THIRTY-FIVE FREQUENTLY ASKED QUESTIONS ANSWERED 263The other problem is that much of the euphoria in the
fracking fields was financed with low-grade corporate debt.
This debt was issued on the assumption that oil prices would
remain above $80 per barrel or higher. With oil in the $45 per
barrel area and likely to remain below $60 per barrel, much of
this investment will have to be written off.
The amount is in the trillions of dollars, larger than the sub-
prime mortgage crisis, and much of the debt is stashed away in
bond funds buried in retail 401(k)s. As I mentioned earlier, you
should check your 401(k) to see if there are any corporate bond
funds, and if so, call your broker or adviser to find out if there
are any fracking-related junk bonds tucked inside.
- I read in the introduction of your book, Currency
Wars, about the possibility of an 80-90-98% “windfall
profits tax” on gold (if and when it goes up to $7,000-plus
per ounce). If that’s true, wouldn’t that mitigate the ben-
efits of holding gold?
My reference to a future windfall profits tax on gold in
the introduction to my book Currency Wars was intended to
form a contrast to the confiscation of gold in 1933. The point
simply is that the government sometimes works to suppress
the price of gold, but when gold goes up anyway, the govern-
ment finds a way to steal the profits from private investors. A
windfall profits tax is one way to do this, but not the only way.
I mentioned it as an illustration of what could happen, not as
a hard-and-fast prediction.
The possibility of such a tax is not a reason to avoid hold-
ing gold today. The surge in the dollar price of gold that I ex-
pect has barely begun. If the price does move up sharply, there
should be time to sell the gold at a high level and reinvest in
another asset class, such as land or fine art, which is less likely
to be targeted for confiscatory taxation by the government.
Of course, deciding when the profits on gold are large