Sunday, October 30, 2016
The Gold Chronicles With Jim Rickards - The Road to Ruin
Thursday, October 27, 2016
Jim Rickards: International Monetary System and Gold
Monday, October 24, 2016
James Rickards Reveals IMF World Currency Crash Conspiracy, We Need The Gold Standard
Jim Rickards discusses the ongoing threat of cyber terrorism, the currency collapse that he see's coming and how the global economy is going to deal with all of these threats. Will we persevere, or will we collapse under our own weight?
Monday, October 17, 2016
The Dollar Will be Devalued, Are You Prepared?
There’s no doubt that the U.S. was the most powerful country in the world in the 1980–2000 period shown in the chart above. The Soviet Union was in terminal decline by 1987, and collapsed in 1991. China was still emerging and had a major setback with the Tiananmen Square uprising in 1989. Europe did not implement the euro until 1999. The U.S. was king of the hill.
When the U.S. wanted a weaker dollar in 1985, we just dictated that result to the world in the Plaza Accord. When the U.S. wanted to lock in the cheap dollar in 1987, we dictated that result also in the Louvre Accord. Market forces had nothing to do with it. Whatever the U.S. wanted, the U.S. got. Investors were just along for the ride.
Before the Plaza and Louvre Accords, there was the Smithsonian Agreement of December 1971. That was an agreement among the “Group of 10” (actually 11: U.S., U.K., Japan, Canada, France, West Germany, Belgium, Netherlands, Italy, Sweden and Switzerland) to devalue the dollar between 7% and 17% (depending on the currency pair in question).
This happened shortly after President Nixon suspended the conversion of dollars for gold on Aug. 15, 1971. Nixon thought this would be a temporary suspension and that the gold standard could be resumed once the devaluation was agreed.
The devaluation happened but the gold standard never returned. By January 1980, the dollar had devalued 95% when measured in the weight of gold.
Even before the Smithsonian Agreement, there was Harold Wilson’s 14% sterling devaluation (1967), the Bretton Woods Conference (1944), FDR’s gold confiscation and 60% dollar devaluation (1933), U.K. abandoning the gold standard (1931), and the Genoa Conference and the Gold Exchange Standard (1922).
The point is that monetary earthquakes happen from time to time. We just noted nine big ones in the past hundred years, but there were many others, including the sterling crisis of 1992 when George Soros broke the Bank of England, and the Tequila Crisis of 1994 when the Mexican peso devalued 50% in a matter of months.
These monetary earthquakes move in both directions. Sometimes the dollar is a huge winner (1980–85), and sometimes it loses a large part of its value (1971–80 and 1985–87). The key for investors is to be alert to behind-the-scenes plans of the global monetary elite and anticipate the direction of the next big move.
What will happen in the next five weeks is just as significant as any of the monetary earthquakes mentioned above. There are three major events happening in rapid sequence. Here’s the list:
You might be tempted to dismiss this calendar as “business as usual.” G20 leaders’ meetings happen every year. The SDR basket has been changed many times in the past. The IMF has global meetings twice a year (spring and fall). But it’s not business as usual. This time is different.
The hidden agenda involves the formal transition from a dollar standard to an SDR standard in world monetary affairs. It won’t happen overnight, but the elite decisions and seal of approval will take place at these meetings.
The SDR is a source of potentially unlimited global liquidity. That’s why SDRs were invented in 1969 (when the world was seeking alternatives to the dollar), and that’s why they will be used in the imminent future.
SDRs were issued in several tranches during the monetary turmoil between 1971 and 1981 before they were put back on the shelf. In 2009 (also in a time of financial crisis). A new issue of SDRs was distributed to IMF members to provide liquidity after the panic of 2008.
The 2009 issuance was a case of the IMF “testing the plumbing” of the system to make sure it worked properly. With no issuance of SDRs for 28 years, 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 also partly to make sure the system works in case a large new issuance was needed on short notice. The 2009 experience 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 Jan. 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 asrepos , derivatives, settlement and clearance channels, and the entire apparatus of a liquid bond market.
In November 2015, the Executive Committee of the IMF formally voted to admit the Chinese yuan into the basket of currenciesinto which an SDR is convertible.
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. Other private SDR bond issues are expected soon.
On Sept. 4, 2016, the G20 leaders will meet in Hangzhou, China, under the leadership ofG20 President Xi Jinping, who is also the general secretary of the Communist Party of China. In this meeting, other world leaders will metaphorically kowtow to the new Chinese emperor and recognize China as the co-head of the global monetary system alongside the U.S.
On Sept. 30, 2016, at the close of business, the inclusion of the Chinese yuan in the SDR basket goes live.
On Oct. 7, 2016, the IMF will hold its annual meeting in Washington, D.C., to consider additional steps to expand the role of SDRs and make China an integral part of the new world money order.
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.)
Thereafter, the international monetary elite will await the next global liquidity crisis. When that crisis arrives, there will be massive issuances of SDRs to return liquidity to the world and cause global inflation. The result will be the end of the dollar as the leading global reserve currency.
Based on past practice, we can expect that the dollar will be devalued by 50–80% in the coming years.
A devaluation of this magnitude will wipe out the value of your life’s savings. You’ll still have just as many dollars, but they won’t be worth nearly as much.
The time to start preparing is now.
When the U.S. wanted a weaker dollar in 1985, we just dictated that result to the world in the Plaza Accord. When the U.S. wanted to lock in the cheap dollar in 1987, we dictated that result also in the Louvre Accord. Market forces had nothing to do with it. Whatever the U.S. wanted, the U.S. got. Investors were just along for the ride.
Before the Plaza and Louvre Accords, there was the Smithsonian Agreement of December 1971. That was an agreement among the “Group of 10” (actually 11: U.S., U.K., Japan, Canada, France, West Germany, Belgium, Netherlands, Italy, Sweden and Switzerland) to devalue the dollar between 7% and 17% (depending on the currency pair in question).
This happened shortly after President Nixon suspended the conversion of dollars for gold on Aug. 15, 1971. Nixon thought this would be a temporary suspension and that the gold standard could be resumed once the devaluation was agreed.
The devaluation happened but the gold standard never returned. By January 1980, the dollar had devalued 95% when measured in the weight of gold.
Even before the Smithsonian Agreement, there was Harold Wilson’s 14% sterling devaluation (1967), the Bretton Woods Conference (1944), FDR’s gold confiscation and 60% dollar devaluation (1933), U.K. abandoning the gold standard (1931), and the Genoa Conference and the Gold Exchange Standard (1922).
The point is that monetary earthquakes happen from time to time. We just noted nine big ones in the past hundred years, but there were many others, including the sterling crisis of 1992 when George Soros broke the Bank of England, and the Tequila Crisis of 1994 when the Mexican peso devalued 50% in a matter of months.
These monetary earthquakes move in both directions. Sometimes the dollar is a huge winner (1980–85), and sometimes it loses a large part of its value (1971–80 and 1985–87). The key for investors is to be alert to behind-the-scenes plans of the global monetary elite and anticipate the direction of the next big move.
What will happen in the next five weeks is just as significant as any of the monetary earthquakes mentioned above. There are three major events happening in rapid sequence. Here’s the list:
- On Sept. 4, the G20 leaders meet in Hangzhou, China
- On Sept. 30, the yuan officially joins the SDR basket of currencies
- On Oct. 7, the IMF holds its annual meeting in Washington, D.C.
You might be tempted to dismiss this calendar as “business as usual.” G20 leaders’ meetings happen every year. The SDR basket has been changed many times in the past. The IMF has global meetings twice a year (spring and fall). But it’s not business as usual. This time is different.
The hidden agenda involves the formal transition from a dollar standard to an SDR standard in world monetary affairs. It won’t happen overnight, but the elite decisions and seal of approval will take place at these meetings.
The SDR is a source of potentially unlimited global liquidity. That’s why SDRs were invented in 1969 (when the world was seeking alternatives to the dollar), and that’s why they will be used in the imminent future.
SDRs were issued in several tranches during the monetary turmoil between 1971 and 1981 before they were put back on the shelf. In 2009 (also in a time of financial crisis). A new issue of SDRs was distributed to IMF members to provide liquidity after the panic of 2008.
The 2009 issuance was a case of the IMF “testing the plumbing” of the system to make sure it worked properly. With no issuance of SDRs for 28 years, 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 also partly to make sure the system works in case a large new issuance was needed on short notice. The 2009 experience 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 Jan. 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
In November 2015, the Executive Committee of the IMF formally voted to admit the Chinese yuan into the basket of currencies
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. Other private SDR bond issues are expected soon.
On Sept. 4, 2016, the G20 leaders will meet in Hangzhou, China, under the leadership of
On Sept. 30, 2016, at the close of business, the inclusion of the Chinese yuan in the SDR basket goes live.
On Oct. 7, 2016, the IMF will hold its annual meeting in Washington, D.C., to consider additional steps to expand the role of SDRs and make China an integral part of the new world money order.
Over the next several years, we will see the issuance of SDRs to transnational organizations, such as the U.N.
Thereafter, the international monetary elite will await the next global liquidity crisis. When that crisis arrives, there will be massive issuances of SDRs to return liquidity to the world and cause global inflation. The result will be the end of the dollar as the leading global reserve currency.
Based on past practice, we can expect that the dollar will be devalued by 50–80% in the coming years.
A devaluation of this magnitude will wipe out the value of your life’s savings. You’ll still have just as many dollars, but they won’t be worth nearly as much.
The time to start preparing is now.
- Source, The Daily Reckoning, Jim Rickards
Friday, October 14, 2016
A Timetable for the Dollar’s Demise
The next five weeks will mark one of the most significant transformations in the international monetary system in over 30 years.
Since the dollar is still the lynchpin of this system, the dollar itself will be affected.Whatever affects the dollar affects you, your portfolio and your personal financial security. It is vital to understand the changes underway in order to protect your net worth, and even prosper in the coming transition.
Such radical transformations of the international monetary system have happened many times before, including the dual “accords” of the 1980s. These were the Plaza Accord in 1985, and the Louvre Accord in 1987 — named respectively after the Plaza Hotel in New York, and the Louvre Museum in Paris where the key meetings took place.
At the Plaza Accord, the top financial officials from the U.S., U.K., West Germany, France and Japan agreed on Sept. 22, 1985, to devalue the dollar. The dollar plunged 30% in the next two years.
The damage was so bad that a second meeting was called at the Louvre on Feb. 22, 1987. That meeting was attended by the top financial officials from the U.S., U.K., West Germany, France, Canada and Japan. Participants at that meeting agreed to halt the dollar’s devaluation. The dollar was relatively stable in the years following.
It’s a mistake to believe the dollar’s value is set by market forces.
That may be true in the short run, but in the longer run, the dollar is worth whatever governments want it to be worth.The more powerful the government, the more they can call the shots.
Since the dollar is still the lynchpin of this system, the dollar itself will be affected.Whatever affects the dollar affects you, your portfolio and your personal financial security. It is vital to understand the changes underway in order to protect your net worth, and even prosper in the coming transition.
Such radical transformations of the international monetary system have happened many times before, including the dual “accords” of the 1980s. These were the Plaza Accord in 1985, and the Louvre Accord in 1987 — named respectively after the Plaza Hotel in New York, and the Louvre Museum in Paris where the key meetings took place.
At the Plaza Accord, the top financial officials from the U.S., U.K., West Germany, France and Japan agreed on Sept. 22, 1985, to devalue the dollar. The dollar plunged 30% in the next two years.
The damage was so bad that a second meeting was called at the Louvre on Feb. 22, 1987. That meeting was attended by the top financial officials from the U.S., U.K., West Germany, France, Canada and Japan. Participants at that meeting agreed to halt the dollar’s devaluation. The dollar was relatively stable in the years following.
It’s a mistake to believe the dollar’s value is set by market forces.
That may be true in the short run, but in the longer run, the dollar is worth whatever governments want it to be worth.
Monday, October 10, 2016
Gold Demand Could Become a Self-Fulfilling Prophecy
Switzerland has been a net exporter of gold for the past four months. More gold is going out than is coming in. This means demand remains strong, but supplies are tight.
Switzerland does not produce its own gold. Some refiners may have inventories and there are gold vaults in Switzerland that are a potential source of supply. But the high-net worth individuals who keep their gold in Switzerland are long-term buy-and-hold investors and tend not to sell. On balance, these net outflows are unsustainable. If theoutlfows persist, the price of gold is likely to go up because that’s the market’s solution to excess demand.
The “big five” destinations are China, Hong Kong, India, the U.K.and the United States. Those five destinations account for 91% of total Swiss gold exports.
Hong Kong demand is mostly for re-export to China. This is revealed through separate Hong Kong import/export figures, which are also considered reliable by international standards. Using Hong Kong as a conduit for Chinese gold is just one more way China tries to hide its true activities in the physical gold market.
Bear in mind that China is the largest gold producer in the world. There is an additional 450 tons per year of indigenous mining output available to satisfy China’s voracious demand for official gold, held by its central bank and sovereign wealth funds.
Chinese demand has been tempered by the recent strong dollar, which makes gold more expensive when purchased for yuan. That headwind may be about to dissipate if the Fed engineers a weaker dollar (which we expect) to deal with a slowing U.S.economy .
Switzerland has exported 102 tons to the U.K.and U.S., almost all to satisfy demand from ETF investors. Will this strong demand persist? ETF demand runs in a feedback loop relative to gold prices.
When gold is going up, ETF demand goes up also which puts more upward pressure on the price. This also works in reverse as we saw in 2013. When gold is going down, ETFs tend to disgorge gold, which puts further downward pressure on the gold price.
Either way, ETF demand tends to be pro-cyclical and to amplify whatever goldis doing based on other factors. If we have reason to believe that gold prices are going up on their own, ETF demand will tend to drive the price even higher and faster.
Supplies of gold in Switzerland are already tight (I heard this first-hand from my refinery and vault contacts there). If that shortage gets worse, as we expect it will, there’s only one way to adjust the Swiss gold trade imbalance — higher prices. Once the higher prices kick in, the ETF demand will send it into overdrive. From there, it’s just a matter of time before the whole paper gold pyramid comes crashing down.
Gold prices are set to skyrocket based on a combination of supply and demand fundamentals and the ETF pro-cyclical feedback loop. If gold goes up, the prices of gold mining stocks go up even faster. In effect, buying gold mining stocks is a leveraged bet on the price of gold itself.
- Source, Jim Rickards
Switzerland does not produce its own gold. Some refiners may have inventories and there are gold vaults in Switzerland that are a potential source of supply. But the high-net worth individuals who keep their gold in Switzerland are long-term buy-and-hold investors and tend not to sell. On balance, these net outflows are unsustainable. If the
The “big five” destinations are China, Hong Kong, India, the U.K.
Hong Kong demand is mostly for re-export to China. This is revealed through separate Hong Kong import/export figures, which are also considered reliable by international standards. Using Hong Kong as a conduit for Chinese gold is just one more way China tries to hide its true activities in the physical gold market.
Bear in mind that China is the largest gold producer in the world. There is an additional 450 tons per year of indigenous mining output available to satisfy China’s voracious demand for official gold, held by its central bank and sovereign wealth funds.
Chinese demand has been tempered by the recent strong dollar, which makes gold more expensive when purchased for yuan. That headwind may be about to dissipate if the Fed engineers a weaker dollar (which we expect) to deal with a slowing U.S.
Switzerland has exported 102 tons to the U.K.
When gold is going up, ETF demand goes up also which puts more upward pressure on the price. This also works in reverse as we saw in 2013. When gold is going down, ETFs tend to disgorge gold, which puts further downward pressure on the gold price.
Either way, ETF demand tends to be pro-cyclical and to amplify whatever gold
Supplies of gold in Switzerland are already tight (I heard this first-hand from my refinery and vault contacts there). If that shortage gets worse, as we expect it will, there’s only one way to adjust the Swiss gold trade imbalance — higher prices. Once the higher prices kick in, the ETF demand will send it into overdrive. From there, it’s just a matter of time before the whole paper gold pyramid comes crashing down.
Gold prices are set to skyrocket based on a combination of supply and demand fundamentals and the ETF pro-cyclical feedback loop. If gold goes up, the prices of gold mining stocks go up even faster. In effect, buying gold mining stocks is a leveraged bet on the price of gold itself.
- Source, Jim Rickards
Friday, October 7, 2016
What Do Central Bankers Know?
Topics:
The outlook for natural resources
Is gold a commodity or money?
How did James come to his conclusion on gold?
Do central bankers know more than they let on?
The outlook for US stocks and more...
For more insightful market commentary and exclusive interviews visit: http://powerandmarket.com
Tuesday, October 4, 2016
Here Is Where The $10,000 Per Ounce Number Comes From
It’s not made up. I don’t throw it out there to get headlines, et cetera. It’s the implied non-deflationary price of gold. Everyone says you can’t have a gold standard, because there’s not enough gold. There’s always enough gold, you just have to get the price right.
That was the mistake made by Churchill in 1925. The world is not going to repeat that mistake. I’m not saying that we will have a gold standard. I’m saying if you have anything like a gold standard, it will be critical to get the price right. To this regard, Paul Volcker said the same thing.
The analytical question is, you can have a gold standard if you get the price right; what is the non-deflationary price? What price would gold have to be in order to support global trade and commerce, and bank balance sheets, without reducing the money supply? The answer is, $10,000 an ounce.
The math is where I use M1, based on my judgment. You can pick another measure if you choose (there are different measures of money supply). I use 40 percent backing. A lot of people don’t agree with that. The Austrians say it’s got to be 100 percent.
Historically, it’s been as low as 20 percent, so 40 percent is my number. If you take the global M1 of the major economies, times 40 percent, and divide that by the amount of official gold in the world, the answer is approximately $10,000 an ounce.
Now, if you go to 100 percent, you’re going to get, using M1, you’re going to get $25,000 an ounce. If you use M2 at 100 percent, you’re going to get $50,000 an ounce. If you use 20 percent backing with M1, you’re going to get $5,000 an ounce. All those numbers are going to be different based on the inputs, but just to state my inputs, I’m using global major economy M1, 40 percent backing, and official gold supply of about 35,000 tons.
Change the input, you’ll change the output, but there’s no mystery. It’s not a made-up number. The math is eighth grade math, it’s not calculus.
That was the mistake made by Churchill in 1925. The world is not going to repeat that mistake. I’m not saying that we will have a gold standard. I’m saying if you have anything like a gold standard, it will be critical to get the price right. To this regard, Paul Volcker said the same thing.
The analytical question is, you can have a gold standard if you get the price right; what is the non-deflationary price? What price would gold have to be in order to support global trade and commerce, and bank balance sheets, without reducing the money supply? The answer is, $10,000 an ounce.
The math is where I use M1, based on my judgment. You can pick another measure if you choose (there are different measures of money supply). I use 40 percent backing. A lot of people don’t agree with that. The Austrians say it’s got to be 100 percent.
Historically, it’s been as low as 20 percent, so 40 percent is my number. If you take the global M1 of the major economies, times 40 percent, and divide that by the amount of official gold in the world, the answer is approximately $10,000 an ounce.
Now, if you go to 100 percent, you’re going to get, using M1, you’re going to get $25,000 an ounce. If you use M2 at 100 percent, you’re going to get $50,000 an ounce. If you use 20 percent backing with M1, you’re going to get $5,000 an ounce. All those numbers are going to be different based on the inputs, but just to state my inputs, I’m using global major economy M1, 40 percent backing, and official gold supply of about 35,000 tons.
Change the input, you’ll change the output, but there’s no mystery. It’s not a made-up number. The math is eighth grade math, it’s not calculus.
- Source, Daily Reckoning
Saturday, October 1, 2016
Double Digit Inflation And The Rise of Gold
Double-digit inflation is a non-linear development. What I mean by that is, inflation doesn’t go simply from two percent, three percent, four, five, six. What happens is it’s really hard to get it from two to three, which is ultimately what the fed wants.
It’s proving extremely difficult just to get up to two. Personal consumption expenditures (PCE) is the core price deflator, which is what the fed looks at. Currently, it is at about 1.6, 1.7 percent, but it’s stuck there. It’s not going anywhere. The fed continues to try everything possible to get it to two with hopes to hit three. Where the problem arises is once you get to three, the next stop isn’t four, it’s eight, and then it goes to ten. In other words, there is a big jump.
The reason is that it’s not purely a function of monetary policy, it’s a partial function of monetary policy.
It’s also a partial function of behavioral psychology. It’s very difficult to get people to change their expectations, but if you do, it’s hard to get them to change back again.
Inflation can really spin out of control very quickly. So is double-digit inflation rate within the next five years in the future? It’s possible. Though I am not forecasting it. If it happens, it would happen very quickly. We would see a struggle from two to three, and then jump to six, and then jump to nine or ten. This is another reason why having a gold allocation now is of value. Because if and when these types of development begin happening, gold will be inaccessible.
To this point, I am often approached on, “How can you say gold prices will rise to $10,000 without knowing developments in the world economy, or even what actions will be taken by the federal reserve?”
It’s proving extremely difficult just to get up to two. Personal consumption expenditures (PCE) is the core price deflator, which is what the fed looks at. Currently, it is at about 1.6, 1.7 percent, but it’s stuck there. It’s not going anywhere. The fed continues to try everything possible to get it to two with hopes to hit three. Where the problem arises is once you get to three, the next stop isn’t four, it’s eight, and then it goes to ten. In other words, there is a big jump.
The reason is that it’s not purely a function of monetary policy, it’s a partial function of monetary policy.
It’s also a partial function of behavioral psychology. It’s very difficult to get people to change their expectations, but if you do, it’s hard to get them to change back again.
Inflation can really spin out of control very quickly. So is double-digit inflation rate within the next five years in the future? It’s possible. Though I am not forecasting it. If it happens, it would happen very quickly. We would see a struggle from two to three, and then jump to six, and then jump to nine or ten. This is another reason why having a gold allocation now is of value. Because if and when these types of development begin happening, gold will be inaccessible.
To this point, I am often approached on, “How can you say gold prices will rise to $10,000 without knowing developments in the world economy, or even what actions will be taken by the federal reserve?”
- Source, Daily Reckoning