HAI: Eventually when the bubble bursts, what do you see happening to gold?
Turk: I still see the underlying fundamental value of gold to be $12,000 per ounce. That's no more outrageous than saying in the early 1970s that when gold was at $35, that it would go to $850 an ounce by the end of that decade. We are in the same kind of situation today that prevailed back then, except circumstances now are worse.
Here is the way I look at it, and I'm looking at it objectively. Gold has this 5,000-year history as money. It’s been through all kinds of crises, wars, fads, political points of views, etc. And it has survived.
Now, for 40 years, we have been in this fiat currency system, which is a long time in people’s lives. It's our adult life; it’s half of our lifetime. But when you look at 40 years within the context of 5,000 years, the last four decades are just a blink of an eye.
People believe that what they're using today in commerce is money, but it’s not. It’s only a money substitute, which describes the essence of the money bubble. All the currency circulating today backed by nothing but promises is a money substitute circulating in place of money, which of course is gold and silver.
In testimony before Congress 100 years ago, famed banker J.P. Morgan gave a clear definition of money: “Money is gold, nothing else.” The money bubble has been created simply because people today have just lost sight of this fundamental, timeless principle.
Eventually people are going to understand that all of this fiat currency that is backed by nothing but IOUs is only as good as the IOUs are good. And in the current environment, the IOUs are so big, a lot of promises are going to be broken. The resulting collapse of confidence is going to have a negative impact on currencies as well as the economy.
The obvious question is, do you want to go and believe in politicians and their 40-year story that this era of easy money printing and excessive government spending is going to continue forever? Or do you want to look at gold’s 5,000-year history and say, “I think I want to go into a physical metal with no counterparty risk rather than taking the IOUs of overleveraged governments.” That’s what it comes down to in the final analysis.