Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the Complete Solution for Real Estate InvestorsTM.
Jason Hartman: Good day and welcome to another edition of Creating Wealth. This is your host, Jason Hartman and I’m joined by Brittney.
Brittney: Hi, glad to be here.
Jason Hartman: You’re here with us today. That’s good. Throughout the world, businesses are failing. Families are losing their homes, their livelihoods, and their futures. Are the financial system and its so called leaders to blame? We will have an interview that talks about just that here in a few minutes with James West. He is the filmmaker, did Crime of the Century, which seeks to illuminate the players’ methods in history of the present configuration of financial disaster that prevents the average citizen from investing profitably, borrowing fairly, or even saving for retirement safely because remember your savings, your equity, your stocks, your bonds are under attack.
And what is attacking it? The devaluation of money. You know, last night when I had dinner with a friend, we were talking about the dollar is on its deathbed. And I replied by saying, “If the dollar is on its deathbed, then so are my mortgages.” And that’s good news for our listeners that understand the plan that works. The only proven wealth creator really for tens of millions of people in American history is the ownership of income properties, properly picked, proper areas, proper financing, proper structuring of the deals. And that’s what we seek to teach you here on the Creating Wealth Show.
Okay, so we have a few questions here before we get to the interview on the Crime of the Century with James West. Brittney.
Brittney: Our first question is from Scott. He’s from California. He asks if we have any recommendations to obtaining corporate credit.
Jason Hartman: You know, Scott, that’s a great question. And we are about – well, I shouldn’t say we’re about to, but we’re investigating now a deal with a group that provides, or I shouldn’t say provides, but helps people establish corporate credit by using LLC’s. And you know what? There are sort of two sides to this. You hear commercials on this where they’re advertising, “Obtain corporate credit – $300,000 in a couple of months.” And they seem to imply that you can just obtain a bunch of corporate credit and if things don’t go well, you can just default on the debts and walk away. So that is not true. My first question is why would you want corporate credit? There are some advantages and they’re not as incredible as these promoters in commercials may seem. But they’re still worthwhile.
Here’s how it works, basically in a nutshell. You can create entities, corporations, or LLCs, and then apply for credit. Now there are certain banks that are more friendly to corporate credit than others. They’re usually small community banks where you establish a relationship with them. The credit that you borrow – now this is my understanding of the whole situation, and I’ve been checking it out. I’m not an expert on it so, you know there’s a chance I might be stating something slightly incorrectly here, but the advantages, you can obtain all this corporate credit and it doesn’t show up on your credit report.
So you can use it to go and buy properties, usually that are properties that you want to hold for a very short period of time. Maybe properties that you want to rehab and flip and just buy them with cash using a corporate line of credit. The rates are not that great. It’s nowhere near what you’ll get on a good 30-year, fixed-rate mortgage, but the nice thing is it doesn’t show up on your credit because you didn’t borrow the money; your corporation did. However, the loans are personally guaranteed. No bank that I know of is going to be stupid enough to loan someone with a very new corporation or a very unestablished corporation, or LLC for that matter, money without a personal guarantee. So if you default on the loans, or I should say your company or your LLC or entity, whatever does default on the loans, then they will get a judgment against you and it will show up on your credit report. So, that’s kind of the distinction there.
The other distinction, which makes it an advantage, is that you can obtain a larger amount of credit potentially than you could just doing everything under your personal name. So we are working on that and as soon as we investigate a little bit more and feel good that this is something that we want to offer to our clients, we will probably have a show about just that subject, obtaining corporate credit. There are some advantages. Again, it’s not some kind of panacea that is like free money that you can just not pay back, as the commercials would imply because I hear those commercials on the radio and I’m thinking, “This is ridiculous.” And those claims are exaggerated I would said. But you know again, some reasonable advantages here. So more to come on that. Thanks for asking the question.
Brittney: Our next question is from Herbert. And Herbert is from Canada. He’s wondering, “How do I get financing to buy in the U.S.?” He’s asking the conditions behind that. “If buying one of the properties that you advise, do you offer support, advice, and financing the deal?”
Jason Hartman: Well, we certainly offer support and advice and education and market screening. That’s what we do here. We certainly will help you with all of that. We have been getting a lot of financing questions from our non-American friends lately, from Australia, New Zealand, Canada, Europe, etc. There must be something going on there, judging by the volume of questions we’re getting because my understanding from just a couple of months ago, the last time I really had a discussion with a couple different lenders that we work with about this, was that it was really pretty easy to obtain financing for foreigners buying in America.
However, I’m thinking by your questions that it must be harder and something must have changed that we might not be aware of. We will check this out and get back to you. The last thing we knew is that if you just make a larger down payment, 30 percent or so, you could obtain credit to buy American real estate without much trouble at all. Again, I’m getting the sense that something has changed and maybe that’s become a little bit tougher based on all the questions we’re getting. So let us get back to you on that a little more.
Brittney: And that means we will also be getting back to Kevin, who is from Ontario, who is our next question.
Jason Hartman: Another one.
Brittney: He’s wondering about 1031 Exchanges and how he can do that here in the U.S.?
Jason Hartman: Well, I don’t have enough detail on your question, but if you own a U.S. property and you file a U.S. tax return and you want to trade it for another U.S. property, then of course you could defer a gain in the U.S., but again, I just don’t have enough detail. We do have a fantastic 1031 Exchange person that does deal with people outside of the country. I know that because she’s talked about it. Her name is Cathy. I’ve had her speak at our Masters Weekends before. And she’s been on shows. And her associate, Dino was on a prior show, back in, oh, this is Show No. 104. I want to say that was Show No. 30 or something. So if you look back in there, you will find some shows on 1031 Exchanges. You know, we may want to get Cathy back on the show to talk about this stuff in detail.
Folks, when you ask these questions, you’ve got to provide us with a little more detail because we’re not always exactly sure what you’re asking. And we’ve also been thinking of setting up a voicemail line where you could call into a voice recorder and leave your question and then we just play it on the air and maybe that would make it a little easier to understand the questions. We’ll get the 1031 Exchange show back again, but I would recommend listening to the old shows.
Since I talked about Masters’ Weekend, why don’t we mention that?
Brittney: Yeah, let’s bring that up. When is Master’s Weekend?
Jason Hartman: Well, October 10th and 11th, 2009, right?
Brittney: That’s correct.
Jason Hartman: Okay, so we have two Masters Weekends every year. And this is a very special event. And I want to say congratulations, welcome, and thank you to Philip, who was our first registration for Masters Weekend. And I know he’ll be attending for the second time. He’s been to one before.
Brittney: Thank you, Philip.
Jason Hartman: Welcome back. Masters Weekend this year we are thinking will not be at our office. It will probably be at the very swanky new private club that I joined a couple of months ago, and that is called the Center Club here in Costa Mesa. It’s right by our office; either way it’s the same arrangements, hotel and flights and so forth, so we’ll be announcing that soon. And we’re also thinking about having our August 15th Creating Wealth Event at the Center Club as well. Just a really nice facility, a private club. It’s pretty nice. Next question.
Brittney: All right, our next question is from Roberto. He’s from Miami Beach and actually, it’s more of a comment. He just says, “I love your programs.”
Jason Hartman: Well, thanks Roberto. Keep listening and pass it on! Tell everybody you know.
Brittney: Well, Jason, maybe that’s the time to mention our other programs that he’s probably discussing – maybe Holistic Survival, maybe he’s talking about our Loan Mod Kit. Maybe you want to mention that to our audience.
Jason Hartman: Yeah, just as a reminder and I know we mention these things from time to time. We’ve got a new show that we’re launching called Holistic Survival. Go to www.HolisticSurvival.com and check it out. We’ve been working very hard on that one. And we’ve recorded several shows. We’re about to come out with Show No. 1 here. We’ve picked the music for the intro and done all the stuff and we’ve been collecting a lot of stuff for the Holistic Survival Newsletter, which we will be publishing. And that is about protecting the people, places and profits you care about in uncertain times.
So it’s about a broader subject than just the financial stuff we discuss here on the Creating Wealth Show. So the Creating Wealth Show is more offensive. Holistic Survival is more defensive. And I think you’ll like them both and you’ll want to listen to both of them, so more coming up on that. Be sure to get a free copy of our Financial Freedom Report. This is a new newsletter. It is in the “Members Only” section for free atwww.JasonHartman.com. We’ll be giving out some free samples and then it will become a subscription only after that.
And Doug is doing a great job as the editor. We’re working on our second edition of that newsletter now. And we just really appreciate his good works there. And I think you’ll enjoy that newsletter. Also the DIY Do It Yourself Loan Modification kit go to www.TheDIYLoanModification.com and take advantage of that kit, where we are claiming that you can save $2,950.03 off a traditional loan modification.
Let me just let you know how I’m doing that math. Okay? If you have one loan that you want to modify, usually they’re going to charge you about $3,000 and I have now modified ten of my own loans – ten of them; I just got two more approved last week – done it myself, so I’m not saying you can always do it yourself, but a lot of times you can. So, check out the Do It Yourself Loan Modification package that we are selling for $49.97, I think. That includes I think it’s a 56-page book, also a multi-media presentation that’s professionally voiced by a professional voice-over artist.
Brittney: All right, and our final question is from Alvin, right here in Los Angeles. And Alvin writes, “Dear Sir: Would you please allow me to become a member of your wonderful group of investors?”
Jason Hartman: Well, Alvin, no need to be so formal. But thank you for the note. There’s no membership fee to join, so just go to www.JasonHartman.comand click “Contact Us” and just put your name in our data base and you’ll start receiving our email newsletters. You can also join the Members Only section of the website and get access to a whole bunch of free stuff. So take advantage of that. And Brittney, if there’s nothing else, let’s go to the interview with James West.
Brittney: Well, would you like to mention our upcoming guests? We have Thomas Sowell; we have Robert Kiyosaki and Addison Wiggin all coming up here on our show pretty soon, so stay tuned.
Jason Hartman: Thanks for the reminder on that. Yeah. We’ve got a bunch of great guests. The Robert Kiyosaki interview was scheduled to be today, but I did not interview him today because he had an interview on CNBC. Can you imagine that? I mean CNBC over the Creating Wealth Show? I don’t know folks. We’re getting big, but I guess CNBC still pre-empted us. So we’re interviewing Robert, the author of The Rich Dad Poor Dad series on Thursday I believe.
Jason Hartman: And Addison Wiggen, who’s involved with Agora, who has written several books. And they’re the largest financial newsletter publisher in the world I believe. And he had some interesting things to say. Thomas Sowell just wrote a book about the Housing Boom and Bust. He’s a professor at Stanford University – very interesting guy. And just a lot more great stuff coming up. So, keep on listening and here’s the interview with James West on the Crime of the Century.
Interview with James West, author of Crime of the Century
Jason Hartman: It’s my pleasure to welcome James West to the show. Mr. West is the writer and executive producer of a fantastic new movie and I’m looking forward to sharing this with all of you listeners. James, welcome to the show.
James West: Thanks very much for having me.
Jason Hartman: Tell us about your new movie coming out.
James West: The title of the film is “Crime of the Century”. It’s a feature length documentary film that examines the relationship between monetary policies of global governments and the financial boom and bust cycles that typically permeate the economic business cycles over the last 150 years.
Jason Hartman: Now that’s a very interesting topic because I assume you’re going to talk in the film about the Federal Reserve and its involvement in our economy. Wasn’t that one of the things that the Federal Reserve really sort of promised when they pitched the idea back in the early 1900’s, is an end to these harsh cycles?
James West: Well, exactly and the thinking back then was that the last panic before the establishment of the U.S. Federal Reserve was the one that occurred in 1907. And that one got underway because of a panic with copper stocks. And what happened was J.P. Morgan led a consortium of bankers to lend money essentially to other banks at the request of the government because otherwise these other banks and brokerage firms were going to fail. And the perception of government at the time was, “Well, we can’t be seen going cap in hand to the bankers every time there’s a liquidity problem in the financial markets. This needs to be a government solution not a private banking solution.” That was the logic anyway that drove the establishment of the U.S. Federal Reserve from the government side.
Jason Hartman: Which oddly enough turned out to be a private bank anyway, right?
James West: Exactly. Well, J.P. Morgan stipulated at the time that he would help establish the U.S. Federal Reserve, as long as it was run by bankers, not by government representatives. That is actually the key moment in time where you know we had an opportunity to have what properly should be a government-run issuer of our monetary policy and money. But instead it turned out to be a private organization.
Jason Hartman: It is really amazing the way this country seems to be held hostage to its Central Bank. These private people and foreign banks also are benefiting from the misery of us the people, we the people, you know? Our currency is being devalued. Our taxes are going up, our government is broke. It seems like we would be at least hitting on one cylinder right, but it seems like every cylinder is going the wrong direction, does it not?
James West: It sure does. And again, that’s something we try to examine in the film is that the entire episode as it unfolds seems to be a case of whoops and oops, this was an accident, and we made this mistake and we made that mistake. But the premise of this film is that you look back over the last 150 years, once big business sort of got married to banking and banking started to influence the direction of government and what was allowed and what wasn’t allowed, there’s a pattern that we’ve identified in that the bankers tend to flood the system with liquidity because their product, what drives more money into their pockets than anything else, is the extension of credit. So, as creditors, their product is money. So when the economy uses lots of money, the bankers are at the top of that food chain and they extract fees and percentages and all of this all the way along and now derivatives.
And so it’s very much within their interest to see the growth phase of the business cycle over-capitalized so that you drive prices up much higher than you would normally see for both commodities and for other asset classes like stocks and their derivatives. And when they decide that the system has grown out of control, then they contract the availability of credit. The system goes into a freefall and they mop up the assets that have become so quickly devalued and that the builders of those assets can no longer afford to hang on to because suddenly they’re over-leveraged – their credit’s no good.
And so that is the crime of the century. And our view is that the over-capitalization of this system is a pattern that we see happening again and again. Right now, I’m reading about the financial panic of 1907 and the similarities in some of the loans that are being extended to save financial institutions. I mean, if you read the New York Times in that period, you would think you were reading the New York Times of the last six weeks. I mean it’s just so identical, except then they’re talking millions; now we’re talking billions and trillions.
Jason Hartman: It’s really amazing. So, that’s a very interesting concept on the Crime of the Century, which is the title for your film. So what you’re saying is that what they’re doing is they’re flooding the markets with credit. All this money floods the system. You have too many dollars chasing a limited supply of goods and services. And so we’re talking really about goods or assets. So asset prices rice. So we’ve seen that with housing, stocks, some areas of the precious metals market certainly and other things. And these prices rise; then they contract the credit. Asset prices fall as they’re doing now and then they go in, these bankers and so forth, and the various elites, and buy up theses assets on the cheap. That’s the story, right?
James West: That’s right.
Jason Hartman: That is the crime of the century.
James West: That is one of the crimes of the century. We saw that happen with Merrill Lynch, Wachovia. The banks that have collapsed and disappeared and been absorbed are far too numerous to mention in a single conversation. But everybody will remember that during the course of the summer of 2007, Goldman Sachs came out and said – oil at that time was trading at $70, which was just mindboggling in 2007. Then Goldman Sachs came out and said, “Well, you think $70 is bad. We predict that you’re going to see $100 a barrel within the next two years.” Well, what happened was as soon as they issued that statement, oil raced up over $100 right away. Within the next two weeks, it topped $100.
So they use the media to sort of create perceptions on our part that, “Wow, it’s going much higher.” So another part of the crime of the century is that some financial institutions are so large and so far up the ladder that they don’t sort of react to the market. They drive market behavior and they know when they say something that they’re going to elicit a certain kind of behavior by all the layers of the financial players underneath them. So that if you come out and you’re Goldman Sachs and you say, “Oil’s going to go to $100,” well, then all of the private equity firms, that are also commodities traders, are going to rush out and bid up oil futures because the perception is that, “Well, if Goldman Sachs said oil is going higher, oil is going higher.” So they create the reality by putting it out there that, hey, this is what’s going to happen, so that’s what happens.
Jason Hartman: You know, isn’t that always true, that any big player in any type of market makes a market to some extent? Of course, if Trump says he’s going to buy up a bunch of land in a certain area, won’t that cause people to follow and react? That’s not inherently bad is it?
James West: Well, that’s completely contrary to, for one thing, to the Sherman Anti-Trust Act. I mean, the whole point of diversity of markets is to prevent monopolization of markets so no single entity can have that great an influence on any given market.
Jason Hartman: Well, I certainly agree with you with that. The trust should be busted no question. But the trust is a matter of degree. Should someone have 10 percent of the market, 20, 50 percent of the market? How much is too much? Obviously 100 percent is way too much. But you’re always going to have large and small players and so this would say that the central planners and the consolidation of the banking world is bad. And I’m certainly going to agree with you there. But you’re always going to have larger and smaller players. They’ll always influence to some extent, right?
James West: True. But when it comes to the currency of the world – and you only have like we’re talking the U.S. dollar, which is now the reserve currency of the world, and ostensibly, you’ve got the Federal Reserve and the Treasury acting in the interest of the U.S. citizenry to protect its value and to protect our interest.
Jason Hartman: We’ve certainly seen that as a big myth right?
James West: Well, exactly. So instead, what’s actually happening is you’ve got the layers of banks above government, which is J.P. Morgan, Goldman Sachs, but the derivatives of the Rothchilds and the derivatives of the Rockefellers, which is Citibank. Then you’ve got that layer sort of operating in collusion with the U.S. Federal Reserve because that’s a private institution. And they dictate the terms under which they think things should happen to the Treasury. And so it comes out as government policy and government decisions, but the pattern is that there’s a layer operating above government here and key to their continuation of this ongoing cycle of boom and bust is the suppression of gold. And really, that’s at the key of our film here is that this whole thing couldn’t happen if gold was allowed to trade in an unfettered manner.
Jason Hartman: Yeah, I definitely agree with you that there’s lots of manipulation. I just want to go back to your thought, though, earlier on what is really the big crime of the century, which is drive up asset prices, plunge asset prices, manipulate markets in other words, and then buy up assets on the cheap when markets are low. It’s an interesting concept. If we want to just look at that a little more closely, though, we have to see a point, though, if that crime of the century is going to work, where the asset prices are cheaper than they were at the previous low, or at least in inflation adjusted terms, they are cheaper than they were to make that work and to make that enrich the Rothschilds and the Rockefellers and so forth.
So, if you take the Dow, the Dow is much lower. It’s off its high for sure. Even when it was at its high, I was saying that you know that was sort of an illusion really created by inflation and the dollar. Or well, deflation in the value of a dollar, but inflation as it’s called, which is kind of a misnomer in many ways. But you know we don’t see asset prices cheaper than where they were yet. I mean, are you saying we will? That has to be the case, to enrich people. I mean they can get people to pay higher prices buy at the peak, asset prices are inflated, credit contracts, and then the big banks and all the big players and the elites come in and buy cheap later. But they’re not buying cheaper than the last low, are they?
James West: It’s not so much that they’re paying the price as quoted on the Dow, but what happens is, for example, in the case of say Warren Buffet’s $10 billion investment in AIG.
Jason Hartman: Okay.
James West: Shortly after, Paulson decided that they were going to invest a further $10 billion in AIG. I’m not sure if it was AIG now or JP Morgan or one of the banks, but the terms under which the Treasury invested some of its bailout money were far more onerous than Buffett experienced for his investment. And so you know it wasn’t –
Jason Hartman: And so the taxpayers are paying to increase the price of Buffett’s investment, right? Is that what you were getting at?
James West: Well, essentially, yeah. It’s the cost of his investment is being offset by public money. And so the other thing is the share price that he’s paying to buy into this entity would never be so low, if the company was not in such a state of distress. It’s in the position that it needs the money or it’s going to fold. So the offering price of the securities in exchange for the investment are far lower than they would be in normal times and far lower than what the average investor has put into it, while the economy was functioning normally. And so that’s where the whole asset doesn’t necessarily disappear, but what happens is control positions and large ownership positions are obtained by elite financial interests, who take advantage of the stress that these companies find themselves in.
Jason Hartman: This is really interesting you know because what really is happening there is a transfer of wealth from the middle class investor, who rode the market, did all the things that I call it the vast Wall Street Conspiracy tells us to do: invest for the long term, buy a stupid mutual fund, etc. And so it’s always that middle part of the populace that did all that, they stuck their 401K’s in it, etc. And then they lost the value and essentially transferred that wealth to the elite, to Buffett, to the other players because they drove up the price of that asset. It’s really just unbelievable. And of course, it’s incumbent upon them to keep this huge PR machine out there. You know, you see Warren Buffett go on and say, “I’m buying up stocks right now.” So, every typical middle class investor probably thinks, “Oh, if Buffett is doing it, then I should, too.” But you know he’s in on the game. I mean, it’s like –
James West: Exactly.
Jason Hartman: He comes out of a meeting with Bernanke and Paulson and says, “Well, yeah, buy stocks in American companies.” Well, you know, of course he’s going to say that.
James West: That’s right. That’s because he just got them for cheap and he needs somebody to sell them to.
Jason Hartman: Yeah, right. Very good. I love the simplicity of your statement right there. That’s excellent. Tell us what else is involved in this crime of the century, if you will?
James West: Well, essentially our position is that there are four key mechanisms to this cycle. There’s the U.S. Federal Reserve system, which is sort of a private gateway through which these bankers influence monetary policy. There’s the fact of the U.S. dollar being the global reserve currency of having no choice really is what the situation is now. Then there’s the suppression of gold. If gold is allowed to trade freely, typically, it’s the canary in the coal mine, when a currency is being over-diluted, when they’re printing too much. Typically, gold goes up in relation to any currency indicating that the investment world perceives that there’s too much currency relative to the amount of gold that’s out there and so people start to sell the currency and buy the gold, which drives the price up.
Jason Hartman: Gold is supposed to be the consistent measuring stick. And of course, it’s not in today’s world because it’s manipulated.
James West: Yeah, exactly. It’s manipulated right now, but if you step back to a geological sense of time, for our brief snippet of recorded history – call it 5,000 years – gold has been the standard by which all things of value are measured. It’s always the case of, “Well, how many gold can you get with X, with that currency, with those sea shells, with whiskey?”
Jason Hartman: Right.
James West: It’s always been about the gold and so, certainly, now gold is suppressed and has been for call it the last 30, 40 years since the advent of the gold carry trade, which we’ll get to in a moment. But gold has always been that monetary standard and right now, we’re living in a time where it’s popularly perceived to be a barbarous relic. Not something that’s practical. It’s merely a commodity. It’s just a metal that has no value in anything except jewelry.
That’s all going to change because the one thing that’s happening now is that with the currency becoming so diluted, and gold, even though it’s being suppressed with every effort on the part of the major futures exchanges, or rather the Central Banks, the imbalance is reaching an explosive point. We’re seeing that certainly with the near default of COMEX that seems to be unfolding, and so eventually, the price of gold is going to explode. When that happens, the U.S. dollar is going to plummet, and so part of this strategy is the suppression of gold.
And then the fourth thing would be the unregulated derivatives market, which is part of how they keep the price of gold suppressed. And we won’t go into too much detail there because that’s just so arcane that I’d put everybody to sleep within ten minutes of talking about how the derivative trade works to suppress the perceived price of gold or the spot price of gold.
Jason Hartman: That’s fascinating, though. I hope you cover that in the film. Do you because I really can’t wait to hear more of that?
James West: Well, we do touch on it, but if we were to explain it in its full depth, two-thirds of the audience would not be interested I don’t think. They’d become very bored. The only thing you have to know about derivatives is it’s gambling. So think of the derivatives market as a giant Las Vegas casino. Two things about gambling in Las Vegas – the house always wins and you always leave with nothing.
Jason Hartman: It’s amazing how some people still don’t realize that, huh?
James West: That’s right. So if I make you think that the chips in this casino are better than that casino down the street, you’re going to come and play in this casino. So that’s what they’ve done with gold. They’ve made it look like, well, there’s no point in playing with gold because it’s just so volatile and so unpredictable and the market’s so small and there’s just no point in even being here. So that’s the perception that’s successfully been perpetrated for the most part throughout the United States. Now there’s a small part of the population who sort of sees through that and that’s where the upward pressure on gold is coming from, from them, as well as, more substantially, from countries like Saudi Arabia, China, Russia, etc.
Jason Hartman: First of all, the reserve currency issue, you know the dollar has been the world’s reserve currency for decades now. Why is the world willing to accept the dollar as the reserve currency when it continues to be debased and debased and debased? And I mean it’s not like the whole world is that stupid that they don’t know that we’re mismanaging our currency and our whole government and economy in general. Why are we still the reserve currency? I sort of can’t believe everybody’s agreeing to that still.
James West: To understand that, we’ve got to look at how we became the reserve currency and that was a process that occurred through the Bretton Woods Act of 1944, which, in fact, also oversaw management of the Gold Standard. So, at that time, gold was pegged to $35 and the U.S. said, “Well, our money will back the gold. And so that if you want to redeem or you want to trade in gold, then it’s much easier if you just do it through the U.S. dollar.” And so because the United States was the arbiter of the Gold Standard – you don’t want to trade in gold, well, use U.S. dollars. So you use the similar amount in U.S. dollars to sort of pay for things like oil and from oil, it just sort of branched out from there.
It was really the advent of the big oil industry, which saw U.S. dollars start to accumulate representative of a certain amount of gold, theoretically so that it wasn’t so much that countries were willing to take U.S. dollars, as they thought they were taking something that represented a value relative to gold. So that’s how, because of the billions and billions of barrels of oil that have been sort of taken out of the ground since the early 1900’s we’ll say, that’s what sort of built up the U.S. as a reserve currency globally.
Now, at this point, we’ve got two interesting phenomenon happening. It’s that we’ve got the G8 with a major portion of the U.S. treasuries and U.S. denominated assets held in foreign reserve. So they see that while we’ve got a grossly elevated dollar value presently because of the financial crisis that has caused the repatriation of U.S. dollars en mass because suddenly all these firms around the world who have been trading in U.S. dollars that have been leveraged out at 10 to 1 and 20 to 1 and 30 to 1, now they’re being forced to de-leverage, which means they’re selling assets, which means they need U.S. dollars, which is putting undue demand on the U.S. dollar currency, which makes it look likes it’s very strong right now.
Jason Hartman: That is a critical understanding right there. These U.S. dollars are being soaked up in abundance right now around the world, as various funds and institutions unwind their investments and they’re over-leveraging, and that is causing false dollar strength, in our opinion. So, I agree with you there.
James West: Also, to add to the upward pressure on the U.S. dollar, right now, because gold is so widely perceived as, well, that should be the safe haven sort of investment during times of financial trouble, but it hasn’t been performing that way, so a lot of people who had traditionally gravitated towards that as a safe haven investment are staying away and instead putting their money in U.S. Treasuries, which again, only adds to the demand for U.S. dollars, which gives them some justification between the U.S. Federal Reserve and the Treasury Department to continuously come up with these trillion dollar bailout packages because it looks like the dollar’s strong and it looks like it’s only getting stronger. But we are almost at the peak of that process. And it’s going to probably coincide with Barack Obama’s taking the office in January that suddenly the dollar’s going to go the other way. And when that happens, you’re going to see two things happen. You’re going to see the dollar plummet as gold rockets. And people are very critical of that statement because gold bugs have been saying that for the last ten years.
Jason Hartman: Well, they’ve been saying it for a lot longer than that. They were saying it in the ‘70’s and they were true for a time. You know they were saying that in the ‘80’s and they were wrong. They were saying that in most of the ‘90’s and they were wrong. What this really reminds me of on the gold thing is that quote and I don’t know who said it off the top of my head, I can look it up, but it said this, “The market can remain irrational longer than you can remain solvent.” I can’t remember who said that off hand. But can the gold price be manipulated longer than we can wait for a return because I just don’t think gold is the solution? It should be. It makes sense that it is. It’s totally logical. I completely understand the thinking, but the powers that be are so powerful and they’re getting more and more powerful. I mean Paulson is the world’s global financial czar, at least until he retires. It’s like there’s a fourth branch of government now. I call it the financial branch.
James West: Yeah.
Jason Hartman: You know we’ve got the Judicial, the Legislative, The Executive, and the Financial.
James West: Right.
Jason Hartman: It’s crazy.
James West: This is what inspired the whole idea of doing this as a film was that I was talking to Bill Murphy at GATA, which is the Gold Anti-Trust Action Committee. That’s the group that’s more or less been jumping up and down and screaming about the manipulation scheme and the gold carry trade.
Jason Hartman: They’ve been filing lawsuits and talking about it and nothing’s happening, you know?
James West: Exactly, and I said you know this feels like the Matrix because I just started talking to him because I suddenly felt that, “Wait a sec. The world is not as it seems.” And just like in the Matrix, when the character Neo – he’s sort of going about his business and Morpheus comes to him and says, “Well, haven’t you always felt that something’s not quite right. And here, if you eat this blue pill, you’ll figure it all out. And if you don’t want to know, just eat the red pill.” Well, it seems to me that nine-tenths of Americans haven’t been presented with a choice and the one-tenth that has have chosen to eat the red pill and go back to sleep. And the blue pill is being consumed by very few people. But that’s essentially what’s happening. Is we’ve got this great facade of everything under control and some people have said to me in the past, “Well, if the government can suppress the price of gold for so long, what’s to stop them from doing it indefinitely?”
Jason Hartman: It may be another ten years. What if you need to retire in ten years? Can you be a precious metals investor?
James West: I don’t think that’s possible because if you follow all the research that’s been published by the various analysts who have been following what’s going on in the gold suppression scheme, all that gold has come from the central banks. Now, they must be out of that gold and that’s why COMEX is close to capitulation is because they’ve got gold on hand, which is registered ounces. And before last Friday, the amount of gold they had on hand in those registered ounces was, I believe, 2.6 million ounces. Well, every Friday, the CFTC – the Commodities and Futures Trading Commission issues their Commitment of Traders Report, which tells you what are the contract positions of the various noncommercial traders in the futures market. And they do this for all of the futures. Well, what happens typically, every Friday, you see that approximately 1 percent of the trades want to take delivery of their commodity, gold, on the due date of the contract.
Jason Hartman: You said one third?
James West: No. Sorry, 1 percent.
Jason Hartman: So, only 1 percent of the people actually take delivery off of the COMEX or the NYMEX. So, that means that 99 percent of the people are basically engaging in another kind of fiat money system, just like the Federal Reserve and the Treasury play.
James West: Well, if you look at the $697 trillion dollar notional value of the entire CFTC trading scheme, you’ll start to understand where is all this negative value been accumulating. And that is the great white elephant in the room. However, not to digress excessively here, what happened was two Fridays ago, 5 percent of the closing contracts decided they wanted to take physical delivery. And some of those contracts that wanted physical delivery were HSBC and JP Morgan and Goldman Sachs. So now these are the guys who are typically, they have the bulk of the short contracts. Now they’re demanding delivery of the closed long contracts – seems to indicate a conflict within the system. But what it actually is is that even the banks themselves are starting to demand physical delivery for what gold is left because they know that the COMEX is about to collapse. So when that happens, either the federal government is going to have to step in and make good on all of that gold that’s supposed to be delivered that’s not there.
Jason Hartman: So, it’ll be the next bailout?
James West: Or it’ll be the next sellout, or they’ll just say, “Sorry, we can’t afford to bail that out.” It’s going to have to collapse.
Jason Hartman: Right.
James West: So, if that happens, you know then you’ve got to ask yourself, “What happens to the other futures contracts?” We’re talking $697 trillion in futures contracts under the domain of the CFTC.
Jason Hartman: Which is larger than the economy of the globe in many years is my understanding. I can’t remember what the global GDP is, but that’s a giant number.
James West: Exactly. That’s an amount that nobody but nobody can afford to bail out, unless we are all to say, “Well, okay, this has all been fake and this has all been imaginary and we’re just going to go on and pretend that money can be printed in perpetuity and there will be no effect.” But the ultimate effect of all of this thing is there’s this big effect and this is where the real crime is is that we’re taking too much out of our capacity to create from the planet and that capacity is coming at the expense of future generations. And that capacity is being generated because these financial elite, this one breed of human being at the top of the food chain, doesn’t know when to say, “Thanks. I’ve got enough. I’m done.” It’s just a machine that has now taken on the idea of creating wealth just for wealth’s sake.
And that’s where the real crime is is that we take all the oil out of the ground even though we don’t need it for this population, which is why we’re in a contraction now. We take all this gold out of the ground. We take everything out of the planet and contaminate it with the affluent, from purifying, manufacturing, and other products, etc. Well, then where is that going to leave future generations? And the more we proceed in that direction now the sooner it’s going to be before future generations sort of come to the age of maturity and say, “Well, there’s really nothing to vote for because there’s nothing left to eat. There’s nothing left to do.” I mean, because we’ve done it all. Several generations of this kind of behavior will completely wipe out the resource base of the planet. So, that’s the real crime of this century is that the incredible capacity for resource consumption that is now ongoing to satisfy the rapacious appetite for the financial elite at the top of the food chain will be the crime of this century.
And in future generations, they’re going to look back and say, “Wow, what was wrong with us back then? Why could we not control ourselves?” Ninety-five percent of the people didn’t live beyond their normal average means. But five percent of these people they just about wiped out our generation. And so there’s a time coming in my belief when these captains of industry and these pillars of society are going to be reviled as criminals and that’s how history will remember them.
Jason Hartman: It is amazing who we revere in modern society sometimes. These are basically – they’re criminals – Wall Street, the Federal Reserve System, Central Banks around the world – it’s the new version of organized crime. I mean it makes Al Capone look like Mother Teresa. This is –
James West: Yeah.
Jason Hartman: He is nothing compared to this. These are giant crimes that are affecting the lives of every person on the planet, possibly.
James West: Not just on the planet now, too, but future generations.
Jason Hartman: In the future. Yeah. People yet unborn are paying for their complete greed. I mean it knows no bounds. I tell you, James, years ago, I used to be a little more like a kneejerk capitalist and loving to see these big wealthy people like Bill Gates and Warren Buffett and all this stuff. And you know I used to really believe in them. But I don’t any more. I think they’re part of the big scheme. And I’m not calling them out by name. I’m just saying all of their ilk really. There is just no limit to the power grab of these people and how much they will take, how much of the wealth they will take out of people’s lives.
Inflation for example and the debasement of currency is such a slow process, most of the time. Or at least it has been historically. And I think that’s going to change pretty quickly here. It’s just sort of like you put the frog in the water, you turn up the heat slowly and eventually, it just sits there thinking he’s getting a nice warm bath, until he’s boiling to death. And that is what is happening. People have got to be made more aware of this – which is why I really commend you for what you’re doing with your film. Tell us quickly how you financed the film and how we can support you in this effort in getting the message out there.
James West: Well, we’re trying to raise $2 million through donations by talking about the film and logic underlying it on programs like yours. So far we’re doing it strictly by donations through our website and through public appearances and we have these various events. Two million dollars is a lot for a documentary.
Jason Hartman: If you care to disclose, how much have you raised thus far?
James West: Thus far, we’ve probably – we’re still not to $1.5 million yet – so, we’re getting there, but we still have a ways to go.
Jason Hartman: Oh, okay good. Any really big donors in there? Or are those a lot of small donations?
James West: They’re mostly small donations. There are some larger ones. Our larger donors have requested anonymity, and so I have to honor that.
Jason Hartman: Sure.
James West: But there’s some very surprising people have stepped up to the plate. A lot of the individuals, especially a lot of the large donors, actually come from fairly prominent positions within industry and they’re mostly in retirement mode now. And they’ve sort of reached this point in their life where they’ve looked back at their role in helping these organizations they worked for and they sort of said, “My God, I didn’t even realize that this is what I was doing.” And so they see this film as a way to sort of counterbalance what their role has been in assisting these criminals rape the planet.
That’s how we’re going to raise all of the money is hopefully by donations. Now, we’ve got investors willing to step up if we don’t raise the full amount we need for filming. But we’re already there for production.
Jason Hartman: And they can donate at www.CrimeoftheCenturymovie.com is that correct?
James West: That’s right – www.CrimeoftheCenturymovie.com – you can donate any amount. Every little bit helps us and our goal is to divert $600,000 of the $2 million will be going towards generating an audience for the film when it comes out. Our goal is to have this film seen by the broadest possible audience on its release date, which will be at some point early in 2010. By sticking to a strictly donation model, we’re not driven by issues of salability for the film and we control the distribution destiny of the film as well.
Jason Hartman: That’s fantastic. So I am looking forward to seeing this in lots of theatres main stream because the U.S. population nowadays is just distracted with a bunch of things that just don’t really matter. And we’ve got to start paying attention to what’s happening to the value of our work, our labors, our thoughts, our ideas, our creativity, our innovation, which is money. That is the result of all of our efforts that we make over the course of our lives and it is being stolen from people little by little and transferred to the hands of private elites that are just taking the money away from largely the middle class. That’s where it’s really coming from because that’s where you’ve got the biggest amount to take, right?
James West: Yeah.
Jason Hartman: Anything we can do to protect ourselves? Of course, we want to support your efforts and the movie. Any advice? You know, you write a fantastic newsletter available at www.Midasletter.com. What advice do you have? I mean, it’s interesting to understand it. Our listeners know what my advice is. By cheap rental properties in areas with really low land costs because we think land is declining in value in most places, finance it, and let inflation, when it comes in a year or two, really start repaying that debt for you by devaluing the value of the debt. What are your thoughts?
James West: That’s an excellent strategy. And in terms of investment, I don’t think you could do much better. In terms of protecting any stored wealth that you might be holding in say U.S. Treasury Bills or any U.S. dollar dominated asset that does not generate a yield associated with it – I know there’s lots of people rushing to T-bills, which I think today they just announced that the yield on the T-bill is now zero percent. And so, I’ve been advocating to my subscribers at www.Midasletter.com to try to transfer as much of their U.S. dollar paper wealth into gold and silver.
Jason Hartman: Do you have a preference, gold or silver?
James West: I’ve always gravitated towards gold. But over the last five years that I’ve become more closely associated with the economics of silver, I’m starting to appreciate that gold and silver are the precious metal combination and they’ve had a relationship, a fixed relationship over time at a ratio of roughly 50 to 1, I believe. The analysts who follow the silver market see that ratio actually shrinking. So there are those out there who would say that silver is the better investment. I’m just not that well-versed in the silver market to give that advice myself. And I like gold just because it’s something I understand. Historically, it’s very easy to understand. It’s very easy to understand where the idea of value comes from when you look at a piece of gold. I mean it’s worth something. But the problem with acquiring gold, especially in small denomination ounces, which typically come in bars and coins, is that a lot of the bullion dealers are having a hard time finding American gold eagles or Krugerrands or there’s a wind range of –
Jason Hartman: Yeah, this is the big disconnect between the spot price and the physical market that we’ve talked about.
James West: You try to buy an ounce of gold on say eBay you find that the average spot price of gold on eBay, if you were to average out all of the prices being asked per ounce, is actually closer to $1,000. And so, my subscribers come back to me and say, “Well, the spot price is $750 and these guys are asking $950. I can’t bring myself to pay that because I can’t wrap my head around the disconnect. And you know, all I have to say is, “If you believe, as I do and a lot of other people do, who are very close to the gold market, that gold is going to go through $2,000 an ounce within the year, and the upper level of its reach is going to be beyond $5,000 an ounce, then it’s going to make the difference between paying $900 an ounce or $700 an ounce or $800 an ounce look very irrelevant. And so certainly there’s some risk involved when transferring your wealth 100 percent into gold and I wouldn’t recommend that. But certainly I think there’s a strong argument for owning the liquid portion of your portfolio – that is the paper dollars – transferring that slowly into gold and silver within the next several months.
Jason Hartman: James West, thank you so much for being on the show. I appreciate it. The listeners will visit your websites. We’ll also link to them in the show notes. We appreciate having you, thanks so much.
James West: Thank you, Jason.
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Duration: 56 minutes