Sunday, April 18, 2021

James Rickards: The Mainstream Scenario

Here’s the mainstream scenario: The U.S. and global economies are making a strong comeback from the pandemic. China is growing quickly, U.S. unemployment is dropping, the virus is fading and the lockdowns are ending. This would be a recipe for strong growth and higher interest rates by itself.

Now, Congress and the White House have passed a $1.9 trillion COVID relief bill, which has little to do with COVID and everything to do with spending for favored interests, including teachers, municipal workers, federal workers, and community organizers. It also provides money for programs such as the Kennedy Center, the National Endowment for the Arts, etc.

The market view is that this additional $1.9 trillion of spending, combined with the $6 trillion of deficit spending already approved for fiscal 2020 and fiscal 2021 and another $4 trillion deficit spending package expected later this year, is more than the COVID situation requires and more than the economy can absorb without inflation.

Therefore inflation expectations have risen sharply. And, along with inflation expectations, the yield-to-maturity on the benchmark 10-year U.S. Treasury note has spiked.

The yield on the 10-year has risen from 0.917% on January 4 to 1.316% on February 6 to 1.638% today. Those rate hikes might not sound like much, but it’s an earthquake in the note market.

If you compare the rate hikes to the decline in gold prices, there is a high degree of correlation. As rates go up, gold goes down. It’s that simple.

More deficit spending stokes the flames of inflation expectations, which leads to higher rates and lower gold prices. When those fundamental trends are combined with leverage, algo-trading, and momentum, it’s like throwing gasoline on an open flame.

Gold investors have been getting burned.

What’s flawed in this scenario? The short answer: everything.


You can’t argue with the facts – rates are going up, and gold is going down. But, the assumptions behind these trends are flawed. That means the trends will inevitably reverse, probably sharply.

Again, perspective helps.

This is not our first interest rate spike. The 10-year note hit 3.96% on April 2, 2010. It then fell to 2.41% by October 2, 2010. It spiked again to 3.75% on February 8, 2011, before falling sharply to 1.49% on July 24, 2012.

It spiked again, hitting 3.22% on November 2, 2018, before plummeting to 0.56% on August 3, 2020, one of the greatest rallies in note prices ever.

There’s a pattern in this time series called “lower highs and lower lows.” The highs were 3.96%, 3.75% and 3.22%. The lows were 2.41%, 1.49%, and 0.56%.

The point is that the note market does back up from time-to-time. And when it does, it cannot hold the prior rate highs and eventually sinks to new rate lows.

If we apply that pattern to the current rise in rates, we should expect that the rate increase will top out well short of 2.5%, and a new low may follow as low as 0.25% or even zero. There’s no guarantee of this; it’s not deterministic. But, it would be consistent with the 10-year trend of lowering rates.

Still, there’s more going on. The economy is not nearly as strong as the headlines and Wall Street cheerleaders would have you believe.

Friday, April 16, 2021

Jim Rickards: M2 Skyrocketing As Fed Stops Weekly Data Showing Money Supply

Six-time best-selling author Jim Rickards speaks with our Daniela Cambone about the road to economic recovery. 

They cover various topics, including Rickards’ stance that deflation remains the greatest risk to the economy, despite reports of inflation. 

Rickards also talks about M2 skyrocketing and how it coincides with the discontinuation of the Federal Reserve’s money supply series, data that has been published weekly since 1970.

Wednesday, April 14, 2021

James Rickards: The Mainstream’s Got It Wrong

Gold has taken a hit this year, no doubt about it. Since peaking over $1,950 in early January, the price of gold has fallen to $1,725 today.

But not all is doom and gloom. Some perspective is needed. If we go back to the beginning of the current bull market on December 16, 2015 (when gold bottomed at $1,050 per ounce), gold is up over 60% even at today’s beaten-down price.

That bottom occurred on the exact day that the Fed started their “lift-off” in interest rates after seven years stuck at zero. I urged investors to buy gold then. Those who listened are still sitting on huge gains even after the latest drawdown.

Savvy investors know the dollar price of gold is volatile. They keep their eye on the long-term trends and long-term drivers of the gold price. Sophisticated investors don’t sweat the dips. They see the occasional drawdowns as a great entry point and buying opportunity. So do I.

Nothing New Here

We’ve been here before.

Gold fell 17% from August 5, 2016, to December 1, 2016. It fell 8.1% from September 8, 2017, to December 13, 2017. It fell 12.5% from March 6, 2020, to March 19, 2020, during the pandemic panic.

After every one of these falls, gold rallied back and maintained a trend line of higher highs, finally reaching the $2,000 per ounce threshold in August 2020.

The important questions for gold investors are: Is this just a dip or the start of a new bear market?

And, what’s been driving the dip; when can we expect a turnaround? We address both questions by looking at the mainstream scenario and explaining why it’s wrong and how the turnaround will emerge.

- Source, James Rickards via the Daily Reckoning

Saturday, April 10, 2021

The Price of Gold Over the Last 10 Years and What That Means for You

Myths about investing in gold abound. However, people turn to gold for a variety of reasons, financial and otherwise. Attributes such as malleability, resistance to corrosion, and ability to conduct electricity attract many to the metal. However, limited supply and availability tend to bolster its appeal as a form of money.

The Federal Reserve can print more dollars, but no entity can “print” gold. Barrick Gold Corp., one of the largest gold producers in the world, spent $1,065 per ounce to mine gold in 2020. While this makes mining profitable at the current price, this takes a considerably larger effort than increasing the supply of paper or digital dollars.

As for how to invest in gold, financial author Jim Rickards recommends a 10% allocation, and many other advisors agree. This is likely due to poor long-term returns.

Investors should remember that gold does not pay interest. Moreover, it has underperformed stocks over time. Today’s price of $1,740 per ounce amounts to a gain of only 22% over 10 years. Over the same period, the S&P 500 has nearly tripled. Hence, investing in gold has generally not served investors well.

Gold Through History

Nonetheless, the reverence for gold goes back to the beginning of civilization. The ancient Egyptians smelted it as far back as 3600 B.C. and began using it for jewelry in 2600 B.C. Ancient civilizations in Persia, China and many other places revered and treasured this precious metal.

Use as money goes back as far as ancient Rome, but most societies treated it as money indirectly. In the 18th, 19th and much of the 20th century, powerful central banks such as the Bank of England established trust in their respective currencies by guaranteeing convertibility to a specified amount of gold per unit. The Federal Reserve maintained a value of $35 per ounce of gold from the 1930s until 1971.

Removing the gold/dollar peg sent gold as high as $850 per ounce in 1981 as inflation and interest rates reached double-digit levels. However, the Fed moved to counter inflation in the early 1980s. Eventually, gold settled in the $300-$400 per ounce range and stayed there for the remainder of the 20th century.

Tuesday, April 6, 2021

James Rickards: War With North Korea is Inevitable, Only a Matter of Time

Throughout 2016 and 2017 the dollar has been weakening. The Euro has risen against the dollar, and this weaker dollar has translated into higher prices for gold.

Jim thinks a shooting war with North Korea could be a wake-up call for the markets. The markets did react somewhat to Kim Jung-un’s initial missile tests however these launches have become normalized. Jim is convinced the U.S. is on a path toward war and will have to attack before they miniaturize their nuclear warheads to missile size. Korea has achieved made advances faster than intelligence agencies suspected. Jim thinks the markets are overly complacent about it.

Yellen’s recent speeches indicate the Fed will not raise rates. The Fed uses a relatively simple model that targets 2% inflation. The Fed wants interest rates to be around 3.5% before the next recession because you can’t get out of a recession with rates this low. He discusses various pause factors that use in their forecast.

Gold stocks are much the same what differs is management. How do you sort the well-run companies from the frauds? Jim says do your homework or find a reliable source.

Jim provides an overview of a company he is working with that utilize four scientific principals and a supercomputer to analyze the market and make predictions about possible outcomes of future events.

- Source, Palisade Radio

Friday, April 2, 2021

James Rickards: Too Soon to Say if There's an Archegos Contagion

CNBC's Dom Chu talks about the potential ripple effect of the Archegos fallout with Jim Rickards, author of “The New Great Depression: Post-Pandemic Winners and Losers."

- Source, CNBC

Wednesday, March 17, 2021

James Rickards: Use it or Lose it

I’ve said all along that you cannot put negative interest rates on consumers until you eliminate cash. Otherwise, savers would just withdraw cash from the banks and stuff it in mattresses to avoid the negative rates. Implicitly, the European Central Bank (ECB) seems to agree.

One of the ECB Board members says that negative rates (really confiscation) will be applied as a “penalty” against “hoarding” cash. In plain English, that means they will create digital money, force you to spend it, and if you don’t spend it, they will take it away as a “negative rate.”

Now all of the pieces of the global elite plan are converging.

The IMF SDR issuance will reliquify global central banks that cannot print dollars. Then CBDCs will be used to eliminate cash.

Once the cattle (that’s us) have been herded into the digital slaughterhouse, we will be told to “use it or lose it” when it comes to our own money. In other words, either we spend the money, or the government will take it away.

Of course, the spending can be channeled into politically correct causes by excluding unpopular vendors such as gun dealers or conservative social media platforms from the payment system. This represents total domination of human behavior through world money + digital currencies + confiscation.

This is not speculation anymore; it’s happening in front of our eyes. The Great Reset is coming fast. The future is here.

The only solution is to use a non-digital, non-bank store of wealth that cannot be traced or manipulated. Given the planned dollar devaluation, it’s one more reason to own physical gold and silver.

Get it while you still can...

- Source, James Rickards

Sunday, March 14, 2021

James Rickards: The Day China Got a Seat at the Monetary Table

In July 2016, the IMF issued a paper calling for the creation of a private SDR bond market. These bonds are called “M-SDRs” (for market SDRs), in contrast to “O-SDRs” (for official SDRs).

In August 2016, the World Bank announced that it would issue SDR-denominated bonds to private purchasers. Industrial and Commercial Bank of China (ICBC), the largest bank in China, will be the lead underwriter on the deal.

In September 2016, the IMF included the Chinese yuan in the SDR basket, giving China a seat at the monetary table.

So, the framework has been created to expand the SDR’s scope.

The SDR can be issued in abundance to IMF members and used in the future for a select list of the most important transactions in the world, including balance-of-payments settlements, oil pricing and the financial accounts of the world’s largest corporations, such as Exxon Mobil, Toyota and Royal Dutch Shell.

Now, the IMF is planning to issue $500 billion of new SDRs, although some Democrat senators are lobbying for an issue of $2 trillion SDRs or more.

This would be almost ten times the amount of SDRs issued in 2009 and would go a long way to increasing SDR liquidity and advancing the globalist agenda of eventually having the SDR replace the U.S. dollar as the leading reserve asset.

This proposal closely follows the global elite game plan predicted in chapter 2 of my 2016 book, The Road to Ruin.

Over the next several years, we will see the issuance of SDRs to transnational organizations, such as the U.N. and World Bank, to be spent on climate change infrastructure and other elite pet projects outside the supervision of any democratically elected bodies. I call this the New Blueprint for Worldwide Inflation.

More Than Just SDRs

But there’s more to the Great Reset than the issuance of new SDRs. Here’s another breaking news story that validates the longstanding prediction of a coming reset in the global financial system.

In 1999, the euro replaced the individual currencies of Germany, France, Netherlands, Italy and other major economies in Europe. Today, the number of countries that have joined the euro is up to 19, and more countries are awaiting admission.

The euro is the second largest reserve currency asset after the U.S. dollar. The creation of the euro can be thought of as a stepping stone from national currencies to a single world currency.

Now, the euro (along with the Chinese yuan) is moving quickly to become a Central Bank Digital Currency (CBDC). A CBDC combines a traditional currency with the blockchain technology of a cryptocurrency.

It’s an important move in the direction of eliminating cash and forcing users into a 100% digital system using credit cards, debit cards, and smartphone apps.

Why are China and Europe so focused on eliminating cash?

- Source, James Rickards

Thursday, March 11, 2021

James Rickards: The Great Reset is Upon Us

The Bretton Woods conference of 1944 set the global financial system that still prevails today. The period 1969-1971 can be regarded as the First Reset, which involved the creation of Special Drawing Rights (SDR, ticker:XDR), the devaluation of the dollar and the end of the gold standard.

For years, commentators (myself included) have discussed the next global monetary realignment, which is sometimes called The Big Reset or The Great Reset.

Now, it looks like the long-expected Great Reset is finally here.

Details vary depending on the source, but the basic idea is that the current global monetary system centered around the dollar is inherently unstable and needs to be reformed.

Part of the problem is due to a process called Triffin’s Dilemma, named after economist Robert Triffin. Triffin said that the issuer of a dominant reserve currency had to run trade deficits so that the rest of the world could have enough of the currency to buy goods from the issuer and expand world trade.

But, if you ran deficits long enough, you would eventually go broke. This was said about the dollar in the early 1960s.

In 1969, the International Monetary Fund (IMF) created the SDR, possibly to serve as a source of liquidity and alternative to the dollar.

In 1971, the dollar did devalue relative to gold and other major currencies. SDRs were issued by the IMF from 1970 to 1981. None were issued after 1981 until 2009 during the global financial crisis.

“Testing the Plumbing”

The 2009 issuance was a case of the IMF “testing the plumbing” of the system to make sure it worked properly. Because zero SDRs were issued from 1981–2009, the IMF wanted to rehearse the governance, computational, and legal processes for issuing SDRs.

The purpose was partly to alleviate liquidity concerns at the time, but it was also to make sure the system works, in case a large new issuance was needed on short notice. The 2009 experiment showed the system worked fine.

Since 2009, the IMF has proceeded in slow steps to create a platform for massive new issuances of SDRs and the creation of a deep liquid pool of SDR-denominated assets.

On January 7, 2011, the IMF issued a master plan for replacing the dollar with SDRs.

This included the creation of an SDR bond market, SDR dealers, and ancillary facilities such as repos, derivatives, settlement and clearance channels, and the entire apparatus of a liquid bond market.

A liquid bond market is critical. U.S. Treasury bonds are among the world’s most liquid securities, which makes the dollar a legitimate reserve currency.

The IMF study recommended that the SDR bond market replicate the infrastructure of the U.S. Treasury market, with hedging, financing, settlement and clearance mechanisms substantially similar to those used to support trading in Treasury securities today.

- Source, James Rickards via the Daily Reckoning

Sunday, March 7, 2021

How Jim Rickards Lied, Cheated, and Stole as Pentagon's Financial War Game Played Out

Pentagon Financial War Game: 

Jim Rickards describes to Applico CEO Alex Moazed his strategy during the Pentagon's first ever Financial War Game held at Johns Hopkins University's top secret Warfare Analysis Laboratory. 

Rickards breaks down how he clandestinely met with a member of the Russian team before commencement of the games to spell out his plans to announce a new gold standard for the Chinese. 

After having his move ruled as illegal by the game adjudicators and being forced to argue his case, Jim reveals that the radical action ended up scoring points for the Russian team at the end of the games two days later.

Friday, March 5, 2021

Harry Dent vs James Rickards: The Great Gold Debate

Will the great gold debate finally be decided by these two titans of the industry?

Harry Dent is a bestselling author and renowned economic forecaster. Dent predicted Japan’s 1989 economic collapse, the dotcom bubble AND the US subprime bust… all well ahead of time.

His forecasts are legendary. Particularly in the late 1980s, when he predicted the coming Japanese slowdown.

Probably his most famous book was The Great Boom Ahead, published in 1993, where he was virtually on his own in predicting the unanticipated ‘boom’ of the 1990s.

James G. Rickards is an American lawyer, economist, investment banker, speaker, media commentator, and New York Times bestselling author on matters of finance and precious metals.

He is the author of Currency Wars: The Making of the Next Global Crisis, The New Case for Gold and “The New Great Depression, Winners and Losers in Post-Pandemic World”.

He is known internationally for predicting GFC - the worst economic crisis in history.

James Rickards was a national security advisor for the Pentagon and the CIA. He also gave the Federal Reserve a hand when America was about to enter a $1.3 trillion financial crisis, back in 1990.