The Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets

I just finished reading The Coming Collapse of the Dollar and How to Profit From It By James Turk & John Rubino published in 2004. James Turk is founder of GoldMoney.com, the leading digital gold currency payment system. John Rubino is the author of How to Profit from the Real Estate Bust. I've posted a lot about inflation and gold, the Federal Reserve, and the destruction of the US Dollar. I have read about the inflation that Germany experienced after WWII, the devaluation of the Mexican Peso and the Argentine Peso. If that is our future, I wanted to have some idea of what is in store for us and. The book is divided into four parts and is well written and difficult concepts are explained well: Part One - Why the dollar will collapse Part Two - Money Then and Now Part Three - Wht Gold Will Soar Part Four - Profiting From The Dollar's Collapse In part one we learn that we have a fiat currency, backed by nothing except a decree that the US Dollar is legal tender. Throughout history, in order for governments to satisfy demands without raising taxes, a government not only begins to debase its money, but inflates as well. Both are happening in the US and no government has been successful. We have a history of that in this country with the Continentals and the Confederate currency, both worthless. Another fact that dooms our currency is that we have too much debt. Total unfunded liabilities of the US are in excess of $43 Trillion, as a society we owe another $37 Trillion and Derivatives are in excess of $200 Trillion. Then we have a trade imbalance which just topped $800 Billion for 2005. We have been up in arms lately by the Chinese wanting to buy Unocal, then Dubai wanting to own our eastern port management companies and Dubai wanting to own some of our critical defense industry by trying to buy Doncasters Turk and Rubino point out on p31: Foreign investors now own about $8 trillion of U.S. financial assets, including 13 percent of all U.S. stocks, 24 percent of corporate bonds, 43 percent of Treasury bonds, and 14 percent of government agency debt. By the end of 2003, about a third of Fannie Mae's mortgage-backed bonds were being sold outside of the U.S. That was in 2003 and it has gotten considerably worse. What's in store for us: Over time, the gap between tax revenue and the demands placed on government tends to grow, and spending, borrowing, and currency creation begin to expand at increasing rates. Inflation accelerates, and the populace comes to see the process of "debasement" for what it is: the destruction of their savings. They abandon the currency en masse, spending it or converting it to more stable forms of money as fast as possible. The currency's value plunges (another way of saying prices soar), wiping out the accumulated savings of a whole generation. Such is the fate of every fiat currency. The government wants to keep this game going as long as possible by issuing phony CPI numbers, then by excluding energy and

This remarkable book should be read by everyone who has a savings account or a 401K. Even if you don't act on the authors' recommendations, you will see what is REALLY taking place in today's financial markets. I can guarantee that you won't hear any of this on CNBC. Be warned: the authors are doing something very rare. They're telling the truth.

The world is today awash with liquidity. Thanks to the extravagant living backed by paper currency, America is today the world's largest debtor nation. Though debt by itself is not bad, it is dangerous both to the borrower and the lender if it is not backed by productive assets. This book is about the origin and consequences of such a situation and the currency that has helped inflate the global monetary bubble on a scale that is threatening to burst on our faces. First the book gives a good definition of money as a standard of value, store of value and a medium of exchange. Going by this definition, over the centuries mankind has experimented with several monetary equivalents including cattle, sea shells, metals and the like. Whatever the medium, there was a definite asset equivalent attempted to be stored in money. This system got refined over the years and ultimately gold emerged as the undisputed monetary standard in the nineteenth century. Under this system, governments and central banks had to maintain gold equivalent in their vaults for the paper currency issued by them. Excessive government spending was thus effectively curtailed and exchange rates were automatically balanced. It is the gradual deviation and debasement and later the outright abandonment of this system in 1971 that seems to have led to today's situation where the dollar has just over 1% of its value as gold reserves with the Fed. In an imminent possibility of a virtual run on the dollar by creditor nations and oil exporting countries, the dollar is bound to plunge. Gold expressed in dollar equivalent will surge. This logic does not need any further explanation. But what is more interesting is the discussion on alternate investment strategies that can outperform gold in real terms. Silver emerges as a surprising and sure alternative. Unlike gold, silver gets consumed in large quantities in industrial use and not reclaimed. Hence the quantity of silver available above the ground is actually reducing. When there is a rush to convert paper currency into precious metals, the authors expect silver to rise faster than gold due to these fundamentals. If gold is a Boeing 747, silver will be an F-16 is a good analogy. The book discusses some facts on mining of gold and different categories of companies involved in this industry. Depending on factors like asset base, quality of mines, financial and operational leverage, quality of management and country risk, each of these are analyzed for their risks and potential returns. Numismatics also gets a fair share of the coverage. The book is however bound to come under severe criticism on the following grounds. - Gold is not the only possible store of value - The fundamental principles on which monetary expansion kick starts economic expansion is completely ignored - In a global economy where currencies are tightly linked and freely traded, only the dollar is isolated for criticism - Unbridled monetary expansion is bad, but re

I like the book. Bottom line for me is that trouble is coming and we all need to be prepared. Recently, on the 5 year anniversary of Nasdaq's high , I was reading in our local paper about the dramatic downturn and thinking about the many people I know who are in the tech industry and lost much of the value of their 401K's not to mention their jobs and are still desperately today looking for work. Many of these guys have taken huge paycuts just to keep working. WE are still feeling the effects of that bubble. The weird thing is that I also recall briefly reading a review of John Rubino's book about the tech bubble before the burst and feeling that he was probably wrong. I think its wise to consider their advice as there are many things to take from this book that will help provoke thinking ( and then compare to the daily news). Inflation is rising, people are strapped for cash, with huge credit card debt, plus their mortgage rates are rising. I personally know people here in the Bay Area who have put no money down on a half million dollar 2 bedroom condomiums and are barely making ends meet now. If there is an accompanying recession, it will be doubly painful as most have no savings or fall back plan. For me, it is a chance to take a good look at what I am doing with my money and my investing so I appreciate the research they have done. I do not consider myself an investment guru or pretend to be, just trying to look out for myself when I sense things are terribly wrong. I recommend this book !

The title and subtitle of this book really should be swapped. However, the choice is understandable - gold has a stigma unmatched by any other investment. Gold has been a money pit for longer than most people can remember. If you want a definition of a bear market, look at the price of gold over the last 25 years. As such, there has not been one single good book on investing in gold. Until now. The book is in two parts. The first part makes the case for a weaker US dollar. Although Mr. Turk and Mr. Rubino hit all the important points, it is far from thorough. Those who do not know that the US dollar has been declining for four years will be in for quite a shock in these chapters as this information has been glossed over by every major financial publication in the US. Those who do know and understand why will want to skip forward or read Richard Duncan's "The Dollar Crisis" which is much more thorough but also much more dry. The natural hedge against a declining US dollar is gold. This leads to the second part which is far more valuable. They thoroughly discuss all possible ways to invest in gold and its cousins. This is not a theoretical treatise. For example, the authors describe how to buy gold and even name places where you can go to buy gold. They cover gold stocks, both big and small, naming specific companies. They even cover a new breed of options for gold stocks. Model portfolios are provided. Websites for gold related news are cited. Gold related newsletters are listed. No other book that I know of provides this type of specificity and thoroughness. Controversially, Mr. Turk and Mr. Rubino see no problem in putting 100% of your assets in gold and gold related investments. In fact, they make the argument that anything other than gold is imprudent. It should be noted that even those who agree with their premise will dispute this assertion. But as I mentioned, the subtitle of the book is the more appropriate title - this is a book about gold, plain and simple. One may not agree with the authors' narrow recommendation, but this book still provides an excellent guide to the portion of your assets that you do choose to invest in gold. This is a timely and unique book.