With the decision last Tuesday (September 6th) of the Swiss National Bank (central bank) to put boot on neck of appreciation of the swiss franc, we may have have entered a new stage on the Global Economic Crisis. That prompted an interview with James Dines, the author of “Goldbug” (originally published under the title “The Invisible Crash”) and “Mass Psychology” (a guide to investors who want to avoid mainstream psychology), and editor of The Dines Letter since 1960.

James Dines is a contrarian that become legendary. Decades ago, he risked his meteoric career as a Securities Analyst in Wall Street by insisting that what was then called “the almighty dollar” would be devalued – considered a “treasonous” view at the time. He predicted that gold would rise in an “historic bull market” from government-fixed levels of $35 to an outrageous-looking prediction “over $400.” Now, gold is fluctuating between $1800 and $1900.
He began publicly recommending gold stocks in The Dines Letter, created in 1960, and consistently and outspokenly recommended precious metals assets. Dines also early pointed that without a link to gold and silver, the dollar would lose its integrity and suffer a massive devaluation.

The exclusive interview with James Dines:
 

JD: The Dines Letter has long predicted “The Coming Competing Currency Devaluations” to be expressed as “currency wars.” These have been building for decades as some major countries began to competitively suppress interest rates so as to make their currencies less attractive, deliberately undermining them, to enhance their exporting prowess.

JD: America has been severing links between its paper money and gold, for going on one century, as outlined in my Goldbug! book, step by step, with the net result being that all the world’s currencies are floating without any
link to tangible value. As a result, they float depending on the amount of paper each country prints, and it will result in what we have been calling a “fool’s race to the bottom.” It is already happening with interest rates in Japan and the United States at virtually zero, and they are baffled as to what to do next, but there is no next.

JD: The result of nations running their printing presses is, first an inflation, followed by deflation, and the world has been in deflation for several decades, at least since 1989 in Japan. In these circumstances, printing additional large amounts of money risks a dreaded hyperinflation, that we call “the supernovae of inflations.”

JD: All currencies are engaged in currency devaluations in which no country wants an overvalued currency that hurts its exporters. It is very unlikely that all countries of the world would stop running their currency printing presses, or run them at exactly the same rate at the same time. Since all currencies are fluctuating against all the others, instability risks an historic crash sometime in the future, the protection against which would be difficult to find, but we recommend at least gold and silver-related assets. A fluctuating currency introduces an inherent instability into the entire world’s currency and economic systems, gravely risking serious loss of capital to those who are unprepared.

JD: These interventions are part of the competing currency devaluations and, in the long run will have serious consequences for the overall economy because the world needs a sound currency system in order to function properly. Japan has for a long time been living off keeping its yen lower than the US dollar in order to boost its exports. That game is over, so Japan is reduced to buying dollars, thereby pushing it up against the yen, but America is now also engaged in the game of overprinting and one can only marvel that Japan is
printing paper yen to buy paper dollars without grasping that it is all an illusory house of cards vulnerable to a chance gust of wind. Switzerland is in a different position, with so much demand for its stable currency, fewer of which are printed by Switzerland, that seekers of safety are buying the Swiss franc and pushing it up to the point where its own exporters are getting squeezed.

JD: The US dollar and euro have been moving relatively flat to each other since around 2008. No paper currency could have a “sustainable” move because, without a link to tangible value of any kind, it will fluctuate within the rules of Mass Psychology and the emotions of the crowd, as outlined in my Mass Psychology book. You’re basically asking which is the best horse in the glue factory.

JD: The US dollar is already beginning to lose its special privilege as a “reserve currency,” and it began when President
George W Bush decided to let the dollar float freely instead of maintaining the dollar as the yardstick currency of the world.

JD: After Mao died [in September 1976] The Dines Letter predicted that China would dominate the 21st century, still not widely believed. The yuan becoming the reserve currency would surely be part of that picture. Indeed, China is already experimenting the yuan with international functions, through Hong Kong. Actually, we predict that no paper currency will become the reserve currency, because that honor always has been and always will be gold and silver.

JD: The Genoa Conference in 1922 doubled the money supply in order to pay for World War I, a flood of paper that unleashed the so-called “Roaring Twenties.” The inevitable deflation immediately following 1929 was a normal and natural deflation, eliminating the overprinting of paper. After World War II America began to get addicted to debt and running the printing presses, based on Keynesian economics, which was antipodal to the Austrian School of Economics as promulgated by von Mises and von Hayek. Not everybody realizes that the word “inflation” means an increase in the money supply rather than a synonym for “higher prices.” The pangs of deflation are already being felt in America, especially in wages, and the absence of jobs, but also worldwide. The overprinting of dollars is wending its way into commodities, actual products, and these higher prices are triggering violence and revolutions in a number of countries worldwide.

JD: “Unless things change, the world is headed straight for what we call “The Second Great Depression,” where the lust for financial capital gains will be extirpated and then replaced by survival of capital.”