonds. The ultimate determining factor right now is home prices, which are accelerating down. Wall Street seems unwilling even to mention home prices, preferring to talk about bank liquidity concerns having been addressed. Except that bank capital is still negative. Let’s take a whirlwind tour of relevant charts, to see that the progress of the corrections is in its last stages. Sentiment is not good for gold, but it never is when the next upleg begins, the nature of the beast. Only the mentally tough,

Trading Gold & Silver Against The Cartels

By Roger Wiegand May 14 2008 11:42AM

“Initially, we wanted to title this essay ‘Trading With The Enemy’ but we’re trading against them not with them. Former Treasury Secretary Robert Rubin and former Chairman of Goldman Sachs wrote the PPT Plunge Protection Team Playbook to support and suppress certain markets using direct market intervention. Allegedly, this game was installed to prevent stock market crashes but it’s morphed into an ‘Interventionist Market Place.’ There are no more free markets in the stock indexes. Roughly 66% of these monopoly positions are traded by funds. The trading cabal exists. When stocks are falling below plan they just buy S&P’s and Dow Futures. And, of course, they sell gold; the arch enemy of fiat currencies and false markets. Let’s stop whining about it and just learn to deal with it. In our view, this continues until their entire game and global system falls apart, which we feel is cast in bronze.” –Traderrog

As Chopper Ben Was Busy Jawboning Markets on TV, The Boyz Were

Just As Busy Selling Gold Short. Nothing Like a Coordinated Effort

To Produce Immediate Results. Gold Flopped $20 In Minutes.

June, 2008, Most Active Gold Futures Intraday 10AM 5-13-08

Market intervention will work quite nicely on a shorter term basis. However, for the longer term, nothing can stop major markets from seeking their proper levels. Stocks, adjusted for inflation and dollars are in the tank and have been for years. New York feels they can keep the game in play if the Dow stays above 10,500. So far this has worked. However, with each manipulation and intervention the situation requires larger amounts of additional support trading stock futures and gazillions more in printed dollars. Economic history tells

Why Wall Street Hates Gold and Silver

Wall Street ignored gold and silver during most of the 1970’s hyper-profitable bull market. They were either outright hostile, or acted as though the metals didn’t even exist. I got no respect, even though the first edition of this book sold 2.6-million copies and was near or at the top of The New York Times best-seller list in both hard and soft cover for two years, and I was all over the media; Wall street Week, Oprah twice, Regis and Kathy Lee three times, etc, etc. They were usually hostile. Wall Street paid little attention to gold until it passed $650, far too late for them to have much of a chance for their clients to make money. In retrospect, we know that in 1979 the aging bull market was almost over. Soon after it made a brief climactic spurt to $850, and then went into a multi-year decline. They did their usual thing; they bought high, and then held on too long, and sold low.

Why the hostility? Partly because they believed their own rhetoric! Historically, because rising gold always means falling stocks or a troubled world, and they made most of their commissions in the stock market, they had to remain bullish on stocks, and bearish on gold. Investors wouldn’t buy stocks if their advisors were bearish. They sneered at the inflation fears of us gold and silver fans, and derisively called us “gold bugs.” OK because I have lost much of my respect for them also for a lot of reasons. I also didn’t get any apologies from them when inflation rose to 18% and gold to $850 and silver to $50, and didn’t expect any. Unfortunately, most of the young whippersnappers who now control Wall Street were in diapers 25 to 30 years ago, so they haven’t experienced rising gold and inflation. Consequently, another gold bull market is inconceivable.

Studying Psycho-ceramics

I can’t resist telling you about one of the funniest things that ever happened to me which illustrates the skepticism of mainstream media types. In 1978 I was on a national promotion tour for the first edition of this book when I was in Detroit, rushing to a TV station for an interview on a big live morning show. I barely got there in time. The host turned to the camera and said, “Today we’re going to study psycho-ceramics, and with us today is a crackpot from California.” And the interview went downhill from there; with his biggest argument being that silver

What Comes After A Trillion?
By Eric J. Fry
The supply of newly-minted dollars bills has doubled since George W. Bush took his first oath of office. The world’s known supply of crude oil has decreased by about 13% over the same timeframe. These two data points are part of a new macroeconomic equation that equals soaring oil prices.
Before the human race began sinking oil wells into the ground 150 years ago, the planet’s total geological inheritance of crude oil totaled about 2 trillion barrels. But mankind has already burned up about one trillion of those barrels. So we’ve only got one trillion left. By contrast, during those same 150 years, America’s total government liabilities exploded from $75 million to $54.6 trillion as of today.
As the planet’s supply of oil slips below one trillion barrels, and America’s pile of liabilities soars above 54 trillion dollars, crazy things might start to happen – crazy things like $200 oil.
“Net of all accounting gimmicks, the actual federal budget deficit is running at an unsustainable, system-dooming pace,” warns John Williams, founder of Shadow Government Statistics. “The consolidated statements show that the actual annual federal deficit for the fiscal year ended September 30, 2006 was $4.6 trillion, up from $3.5 trillion in 2005. Total federal obligations at year-end were $54.6 trillion, up from $50.0 trillion in 2005.”
[Editor’s Note: The 2006 GAAP statement can be found on the Treasury’s Web site, under Financial Management Services at: http://www.fms.treas.gov/fr/index.html ]

America’s fiscal condition, says Williams,

If Investors Were Smart …

By Alex Wallenwein May 1 2008 10:03AM

… they’d be bidding up gold and silver - instead of oil!

If traders and investors were smart, they would bid up the price of gold instead of oil. Likewise, if governments and central banks were smart, they would take the lid off the gold price and actively encourage investment in that most precious of all commodities.

Why?

Simple. Everybody can live with a high and further rising price of gold – because such would not in any way drive up the prices of other commodities, of transportation, of manufacturing processes, and of all products that are either hydrocarbon based themselves (like all forms of plastics or rubber) or that require hydrocarbon input (such as heating/cooling energy).

In short, piling money into gold would actually preserve the buying power of those worthless but over-hyped forms of scrip and electrons we all refer to as “money”.

As long as my fiat dollars buy approximately the same amount of the things I need in order to just exist next year, or five, maybe ten years from now, I can live with a high price of gold even if I’m not a gold investor.

But I might become one, if I see gold rising to fantastic heights relative to dollars.

However, if it’s the price of oil that gets bid up, things look different. More and more of my meager paycheck will go to gasoline and heating/cooling my home while everything else gets more expensive as well, and while the buying power of my dollars drops against other currencies.

The problem is, of course,