Jim Rickards, fully James "Jim" G. Rickards

Jim
Rickards, fully James "Jim" G. Rickards

American Lawyer, Portfolio Manager and Economist, Author of best-selling Financial Books, Editor of Strategic Intelligence (financial newsletter), Director of The James Rickards Project (an inquiry into the complex dynamics of geopolitics and global capital)

Author Quotes

broad-based tax cut . . . accommodated by a program of open market purchases . . . would almost certainly be an effective stimulant to consumption.... A money-financed tax cut is essentially equivalent to Milton Friedman?s famous helicopter drop of money.... Of course . . . the government could . . . even acquire existing real or financial assets. If . . . the Fed then purchased an equal amount of Treasury debt with newly created money, the whole operation would be the economic equivalent of direct open market operations in private assets.

inflation is the stealth destroyer of savings, capital, and economic growth.

The best thing a small investor can do is to have about 10% of investable money in physical gold. When I say investable assets I would exclude your home equity and any equity in your business. Put that into a separate category and take everything else into the category of your investable assets: Money that you have available to buy stocks or bonds. Put 10% of that in physical gold. Don?t buy paper gold like an ETF because when they close the exchanges your ETF is just a share and the gold will be unavailable to you. Also, put it in a safe place. Not in a bank because the banks may be closed, too. That would be your insurance. So even if you?re losing 60 or 70% on your other investments, gold could be going up three, four or five hundred percent.

The Treasury and the Fed resemble two drunks leaning on each other so neither one falls down. Today, with its 50-to-1 leverage and investment in volatile intermediate-term securities, the Fed looks more like a poorly run hedge fund than a central bank.

Debt used to finance government spending is acceptable when three conditions are met: the benefits of the spending must be greater than the costs, the government spending must be directed at projects the private sector cannot do on its own, and the overall debt level must be sustainable.

Ironically, solutions are not hard to devise. These solutions involve breaking big banks into units that are not too big to fail; returning to a system of regional stock exchanges, to provide redundancy; and reintroducing gold into the monetary system, since gold cannot be wiped out in a digital flash.

The confidence of the entire global financial system rests on the U.S. dollar. Confidence in the dollar rests on the solvency of the Fed?s balance sheet. And that solvency rests on a thin sliver of . . . gold.

The Washington, D.C., area is thick with secret agencies with?three-letter names,? such as CIA, FBI, NSA and less well-known outfits such as the Defense Intelligence Agency (DIA) and the Director of National Intelligence (DNI). One of the most powerful, and also most secretive, of these agencies is an institution that is not even part of the U.S. government. It?s an autonomous part of an emerging scheme of global governance accountable only to a small elite of central bankers, finance ministers and heads of state. That institution is the International Monetary Fund, or the IMF.

Deflation increases the real value of government debt, making it harder to repay. If deflation is not reversed, there will be an outright default on the national debt, rather than the less traumatic outcome of default-by-inflation.

It [gold manipulation] will end when the physical shortage gets to the point that someone fails to deliver; which, at that point, there will be a buying panic. There could be a buying panic or what some people call a demand shock. One of the things I said about gold manipulation is if I was the manipulator, I would be embarrassed at this point. The manipulation is obvious. The evidence is coming in from all directions. . . . The manipulation is clear. When will it end? It will end when there is a physical shortage that pops up somewhere, or it will end with a short squeeze.

The difference, however, is that, right now if we have inflation, everyone blames the Fed. In the future, however, you?ll have inflation coming from SDRs. That means when people try to blame the Fed, the Fed will say it?s not us; it?s those guys over there on G Street in Northwest Washington. Go blame them. No one even knows where the IMF is. So the SDR is just a way to get inflation through the back door.

The worst-case dynamics are daunting, but they are not inevitable. It is not too late to step back from the brink of collapse and restore some margin of safety in the global dollar-based monetary system. Unfortunately, the deck is stacked against commonsense solutions by the elites who control the system and feed at the trough of complexity. Diminishing marginal returns are bad for society, but they feel great for those on the receiving end of inputs - at least until the inputs run dry.

Derivatives serve practically no purpose except to enrich bankers through opaque pricing and to deceive investors through off-the-balance-sheet accounting.

It is one thing when prices drift downward over time due to innovation, scalability or other efficiencies. This might be considered good deflation and is familiar to any contemporary consumer who has seen prices of computers or wide-screen TVs fall year after year. It is another matter when prices are forced down by unnecessary monetary contraction, credit constraints, deleveraging, business failures, bankruptcies and mass unemployment. This may be considered bad deflation. This bad deflation was exactly what was required in order to return the most important currencies to their prewar parity with gold.

The dollar won?t be the important global reserve currency. The SDR will be used for the settlement of the balance of payments between countries, the price of oil and perhaps the financial statements of the 100 largest global corporations. The impact on everyday investors will be inflationary.

There are actually three different outcomes. I?m not categorical about which one it will be, but they?re all bad. One possible outcome is that the Fed actually does change psychology and change behavior and we will get inflation. But then it will very quickly morph into something more like hyperinflation. That means you?ll still have your Dollars but the value of the Dollar has been destroyed. Another possibility is that they keep printing money and then the collapse is very sudden and we have another financial crisis, worse than 2008/09. The central banks themselves will not be able to bail out the system again at which point they will require the IMF. The IMF will then have to print world money, so called Special Drawing Rights or SDRs. It will represent a massive money printing exercise which will be inflationary too, but from an entirely new source. This includes a scenario where there will be essentially chaos when we have these collapses. And then riots begin because people see their savings wiped out. Broker firms fail, brokerage accounts are wiped out, inflation wipes out the value of savings, the stock market crashes 70 to 80%. This would be already the third time that this happens: People?s savings were wiped out in 2000 because of the dotcom bubble, they were wiped out again in 2008 because of the financial crisis and now they?re wiped out again, except even worse. That might be the last straw. That might lead to rioting. And that will provoke a neo-fascist response. They will try to use police, national guards, executive orders, mass arrests and so forth. Whichever of these scenarios will be happening, they all stem from the same source: Policy makers not understanding what they?re doing whereas banks are becoming too large.

Eighty-five years ago this month, Credit-Anstalt, by far the largest bank in Austria, collapsed. By that July, banks in Egypt, Germany, Hungary, Latvia, Poland, Romania, and Turkey had experienced runs. A banking panic hit the United States in August, though the sources of that panic may have been domestic. In September, banks in the United Kingdom experienced large withdrawals. The parallels to the 2008 collapse of the US investment bank Lehman Brothers are strong ? and crucial for understanding today?s financial risks. For starters, neither the collapse of Credit-Anstalt nor that of Lehman Brothers caused all of the global financial tumult that ensued. Those collapses and the subsequent problems were symptoms of the same disease: a weak banking system. In Austria in 1931, the problem was rooted in the breakup of the Austro-Hungarian Empire after World War I, hyperinflation in the early 1920s, and banks? excessive exposure to the industrial sector. By the time Credit-Anstalt collapsed, the world had been in deep recession for two years, banking systems in a number of countries had become fragile, and tensions were easily transmitted across national borders, with the gold standard exacerbating financial vulnerability by constraining central banks? ability to act.

It is the thing you won?t see coming that will take the system down. Things happen much more quickly than what investors expect.? Rickards adds, ?What will happen in gold is that it will chug along and then all of a sudden?boom. It will be up $100 an ounce, and then the next day it will be up another $200 an ounce. Then everyone will be on TV saying it?s a bubble?boom. It?s up $300 an ounce, and before you know it, it will be up $1,000 per ounce. Then people will say gee, I better get some gold, and they?ll find out they can?t get it because the big guy will get it. You know, like central banks and sovereign wealth funds will be able to get the gold. The typical investor will run down to the coin shop and they will be sold out, and the U.S. Mint will say sorry, we?re not shipping. You?re going to find out you can?t get it because the whole thing is set up for massive shortages in supply.

The economy is like a high-altitude climber proceeding slowly, methodically on a ridgeline at twenty-eight thousand feet without oxygen. On one side of the ridge is a vertical face that goes straight down for a mile. On the other side is a steep glacier that offers no way to secure a grip. A fall to either side means certain death. Yet moving ahead gets more difficult with every step and makes a fall more likely. Turning back is an option, but that means finally facing the pain that the economy avoided in 2009, when the money-printing journey began. The great

There is hardly a part of the United States where men are not aware that secret private purposes and interests have been running the government. President Woodrow Wilson

Every war has its main fronts and its romantic and often bloody sideshows...So it is with currency wars. The main battle lines being drawn are a dollar-yuan theater across the Pacific, a dollar-euro theater across the Atlantic and a euro-yuan theater in the Eurasian landmass. These battles are real but the geographical designations are metaphorical. The fact is, currency wars are fought globally in all major financial centers at once, twenty-four hours per day, by bankers, traders, politicians and automated systems--and the fate of economies and their affected citizens hang in the balance.

It may be too late to save the dollar, but it is not too late to preserve wealth. We live in an ersatz monetary system that has reached its end stage.

The Fed sees inflation as a way to dilute the real value of U.S. debt and avoid the specter of deflation.

This world is conditioned by the triumph of globalization, the rise of state capitalism and the persistence of terror. Financial warfare is one form of unrestricted warfare, the preferred method of those with inferior weapons but greater cunning.

Everything about the IMF is designed to deceive you?beginning with the name. The IMF is not really a ?fund? in the sense of an endowment or mutual fund; it functions as the central bank of the world, taking deposits, called ?borrowings,? from countries around the world and making loans to its members. It prints money like most central banks, but this world money has the opaque name of special drawing right, or SDR.

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Jim
Last Name
Rickards, fully James "Jim" G. Rickards
Bio

American Lawyer, Portfolio Manager and Economist, Author of best-selling Financial Books, Editor of Strategic Intelligence (financial newsletter), Director of The James Rickards Project (an inquiry into the complex dynamics of geopolitics and global capital)