Propaganda & False Profits
founder Bob Moriarty never fails to get a rise out of The
readers, simultaneously raising hackles and awareness.
interview, his fifth with us since last November, he rails against
continuing business, media and government shenanigans. He prophesizes
bankruptcy, riots and revolution. But he also sees a bit of silver
lining in the thunderheads, predicting “a lot of surprises to the
upside” in the resources sector.
Just reading the papers today, we're seeing lots of interesting news.
We see GM has come out of bankruptcy, we see Goldman Sachs, BofA and
Citigroup all recording record profits. We're even hearing, in some
cases and some places that home sales are increasing. What is going
That's an example of how total the distortion is in the news media in
the United States. First of all, 96% of the news media is controlled
by six people. Their vested interest is not in telling the truth;
their vested interest is in selling products. What we call the news
media is really better termed a propaganda media. It's all
Let's take, for example, year-on-year railway
shipping of automobiles is down 49%. Nobody in creation could
honestly believe that GM is in better shape now than they were a few
weeks ago. Coming out of bankruptcy is a legal maneuver; it's not a
financial maneuver. They're out of bankruptcy; it's perfectly true
and perfectly meaningless at the same time. The government now
As negative as I am toward American management in
business today, the only people who are far worse would be government
bureaucrats. For example, in mid-July I saw Paulson's testimony about
how they threatened bankruptcy when BofA's negotiations with Merrill
Lynch almost came unglued. Bank of America President Lewis didn't
take care of his shareholders, which he has a legal obligation to do.
He pandered to the government and Paulson said, "We'll just
replace you." Since when did we become a communist society or
socialist society? It's no longer capitalism; it's government control
On one hand, we've got the financial system
totally controlled by Goldman Sachs. On the other hand, we've got
government control of Chrysler and GM and major segments of the
economy. We have the worst of all possible worlds.
As to the
record profits you mention, we're in a depression. If these guys are
making money, it's because they're manipulating the markets and
stealing from the taxpayers. There's a difference.
We have this big push for more government oversight and if we already
are allowing banks to steal money, what will additional government
oversight going to give us?
Congress gave these guys the ability to steal. There's been something
like $14 trillion total in government guarantees and loans and
giveaways. In 5, 10 or 20 years from now, we're going to look back
and say this was absolutely unbelievable. That money is simply
evaporating. The government talks about the deficit going over $1
trillion dollars this year. In the first six months, the actual debt
of the United States increased $2 trillion. On a $14 trillion
economy, the debt is going to go up $4 trillion this year. That's
never happened before in history. It's just absolutely amazing.
Speaking of debt, as you probably know, California is not hinged on
either financial industries or the auto industry, but it's been
paying government contracts with IOUs.
California is a disaster waiting to happen. It could fire every state
employee and still not balance its budget. California has the eighth
largest economy in the world and although they threw together a
budget at the 11th hour, the prospect of having to declare bankruptcy
One thing that no government bureaucrat will do
at any level in the United States today is decrease spending. We're
bankrupt; we can't afford to pay the debt that we already have. Obama
is just expanding power and size of government enormously. What we
must do at all levels is reduce government spending and these guys
don't want to do it. The government always wants to increase their
power, not decrease it. The way they gain power and votes is to spend
money. So they say there's no alternative.
Isn't it true that no U.S. state can declare bankruptcy?
Oh, of course, they can declare bankruptcy. Cities go bankrupt all
the time; so can states. We have 37 states that are not going to be
able to balance their budgets.
This is so simple and it's been
happening for millennia. Periodically you go through a time where
there's too much debt. You've got to wipe out debt and start all over
again. Nobody wants to admit that. California's not going to pay
their debts, and neither is the United States. They can't.
Thinking about potential bankruptcy and the debt of the Federal
government, one of your common themes is that there will be riots in
the streets. You talk about this on an international level, but you
also apparently expect it to also happen in the U.S. So far, it
hasn't happened. Do you think part of that is because social
legislation is making the U.S. population complacent?
I don't think so. I will say the U.S. population is complacent to
just an incredible degree. We saw a lot of attention focused on Iran
over charges of malfeasance in their elections. The last two
presidential elections prior to Obama coming in were absolutely
stolen by the Republicans. It was so crooked, it was unbelievable the
American population didn't do anything. But when I've talked about
rioting in the streets in the United States, you can look and see
what's happening in China right now. Everybody in the world is
sitting on a powder keg and it would take very little to ignite that
and it absolutely is going to happen. The fact that it hasn't
happened yet doesn't mean I'm wrong. It just means I'm wrong with the
timing, but my call was for this summer and we've still got some
summer to go.
Shifting from social unrest to financial unrest, when we last
interviewed you, you were talking about the $600 trillion of
outstanding derivatives and the potential—if it begins to
unravel—of putting heavy selling pressure on the financial markets.
Do you see that beginning to happen?
Absolutely. The big crash that took place from last July through
November was unusual because it had far more to do with unwinding or
deleveraging of derivatives. For the first time in about 10 years,
derivatives actually went down. I've been making the comment since
2001 that derivatives were a financial time bomb and the bigger they
grew, the bigger the explosion was going to be.
Here are the
numbers you need to focus on. According to the latest figures put out
by the BIS (Bureau of Industry and Security, U.S. Department of
Commerce), derivatives decreased by about $100 trillion from July
through December 2008. But for derivatives to deleverage $100
trillion, it wiped out $50 trillion worth of net asset value. For us
to knock that $600 trillion to something more manageable—like $50
trillion—could wipe out $250-$275-$300 trillion worth of assets.
There isn't $300 trillion worth of assets in the whole world.
the simple explanation is that there is far more debt in the world
than assets to cover it. We have not come to grips with that. We've
not seen the bottom of the stock market and I believe there will be a
massive deleveraging starting shortly. The bankruptcy of CIT or the
situation in California could well be what starts it.
Do we necessarily have to unwind all of the debt? Can't we live
peacefully with some amount of derivatives?
No. With derivatives, people bet on things that make no financial
sense. There's nothing gained financially. It's a giant crap game,
where everybody's playing with Monopoly money, and the game is
rigged. I've been saying that for years. I'm the last guy in the
world to believe in conspiracy theories, but Goldman Sachs just
brought criminal charges against one of their programmers for
stealing a software program that allowed them to front-run their own
customers. I think 87% of their trades were profitable and they were
doing $100 million a day in profit. They were stealing from their own
How is it they're suing this programmer and not the management?
The programmer stole the code and was going to take it to another
company. But in their criminal complaint, they said the software
would allow someone to manipulate the stock market—that the
software was designed to manipulate the stock market.
If the papers are filed and they're admitting that the software is
designed to front run and cause abnormal profits, why isn't someone
bringing Goldman Sachs to court?
Goldman Sachs owns our government. The government of the United
States is a subsidiary of Goldman Sachs.
How do we break that link?
We go bankrupt, we have riots, we have a revolution. You hang people
from the nearest yardarm.
Your conversation about the riots and the bankrupt and the further
crash in the stock market goes back to something you've been saying
all along—to invest in gold and silver. In fact, you suggested that
the percentage of gold and silver in investors' portfolios should
equal the probability of financial collapse they expect. You're
talking about 100% probability for financial collapse, and the last
time we talked, you were 100% in gold and silver and various forms of
it. But your recent writings suggest that you're moving out into some
other sectors now. What's the story?
I was a little bit inaccurate in what I said. Here's a more accurate
way of putting it. The very most important thing that anyone can do
for themselves and for their family is to have an insurance policy of
physical gold, physical silver or physical platinum. Those are
insurance policies. Once you get past the insurance policy, the very
safest things that you can invest in right now are producing gold or
silver mines, near-term producing gold mines or energy.
scary thing about energy is that it goes up and down. Natural gas
right now is an absolute disaster. Nobody is making money in natural
gas. We could still have more declines in the price of natural gas
and oil. However, we have passed peak oil. Demand has continued to
increase even with a depression and we've got not only peak oil, but
we've got peak food.
Potash is interesting. Potash hasn't come
down very much. It got up to about $1,000 a ton and it's about $550 a
ton now. There are three or four or five really good potash companies
and I think they're very attractive.
But you want to invest in
real things, tangibles that produce something that is valuable in
real-world Economics 101—silver, gold, platinum, potash, oil and
natural gas. So when I talk about gold being insurance against
financial collapse, all of the rest are, too, to varying
Thank you for clarifying that. You mentioned your focus on producing
or near-term producing gold and silver. You've been saying this all
along, and in fact, we give you credit for calling a couple of great
companies in this sector.
Those were not great predictions on the part of Bob Moriarty. The
stock market got absolutely creamed last October and November, so
hundreds of stocks were up hundreds of percent.
there are hundreds of gold companies, silver companies, resource
companies selling very cheaply. They are cheaper than they've ever
been relative to the price of gold and silver and that creates good
opportunity. Gold is very cheap at $940, silver is pretty cheap at
But it's important to understand that even though
prices have come down, the supply of commodities has dwindled faster
than demand has decreased, so we could see explosions in the price of
copper or lead or zinc or niobium or tantalum or silver or gold.
There will be a lot of surprises to the upside. Shares of resource
companies are still at record lows, so you could see lots of
companies go up 1,000%. Evolving Gold is one of my favorites. It got
down to 14 cents in November and has been trading around $1.80
With supply falling faster than the demand, what other metals should
we be watching for surprises?
All of them. We're all familiar with the concept that demand for
metals goes down when you go into a depression. That's absolutely
true. Rail car shipments of metals in the United States are down 40%.
But the key is a lot of these mines have high-cost operations, and
when the price of metal goes down, they just put the mines into care
and maintenance. So the surprise in the metals will be a surprise to
When do you expect all of the government's infusion of currency into
the system to produce inflation?
Everybody is talking about deflation. We don't have deflation.
Housing prices may be down, but we have inflation and it's a lot
higher than most people realize. Ignoring the reported numbers
because any government numbers today are fantasy, what do you suppose
the core inflation rate is today? What do you feel from your
I would say not quite double digits.
You called it very well. I've told people for years that their own
experience is as good as or better than anything else. John Williams
from shadowstats.com is saying that inflation is close to 9.5%.
That's what the real numbers are. We have a lot of inflation right
now and it's only going to get worse.
But at the same time, aren't a lot of the discount stores in essence
keeping prices capped?
They are. The opportunities are shocking now. It's extraordinary. I'm
just knocked out when I go to the stores and see the number of items
That said, though, the consumer is broke. If you
don't have the money, it doesn't make any difference if there are
sales going on or not. But for the core items, I see a lot of things
going up. I just sent a book, interestingly enough, overnight from
Florida to Colorado. For a five-pound book, it cost me $42. I was in
absolutely shock. I thought it would be $10 or $15 or maybe $20
Any parting comments?
There are opportunities, as I said, but we are not out of the woods.
The economy is not recovering. Unemployment is still shooting through
the roof and things are going to get far worse before they get
better. We have another crash coming this fall.
We look forward to one day when we say things are looking up.
We're going to have to smarten up first. We can't keep doing
incredibly stupid things like all these recovery programs. They're
nothing but giveaways for the vested interests.
I personally and/or my family own the following
companies mentioned in this interview: Evolving Gold, Minco Silver,
Passport Metals and Pediment.
At 321gold.com, we receive money
for advertising from the following companies: Evolving Gold, Minco
Silver, Endeavour Silver, Great Panther, Passport Metals, Pediment,
Timmins and Commerce Resources.