best-selling book on investing in precious metals.

It's available in eleven languages.

And in my book, I said that we are on a wild rollercoaster of a ride,

and that we would first see the threat of deflation, followed by a helicopter drop,

and that would be followed by big inflation.

And that has happened. There was the 2008 crisis...

We're seeing the base money around the planet being hyper-inflated right now

while all of the credit aggregates are collapsing, and so it's sort of netting out

to zero inflation or just slightly positive inflation, even though

base money around the planet is just taking off like a rocket.

But it would then be followed by a real deflation

and then followed by hyperinflation.

So I think it sort of looks like this:

we've got the markets going up in the real estate bubble in 2007,

and then we had the threat of deflation, which was the 2008 market crash, and the big

helicopter drop of currency, and you are here [laughs].

And then I think that we're going into something like this,

and it'll be followed by the world central banks overreacting.

People, you know, some people say I've been calling for hyperinflation, hyperinflation, hyperinflation...

There isn't any time that I can find, in all of history,

where a population that's all on one side of the boat, when you have

a nation of debtors,

what has to happen is that you go into a deflation first,

allowing the banks to foreclose.

The public, in general, is on the losing side of the bet.

We are entering a period of financial crisis that is the greatest the world has ever known.

The wealth transfer that will take place during this decade

is the greatest wealth transfer in history.

Wealth is never destroyed, it is merely transferred;

and that means that on the opposite side of every crisis,

there is an opportunity.

The great news is that all you have to do to turn this crisis into your great opportunity,

is to educate yourself.

I believe that the best investment that you can make in your lifetime is your own education:

education on the history of money, education on finance, education on

how the global economy works,

education on how all of these guys – the central bankers, the stock market –

how they can cheat you; how they can scam you.

If you learn what is going on and how the financial world works,

you can put yourself on the correct side of this wealth transfer.

Winston Churchill once said, that the further you look into the past,

the further that you can see into the future. This program

is all about creating your own crystal ball: being able to gaze into the future;

being able to change this crisis – the greatest crisis in the history of mankind –

into your great opportunity.

Well I've been traveling overseas quite a bit,

but I'm on my way home now to speak at an event in California, finally.

What I've been trying to make clear is the fact that this rollercoaster crash

that I was talking about in my book, and that I've been predicting since 2005,

is playing out right before our eyes.

One of the things I really like about speaking at live events is the chance to interact with people and sort of

get my finger on the pulse of what they're thinking.

And lately, it's become pretty obvious

that for a lot of people, it's difficult to grasp why I think deflation

is coming before big inflation, or even hyperinflation.

So here, I'm going to break down four of the biggest reasons that I see deflation coming first.

The first one is simple:

The overreaction to the 2008 crisis has caused a credit / debt bubble, and all bubbles pop.

So, I talked about hyper-inflating base money. This is, this *is* hyperinflation right here.

Inflation and deflation is either an expansion or a contraction of the currency supply,

and prices follow the inflation or deflation eventually.

Now, most of this currency does not circulate. It's sitting on banks' balance sheets and what's called

excess reserves.

You know, if you look at the years leading up

to this crisis, this red line is reserve balances.

The white line is how much of it is excess,

and here we have Alan Greenspan's response to 9/11.

Look at the scale of how big this emergency is compared to 9/11.

But what is Ben Bernanke afraid of, and now Janet Yellen has inherited this legacy?

Well, one of the things that happened in the 2008 crisis is that banks

froze up and wouldn't lend to each other. They were all scared to lend to each other,

and our system is such a fraud,

that at the end of each day, they all have to be able to borrow

digits from each other that were created from nothing

just to keep the whole smoke-and-mirrors game going. They all have to do this interbank lending

to keep things balanced.

Well, if one bank won't lend to another and they don't have any reserves, the whole system freezes up.

Now, if you've got all these excess reserves that are on their balance sheet

and you pay them interest to keep the reserves there and not

use this as a basis of fractional reserve lending,

they're going to be liquid. This basically prevents

bank runs *by* banks *on* banks. It's not a public bank run with the

the public lining up at the doors.

It's a bank run where one bank is trying to

get their currency out of another or won't lend to another,

and so this keeps things liquid. Right now, what this has done though,

the banks get to use this stuff in the middle of the day.

And so, you see the use of margin in the stock market going to record levels.

You see the stock market going to record levels. Things like – I follow collector cars –

they've been going astronomical. The number of 10-million-dollar cars out there now

is just absolutely insane. And there are cars now selling for *30* million dollars.

Wine collections, art – it's all going ballistic at this point.

And all bubbles pop.

This is the average price of a new home divided by the median annual household income.

Normally, 3, 4 times your income is about what you can afford with a house.

When you drop interest rates, the affordability goes up, so people pay more for a house.

But interest rates don't stay in one spot forever; they *have* to revert some time or another,

and all these people are going to be trapped. Every bubble pops; that's a bubble.

We are in for something big again, and this time it's going to be more horrific than the

crash of 2008, simply because the response to 2008 created a lot of stored energy.

And then when the market crashes, that energy is released in the opposite direction. That previous chart

of the hyperinflation of base money, well, we're going to get a reaction from all of this.

Whatever bubble you're in, the opposite happens of what

is of greatest benefit to the most people.

Right now, if we went into big inflation or hyperinflation,

the average Joe Six-pack would get rewarded for mass stupidity.

They're all out on credit; we're in a credit boom, we're in a bond bubble;

those bubbles have to pop. And the popping of a credit bubble is deflationary.

It's deflationary... and history's crystal- clear on that. A lot of the gold bugs say,

you know, the Federal Reserve and central banks, they're creating money, which they are, unprecedented;

but, they're actually inflating to fight the deflation that started to set in the late 2008, early 2009.

And if you look back at history, as you say, every major debt

and financial asset bubble in history – the railroad bubble of the early 1870s that peaked,

followed by deflation;

you know, the auto and farm bubble and tractor bubble – that's actually a tractor bubble

that caused the Great Depression. It was farms failing

and it was smaller local banks failing that caused the Great Depression and high unemployment.

Deflation. Because the deflation has to root out

the massive debt, and the financial assets that get over-inflated. And it's good

if we bring down the cost of living, if we restructure debt, if we bring financial assets down;

it actually improves our standard of living long-term. But it is painful when it happens.

People don't –

people think that the Federal Reserve can prevent deflation; that they control the money supply.

Most people don't realize that the Federal Reserve controls *base* money

only; and it's an incredibly small portion of – it's so tiny! – right,

and all they do is influence the rest of the economy with interest rates and reserve balances and such.

Well, you know, some people say

the strategy didn't work. Well no, it did work: we would have been in a depression,

just like the early '30s. We were going there: banks were melting down, financial institutions; *major*

Fortune 100 companies were failing, like AIG.

We would have imploded because once you have that much debt and

leverage and things go wrong, it just builds the other way. Like you say, you

get a bubble on one end, you get a crash. Bubbles don't crack; they burst.

So we were going into that, but governments said no, we will do

whatever it takes: Mario Draghi, you know, Ben Bernanke...

and they created trillions of dollars to fill the hole.

Well, all that does,

it's like taking more drugs

to keep from coming down. I mean a drug addict can keep taking more drugs until it kills them.

Or until they just fall down and get dragged into detox. It's [the] exact same thing.

Debt, especially when it's extreme, is a financial enhancing drug:

it gives you more than you deserve, makes you feel better in the short-term.

And, but when it's over, you have to go through a detox, as they would call it:

a debt detox. And that's where you get deflation.

This is the demographics of the United States back in the year 1940,

and it's broken into five-year age groups.

And what I'm going to show you here is the baby boom and one of the reasons

that we're going into this deflationary scenario,

and we're also in this swing from individualism to collectivism.

This is a pendulum, a cycle that just goes back and forth throughout time.

And this is the greatest threat to your well-being and the well-being of the economy – and, freedom.

We're going through a period where this demographic

is going to cause some huge problems. So,

here we are in 1950 and you can see the beginning of that baby boom taking off: 1960,

1970, and this wave –

now, the reason I've got this broken up into these different colors – children

are the ultimate consumers: they consume everything, they produce nothing – except

a quality of life for their parents; you know, a big reward

as far as seeing them grow up and so on.

But economically, children are an economic loss. They consume economic energy.

What you're seeing here is this wave coming into

working-age. The green area is sort of a break-even area;

that's when

people are getting a job and it might be a minimum-wage job or something like that, and

uh, might be sharing an apartment with a few other

people. And then, as you get into the yellow area you start to become a net positive

for society. You're paying income tax, you're producing more than you consume,

and then you get into what's called the maximum spending demographic.

The maximum spending demographic is ages 45 to 54.

And this group lives in the largest houses of their lifetimes; they're driving the most cars of their lifetimes;

they're sending their kids off to college; they're spending A LOT. Then,

the kids – then they become empty-nesters; that's the maximum saving demographic.

Once the kids are gone, off to college, they go, "holy moly, we didn't save anything!

We want to retire in five years or ten years!" And so they start saving. And then,

you get to the point where they retire and

they become maximum social burden demographic, I call it, simply because

they're liquidating assets; they're pulling – they've got their stocks and their savings

and each year they're going to liquidate some of those to live. And the only

driver that in – the economic driver is

the medical industry; they drive the medical industry. So economically,

the maximum social burden group is a net loss for

the prosperity of society, the prosperity of an economy.

And so, I'm going to go back again and

you can see that that maximum social burden group almost didn't exist in 1940.

And there's a lot of people of that working age and maximum spending age

supporting the few people that were of the maximum social burden category.

And then we get the baby boom sweeping through and

in the '80s and that stock market boom of the '90s and all the way up to 2000,

that yellow area that really drives the economy

was growing every year. Now,

we have an economy where it's supposed to grow at about 3%

or it's going to stall; we have, we

inflate the currency supply at about that rate and...

but now, after the year 2000, we've got 2010,

the peak of the maximum spending demographic,

and from now on it's sort of downhill.

Maximum savers, they do help drive the stock market,

but look at that maximum social burden category and look at what happens next.

So we are going into this time period right now.

Now, the reason there's no children on there is they haven't been born yet.

But if you look at... you know, when I first presented this a couple of years ago,

birth rates have been falling for quite a while now, and they've been

falling at an even greater speed since the crash of '08.

And if you look at the data from the Great Depression, birth rates just fell off a cliff

in the Great Depression. And so you have less people, less

people of the younger age

coming into this demographic to support the people that are retiring.

They didn't have the pill during the Great Depression.

Contraception was something that was not within most people's reach.

So here it is automated, and you can see that big wave sweeping through there.

And if you could imagine data for the children,

it would be a much lower rate. And if we do have a big economic pullback,

you're going to see that really reduce.

So we're in, most likely, some very serious trouble here. Because all of our social programs

and the way the economy and the society is set up,

everybody is expecting to be able to retire at a certain age and live fairly comfortably

off of the rest of us, off of the government.