Sunday, November 18, 2018

Jim Rickards: The Debt Bomb is Ready to Explode

The great Chinese growth slowdown has been proceeding in stages for the past two years. The reason is simple. Much of China’s “growth” (about 25% of the total) has consisted of wasted infrastructure investment in ghost cities and white elephant transportation infrastructure.

That investment was financed with debt that now cannot be repaid. This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue.

China’s future success depends on high-value-added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy.

In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis. China started to do this last year but quickly turned tail when the economy slowed. Now the economy has slowed so much that markets are collapsing.

But doesn’t China have over $1 trillion of reserves to prop up its financial system?

On paper, that’s true. But in reality, China is “short” U.S. dollars. The Chinese may have $1.4 trillion of U.S. Treasury securities in its reserve position, but they need those assets possibly to bail out their banking system or defend the yuan.

Meanwhile, the Chinese banking sector, which in many ways is an extension of the state, owes $318 billion in U.S. dollar-denominated deposits of commercial paper.

From a bank’s perspective, borrowing in dollars is going short dollars because you need dollar assets to back up those liabilities if the original lenders want their money back. For the most part, the banks don’t have those assets because they converted the dollar to yuan to prop up local real estate Ponzis and local corporations.

There’s not much left over to bail out the corporate, individual and real estate sectors.

This is all part of a global “dollar shortage” attributable to Fed tightening, both in the forms of higher rates but also a reduction in base money...

- Source, Jim Rickards via the Daily Reckoning

Wednesday, November 14, 2018

Robert Kiyosaki and Jim Rickards Predict the Next Financial Calamity

Find out what central bankers and politicians plan to do after the next financial crash. Jim Rickards, author of “The Road to Ruin,” joins Robert and Kim and offers a clear-eyed view of how the next collapse will unfold and what you can do to preserve your wealth. 

Rickards has worked inside Wall St. and consulted at the highest levels of government. His insights are illuminating and rooted in social science and economic history.

Saturday, November 10, 2018

Jim Rickards: Cyber Financial Warfare is Upon Us

Topics Include: 

*Cyberwarfare Update – Chinese embedding hacking chips onto server mother boards used in American Industry and Department of Defense Systems at the factory level 

*Why infrastructure will be most likely targets for cyberwarfare 

*How cyber financial-warfare versus financial systems, stock markets, banks is an evolving and real threat 

*How physical gold is resilient versus cyber financial-warfare 

*IMF Global Financial Stability Report 

*How markets are over 90% automated trading, and there are no human market makers available to stabilize falling markets 

*Total official gold adjusted upwards for Central Bank buying. Eurozone countries now buying gold may be signaling important shift in Central Bank behavior 

*Gold requires no counter-parties to retain its value, all other currencies rely on counter parties 

*Game Theory on Future Monetary System Based On A Sovereign Issued Crypto Currency: Permissioned Distributed Ledger sponsored by China / Russia / IMF, Digital Coin tied to the SDR for measure of value, net of payments settled in Physical Gold.

- Source, Physical Gold Fund

Tuesday, November 6, 2018

Jim Rickards: The Heightened Risk of Financial Calamity is Real

Economist, investment banker, and author James Rickards discusses interest rates, the stock market, the US economy, precious metals, the risk of financial calamity, the future of the Fed and much more.

- Source, Neptune Global

Friday, November 2, 2018

James Rickards: Are We In Another Slow Motion Meltdown?

The biggest thing that I’m concerned about, and that I watch very closely, is the debt-to-GDP ratio.

The Keynesian view is that if the economy isn’t growing fast enough, you’re in a liquidity trap and the private economy won’t spend, the government should spend and there’s your liquidity. From there, you’ll get some growth.

Keynesians have this idea that the more money you borrow, the better, because if the government borrows money they spend it. And when they spend it, they put it in your pocket or my pocket and that’s the money that stimulates the economy.

That’s true right up until the point where everybody changes their mind. The one thing that central bankers do not understand is the importance of confidence. Confidence can be lost and when that happens things can change overnight.

- Source, Seeking Alpha