China Trade Deal: Why Trump Needs This to Win According to James Rickards

The U.S. has completed phase one of a trade deal with China, signaling what could be a de-escalation of and even the possible end of the trade wars. 

This is a move that Trump desperately needs for re-election, said best-selling author, James Rickards. “With slow growth I think you’ll see one, maybe two rate cuts, that will give the stock market a boost. 

The other thing is calm down the trade wars, it looks like we’re literally just days away from doing that with the Chinese, so if you get good news on trade wars and the prospect of rate cuts, that’s going to keep the stock markets up, and that’s going to help Trump for re-election,” Rickards told Kitco News.

- Source, Kitco News

Jim Rickards Ultimate 2020 Financial Forecast

Next year’s macroeconomic growth forecast will not be strong, but as long as the Federal Reserve remains accommodative, equities can remain high, this according to best-selling author Jim Rickards. 

“Some analysts give recession almost a 0% chance in the next six months, and I agree with that, probably not even more than a 30% chance,” Rickards told Kitco News.

- Source, Kitco News

Jim Rickards: Confidence in Fed is Fragile, Are We Doomed for a Crisis?

The direction the Federal Reserve is taking today with their monetary policy does not inspire confidence and erodes the value of money, said best-selling author James Rickards. 

“You can have a fiat money standard if people have confidence. There are a couple of ways to destroy confidence. 

One, too much debt, and the other one is inflation. Inflation is not much of a problem right now but too much debt is, because it points to inflation as a way out,” Rickards told Kitco News.

- Source, Kitco News

James Rickards on the Donald Trump Impeachment

James Rickards: How Easy is It to Be Manipulated?

James Rickards: How To Avoid The Next Market Crash

Jim Rickards Project Prophesy: Does This Government Secret Affect You?

James Rickards is the American financial expert and author of the New York Times best-selling books “The Death of Money”, “Currency Wars”, and “The New Case For Gold”. 

He worked on Wall Street for 35 years, and now advise Johns Hopkins University and the U.S. Department of Defense, where he served as a facilitator of the first-ever financial war games conducted by the Pentagon. 

In his new book “Aftermath”, he explains how the biggest financial crisis is yet to come and reveals his seven secrets of wealth preservation in the coming chaos.

- Source, London Real

James Rickards: The Next Financial Crash is Coming, Guaranteed

James Rickards is a renowned lawyer, economist, and finance expert. Jim is also the author of Currency Wars: The Making of the Next Global Crisis and five other books.

- Source, Triggernometry

Jim Rickards: Central Banks of Russia Buys Another 12.44 Metric Tonnes of Gold

"It's that time again. Central Bank of Russia just reported adding 12.44 metric tonnes of gold to reserves in September. Brings total Russian gold reserves to 2,243 metric tonnes worth $115 billion at the market. I guess Jamie Dimon can buy the Treasury notes Russia is dumping."

- Source, James Rickards via Twitter

Aftermath: The Coming Financial Crisis and the Return to Gold

Economist and author Jim Rickards joins us at Small Caps headquarters to discuss his latest book 'Aftermath'. 

Jim shares his views on the current state of the global economy and why he believes we are headed for a major global financial crisis in the near future that will be greater than 2008. 

Discussed is how investors can prepare and even benefit from the collapse. Gold set to make a comeback as money and why a $10,000 per ounce gold price is not out of the question. 

We go into Jim's work for the US government & CIA, and ask if they know the collapse is coming and are preparing for it. 

The role of the US dollar and its future.

- Source, Small Caps

Jim Rickards: The FED won’t be able to bail out the system again

Commenting on what he thinks the FED may do in the event of another financial panic, Rickards said: “They’re going to freeze accounts and shut the stock exchanges because they won’t be able to bail it out again.”

He went on to say the FED “printed four trillion dollars to bail out [the system] last time, and I was standing with our modern monetary theorists to say that you’re not gonna be able to print another four trillion to bail it again.”

Rickards thinks that this will inevitably cause the FED “to turn to the IMF”.

He believes a move like this may have “a lot of implications” due to the role the IMF plays in today’s global economic framework as essentially “the central bank for central bankers”. A future bailout may result in many central banks all around the world needing to turn to the only place left with a clean balance sheet for a liquidity injection in the form of SDRs – or what Rickards calls “world money”.

- Source, Yahoo Business

Jim Rickards: How Best to Prepare for the Next Financial Crisis

James Rickards is predicting chaos on an unprecedented scale. The financial expert, investment advisor and New York Times bestselling author warns that the most devastating financial crisis yet could be just around the corner.

His suggestions for how we can protect our wealth in tumultuous times are at times counterintuitive, including steering clear of high-valuation tech stocks and being wary of “overhyped” passive investing.

In this video with Moneywise editor Rachel Rickard Straus, Jim also warns viewers to watch out for tricks being played on us all by behavioural economists.

While his predictions are provocative, he has been right in the past, sounding the alarm on currency manipulation and foreseeing the rise of negative interest rates.

Lifestyles could change immeasurably over the next century, with progress by no means a given, he predicts. So, fasten your seatbelt (or pour yourself a cup of tea), and watch our interview with Jim.

- Source, Moneywise

Rickards: The FED May Cause the Next Recession by Trying to Get Ready for the Next One

In a recent interview conducted at the Nasdaq stock exchange headquarters in New York, macro analyst and financial commentator James Rickards warned of a potential upcoming financial panic in the run-up to the release of his latest and final book in a series of four called “Aftermath“.

The bestselling author thinks that the US Federal Reserve (FED) raising the interest rate from zero all the way to the current 2.25% to 2.5% over the last couple of years may be a ploy from the central bank to give it the opportunity to then cut rates in the event of another potential economic downturn.

Rickards has had a long history on the frontlines of financial panics. He had a role as the chief legal counsel for the now-defunct hedge fund Long-Term Capital Management. The firm was infamous for the bailout it received organised by the Federal Reserve Bank of New York to the tune of $3.625 billion following heavy losses for the firm following the 1997 and 1998 Asian and Russian financial panics.

Since then, Rickards has spent time on the sidelines and bore witness to the 2008 financial crisis and subsequent bailout – this time directly from the US Treasury.

Moving forward another 10 years, he thinks we may soon be on the precipice of another major economic downturn, but this time the mess will be too big for even state-backed central banks like the FED to get us out of trouble.

- Source, Yahoo Business

Jim Rickards: Communist China Thought They Could Mimic Capitalism

The key word there is "mimic." The Communist Party [of China] thought they could finesse and control it, but it is turning out markets have a mind of their own. But the "Empire" will strike back, they have an enormous arsenal of tools they can use to try to fight this bubble.

In the end, all bubbles burst, I expect this will go down about 70% or 80% before it runs its course, but bubbles never go down in a straight line...

This could take multiple years and there could be rallies in the meantime. They need to cut interest rates, cut reserve requirements and cheapen the Yuan, sell their reserves and use that to prop up their markets. There is a lot they can do, but this is just going to grind lower...

I expect China will do something, they are probably debating it right now... They do have room, unlike the U.S., because we should have raised rates when we could have back in 2010, China still has room to cut rates, and they've got $3.5 trillion in reserves, that is a lot of dry powder.

However, this has implications, it has what the IMF calls "spillover effects."

If they have to sell their reserves to raise funds to bail out their market, what are they selling? [U.S.] Treasuries. That puts upward pressure on U.S. interest rates, now the trend in interest rates is probably down because of deflation, but in the short run, this is going to make the dollar even stronger and make deflation worse.

By the way, everything that is going on in China sort of started with the Fed. They went though a "kamikaze mission," as I call it, talking about raising rates all year. The eocnomy was visibly slowing, deflation had the upper hand, why on Earth is Janet Yellen talking about raising rates?

But as long as China was pegged, our deflation became their deflation. It was killing them so they broke the peg, but then the markets are crashing, so all these things are connected. It is not that China causes our problems, the problems actually started here, went to China, and now they are coming back...

- Source, Real Clear Politics

Jim Rickards: Should you be Preparing for a Market Collapse?

America's economy is doing pretty well these days. Considering what might happen in the event that it collapses is likely among the last things most wish to do. 

Wall Street veteran Jim Rickards believes that the time is now to prepare for what happens when the good years draw to a close. 

His latest book, the bestseller 'Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos,' details what he believes will transpire as a result of the next global economic meltdown, as well as what ordinary folks can do to shield themselves from fiscal ruination.

- Source

Why The Next Financial Crisis Will Be the Biggest Yet

Jim Rickards explains why there's a financial crisis coming, and in so doing, reviews the unusual origins of his predictive analytics tool. 

He also explores complexity theory and Bayesian statistics. Jim Rickards is a renowned author and the chief global strategist at Meraglim.

Could this be the biggest financial crisis since 2008? The biggest ever?

- Source, Real Vision Finance

Ask the Expert: Jim Rickards on a Future Global Reserve Currency & Interest Rates

James Rickards is Chief Global Strategist at the West Shore Funds, Editor of Strategic Intelligence, a monthly newsletter, and Director of The James Rickards Project, an inquiry into the complex dynamics of geopolitics and global capital.

In the first of a value-packed, two-part Ask The Expert segment, Jim answers your reader-submitted questions, including:

• Canada officially holds zero gold. Where does that leave them now?

• Is the concept of a global reserve currency becoming obsolete?

• Will the trend toward lower (or negative) interest rates ever reverse?

- Source, Sprott Money

Jim Rickards & Grant Williams: Predicting the Currency War and the Case For Gold

Jim Rickards, renowned author and economist, explains his theory on the currency war and why he believes it is important to buy gold now more than ever.

- Source, Real Vision

James Rickards: Forecasting Long Term Cycles

Rickards, who also edits the Strategic Intelligence newsletter, thinks in multi-year and often multi-decade cycles. This, however, poses certain challenges.

One of these is dealing with friends, clients, and readers who want to know what day the economic reset—which smart money managers think is coming—will happen.

(Rickards says he has never met a major hedge fund manager who did not personally own gold.)

The lawyer and former accountant won’t bite.

Rickards likens accumulating system debts, central bank stock market manipulations, and financial institution off-book derivative trading to piling snow on a mountain. Just one snowflake will set the avalanche off—you just never know which one that will be.

Rickards’ favorite talking point is that during the 1998 Long-Term Capital Management crisis, the big banks bailed out the hedge fund. During the 2008 crisis, central banks bailed out the financial institutions.

But during the next crisis, the central banks themselves will need to be bailed out, says Rickards, possibly by the IMF and through hyper-printing of a global currency.

All of this, he says, would be highly inflationary and thus boost the value of hard assets relative to paper claims.

- Source, Sprott Money Blog

Rickards Doubles Down On $10,000 Gold per Ounce Call

James Rickards, who has been warning about fault lines in America’s financial system for more than a decade, is one of the country’s most forward economic thinkers.

The prolific writer mixes with big bank board members, CIA spooks, and grubby miners in the Val D’Or Quebec pits.

After four major works—including Currency Wars, The Death of Money, The Road to Ruin, and The New Case for Gold—you’d think he’d run the gamut.

In his latest book, Aftermath, Rickards updates readers on his thinking and doubles down on his forecast that gold prices, up 25% since we published his initial prognosis in 2016, will hit USD $10,000 per ounce.

An innovative investment strategy: 10% invested in physical gold

Rickards believes that the U.S. economy is already in a depression as defined by John Maynard Keyes, which is a sustained period of sub-par economic growth.

This fact is masked by the reality that U.S. statistical agencies have redefined the way they calculate the unemployment rate, which would in fact be above 10% using previous methodologies.

Rickards’ key message—which makes him a perennial favorite at gold conferences (including, full disclosure: numerous Sprott events)—is that investors should hold 10% of their investable assets in gold, to act as a hedge against coming catastrophe.

This, he says, will come from a variety of factors ranging from a 60% stock market crash, to multiple decades of economic stagnation, to the collapse of major U.S. banks.

Rickards says financial institutions are far more vulnerable than they appear, because much of their derivatives trading is now done through clearinghouses whose debts they are collectively liable for.

Longer-term, America will be particularly hard-hit if oil begins to be priced in IMF-issued special drawing rights, as Russia, China, Iran, and Turkey combine to force accelerated de-dollarization.

The ultimate hedge

In Aftermath, Rickards assigns greater probability to deflationary pressures than he did in previous works, and thus recommends a 30% cash allocation to enable investors to profit from any downturns, with the balance of the portfolio going into equities.

Rickards figures that by using this “barbell” investment strategy, investors will be protected against wild portfolio fluctuations during a time when, for most investors, return of investment is a bigger priority than return on investment.

For example, if gold prices were to fall 20%, an investor who held 10% of his portfolio in gold would register a related setback from the category worth only 2% of his overall holdings.

On the other hand, due to gold’s counter-cyclical properties, a fall in prices would suggest that the investor’s other asset classes are doing much better...

- Source, Sprott Money Blog, read more here

Robert Kiyosaki & James Rickards: Our Forecast for the Economy Moving Forward

The increasing intersection of geopolitics and economics presents new challenges to investors.

Jim Rickards joins Robert & Kim to discuss his latest work into predictive analytics. Find out the real risks to your wealth and separate the hype from what’s important.

- Source, Rich Dad Poor Dad

Jim Rickards: Road to Ruin, Animated Book Summary

  
The Road to Ruin is Jim Rickards new book about the elites plan for the next financial crisis. 

Building on his previous two books (Currency Wars, and Death of the Dollar (which is more accurately referred to as ""The Likely Severe Loss of Confidence of the Current International Monetary System and it's Likely Replacements & What You Can Do To Protect Your Savings"") this book explores how the next crisis will actually play out. 

Why it won't be solved by injecting more liquidity (as in 2008), but will rather be addressed with something cryptically referred to as ICE-9.

- Source, Economics Decoded

James Rickards: The Rapid Accumulate of Gold Reserves, Systemic Risk Grows

ABC Bullion interviewed Jim Rickards, Economist and New York Times Best Selling Author, on 19th August 2019 just before his keynote presentation at our National Conference: A Global Case for Gold. After a personalised tour of ABC Refinery’s operations, Jim kindly made time to cover a number of topics including:

Why has China has recently restricted gold imports? 

– Is the dollar shortage in China and other emerging markets a systemic risk to the global economy?

– What is the future for Australia when its key security partner, being the US, is in a developing cold war with China, its top economic partner? 

– As the world’s second largest gold producer with most of that going to China, how does that complicate Australia balancing it’s relationship between US and China? 

– With Russia looking eastwards and firming its relationship with China do they risk being seen as the junior partner? What do you think about their rapid accumulation of gold reserves and what message does that send to the rest of the world? 

– What is the role of special drawing rights in the future? Can they compete with gold as a supra national reserve asset for central banks? 

– Gold has been in a stealth bull market since 2015, Jim sees the way clear to $2,000 an ounce. 

– Comments on the gold:silver ratio.

The interview was filmed in front of the world's first fully automated bullion bar production line, recently commissioned at ABC Refinery’s facility in Sydney.

- Source, ABC Bullion

James Rickards Exclusive: Prepare Now to Survive the Aftermath of the Next Global Financial Crisis

Our latest guest is Jim Rickards, New York Times best-selling author of Currency Wars, The Death of Money and The Road to Ruin. 

We spoke with James about his latest book, Aftermath, and how we could prepare to survive the aftermath of the next global financial crisis.

- Source, SBTV

Jim Rickards: What the World Will Look Like after the Next Financial Crisis

There are dark clouds forming over the global economy and the bull run in markets could be getting long in the tooth.

Jim Rickards lays out what he sees coming and how the world will look after the next financial crisis unfolds.

For perspective on this and what the financial world could look like after the next crisis, BNN Bloomberg speaks with Jim Rickards, author of "Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos."

- Source, BNN 

Real Conversations: How To Protect Your Wealth When This Bubble Bursts

Outspoken author and investment advisor James Rickards sat down for a pro-to-pro discussion with Hedgeye CEO Keith McCullough recently. 

Here's an interesting quote from Jim: 

“I was able to ask Larry Summers about that at dinner a couple of days ago. I knew the answer, but I wanted to hear what his answer was. 

So the question was, ‘In the last 10 years, Russia has more than tripled its gold reserves and China has more than tripled its gold reserves.’ 

They have a lot more off the books, but let's take the official number. Why are they doing it? And he sort of thought about it for a second and he said, ‘Well, diversification.’ 

That's actually technically a good answer. But then he said, ‘Maybe they think the price will go up.’ 

So I’ve got Larry Summers on the record saying, higher gold prices. I'm on board with that.” 

That’s just one of many fascinating tidbits from this new, in-depth conversation.

- Source, Hedgeye

Robert Kiyosaki & Jim Rickards: How to Survive the Aftermath

The increasing intersection of geopolitics and economics presents new challenges to investors. Jim Rickards joins Robert & Kim to discuss his latest work into predictive analytics. Find out the real risks to your wealth and separate the hype from what’s important.

- Source, Rich Dad, Poor Dad

Preparing to Protect Your Wealth In An Economic Downturn

Stocks are near all-time highs, but investors should be prepared to protect their wealth in times of economic downturns, knowing a bull market can't last forever. We spoke to Jim Rickards, Author of 'Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos'.

- Source, Cheddar.com

James Rickards: Trump Wins Reelection if the Economy Avoids Recession

Best-selling financial author James Rickards is not seeing a recession anytime soon. In fact, he is not forecasting a recession until after the 2020 Presidential Election. 

What does that mean for the chances of a second Trump Presidency? Rickards says, “If you put recession odds at 35%, and that is probably high, then the inverse of 65% is his probability of winning.

Every month that goes by, the odds of a recession by next summer go down. So, the odds of Trump winning go up. I don’t want to debate the economics of the Fed and what they are doing, but the Fed is doing what it needs to do to avoid a recession, and that improves Trump’s odds. 

Right now, I have Trump as the winner.” After the 2020 Presidential Election, Rickards is much less optimistic and so are the wealthy elite. Rickards says, “The rich are building bunkers. Entrepreneurs are actually buying abandoned missile siloes with armed guards and steel doors.

Here’s another interesting thing, hedge fund billionaires may trade stocks, bonds and currencies all day long, but when you ask them where do you have your own money, every one of them that I have spoken to have gold, physical gold.

They all have gold. They don’t trade it, but they have it.” Rickards covers a lot of ground in this in-depth interview that is more than one hour in length. 

Rickards talks about the new gold (and silver) bull market, what everybody, especially the small investors, needs to buy now, and talks about a gold price that is exponentially higher than today’s price. 

Rickards discusses the world’s massive debt, probability of big defaults and huge inflation all coming in the “Aftermath” of the coming crisis...

- Source, USA Watchdog

Jim Rickards: This is Exactly How You Survive the Coming Financial Crisis and Prosper

James Rickards, editor of the newsletter Strategic Intelligence and an advisor on economics and financial threats to the U.S. Defense and intelligence, discusses his book, “Aftermath”.

- Source, Jay Taylor Media

Jim Rickards: Wealth Preservation Survival Guide for the Coming Chaos

We all know the financial crisis is coming. What can you do about it? What can you do to not only survive, but prosper?

Author, financial expert, and investment advisor Jim Rickards joins today's Liberty Report to discuss his upcoming book, "Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos."

- Source, Ron Paul

Economist Jim Rickards On Gold Versus Bitcoin

Jim Rickards is the editor of Strategic Intelligence and the author of Currency Wars: The Making of the Next Global Crisis. 

He believes gold can go to $10,000 an ounce but he is much more skeptical about bitcoin. 

Rickards doesn't trust the bitcoin price action and doesn't believe the cryptocurrency will fare well in a financial crisis.

- Source, Money Insider

Jim Rickards Claims Victory in Gold VS Bitcoin Debate

James G. Rickards joins Remy Blaire in the aftermath of the 'Gold vs. Bitcoin' debate with James Altucher at the Stand Up NY comedy club. Rickards weighs in on the outlook for commodities and cryptocurrencies in "the year of living dangerously.

- Source, Sprott Media

Wall Street and the New Cold War

The stock market seems to rise or fall almost daily based on the latest news from the front lines of the trade wars.

When Trump threatens new tariffs and China threatens to retaliate in kind, stocks fall. When Trump delays the tariffs and China agrees to resume negotiations, stocks rise. And so it goes. It has been this way since January 2018 when the trade war began.

The latest dust-up came late last week when Trump threatened tariffs against Mexico if it doesn’t do more to curb illegal immigration to the U.S. Markets sold off on Friday as a result, bringing a terrible May to an end. Largely due to the trade war, the stock market had its worst May in seven years.

From the start, Wall Street underestimated the impact of the trade war. First they said Trump was bluffing. Then the analysts said that Trump and Xi would put their differences aside and make an historic deal.

All of these analyses were wrong. The trade war was problematic from the start and is growing worse today.

China will lose the trade war. The reasons are obvious. Foreign trade is a much larger percentage of Chinese GDP than it is for the U.S., so a trade war was always bound to have more impact on China than the U.S.

And if China tries to match the U.S. in tariffs dollar for dollar, they run out of headroom at $150 billion while the U.S. can keep going up to $500 billion and inflict far more pain on China.

Other forms of Chinese retaliation are mostly nonstarters. They cannot dump U.S. Treasuries without hurting their own reserve position and risking an account freeze by the U.S. China cannot turn up the pressure by stealing intellectual property because they’re already doing that to the greatest extent possible.

China’s latest threat is to ban exports of “rare earths” to the U.S. and its allies. Rare earths are essential for the production of plasma screens, fiber optics, lasers and other high-tech applications. Electric vehicles, mobile phones and telecommunications systems would be impossible to build without them. China is responsible for 90% of global production, which makes them a potent weapon in the U.S.-China trade wars.

“Rare” earths aren’t actually that rare. They are plentiful in quantity. The problem is that they are found in extremely low concentrations. This means a huge amount of ore and expensive mining processes are needed to extract even a small amount of these vital substances.

So rare earths are one weapon China possesses.

But over time, Western powers can replace rare earths purchased from China. There could be major manufacturing disruption in the meantime, it’s true. But it would not be the end of the world.

The U.S. will win the trade war and either China will open its markets and buy more U.S. goods or the Chinese economy will slow significantly.

But while the trade war is important, it’s not the main event.

The trade war is part of a much larger struggle between China and the U.S. for hegemony in Asia and the Western Pacific.

They are locked in a new cold war being fought on many fronts. These include trade; technology; rights of passage in the Taiwan Strait and the South China Sea; and alliances in South Asia, where China’s Belt and Road Initiative is promising billions of dollars for infrastructure development.

The U.S. is responding with arms deals and bilateral trade deals to counter Chinese influence. Even if a modest trade deal is worked out with China this summer, it will not put an end to the larger struggle now underway.

What are the implications?

If the Chinese view the trade war as just one step in a protracted cold war, which I believe they do, then we’re in for a long period of contracting growth that will not be confined to China but will affect the entire world.

That seems the most likely outcome for now. Get set for slower growth and perhaps stagflation. It could be like the late 1970s all over again.

Slowly, Wall Street is taking the trade wars seriously. But it is still missing its larger implications of a new cold war.

This new cold war could last for decades and it will affect the entire global economy. Let’s just hope it doesn’t turn into a shooting war.

- Source, James Rickards via the Daily Reckoning

James Rickards: If Gold Was Just a Barbarous Relic...

There’s nothing new about the Russian accumulation of gold bullion in their reserve position. It began in a material way in 2009 when Russia had about 600 metric tonnes of gold.

Today, Russia has 2,183 metric tonnes, a stunning 264% increase in less than 10 years. Russia is the sixth-largest gold power in the world after the U.S., Germany, IMF, Italy and France.

Russia’s gold hoard is over 25% of the U.S. hoard, but Russia’s economy is only 8% the size of the U.S. economy. This gives Russia a gold-to-GDP ratio over three times that of the U.S.

While these developments are well-known, the question of why Russia is accumulating so much gold has never been answered.

One reason is as a dollar hedge. Russia is the second-largest energy producer in the world. Most of that energy is sold for dollars. Russia can hedge potential dollar inflation by buying gold.

Another reason has to do with the avoidance of U.S. sanctions. Gold is nondigital and does not move through electronic payments systems, so it is impossible for the U.S. to freeze on interdict.

Yet a deeper reason is that Russia has a long-term plan to subvert the dollar’s role as the leading global reserve currency. The Russian ruble is not positioned to be a reserve currency, but a new cryptocurrency backed by gold would be a good candidate.

The Central Bank of Russia will consider a new study that suggests just such a gold-backed cryptocurrency to settle balance of payments among willing participants. This plan is in its preliminary stages and is a long way from reality at this point.

Still, the Russian endgame has now been revealed. The dollar’s days as the leading reserve currency are numbered.

Of course, Russia is not the only nation accumulating gold as a means to move away from the dollar. You can certainly add China to that list, and many others.

The latest move comes from Malaysian Prime Minister Mahathir Mohamad. He promoted the idea of a common trading currency for East Asia that would be pegged to gold. “The currency that we propose should be based on gold because gold is much more stable,” he said.

I’ve actually advised Mahathir Mohamad in the past and he’s very familiar with my writings on gold. So I’m not surprised he’s issuing this call.

The global monetary regime has collapsed three times over the past 100 years, in 1914, 1939, and 1971. They seem to happen about every 30 to 40 years on average. It’s now been over 40 years since the last collapse, so we’re due.

Got gold?

- Source, James Rickards

Jim Rickards: The Perfect Storm is Coming

People often refer to the “perfect storm.” A perfect storm is generally understood as two or more events that are independent but converge to produce an outcome much worse than either event alone.

The term is an overused cliché, and as a writer I avoid clichés whenever possible. But though rare, perfect storms do exist. The most common example is the devastating 1991 storm popularized by the book and movie of the same name, although it was initially known as the “Halloween storm.”

In that case, three separate weather dynamics all converged in one place on one day to produce a perfect storm. The odds of all three coming together at once were less than one in 100,000. That’s less than once in 270 years. That’s a perfect storm.

Do metaphorical perfect storms happen in politics and capital markets?

The answer is yes, provided the conditions of the perfect storm definition are satisfied. The multiple events that make up the true perfect storm must be independent and rare and come to converge in an almost impossible way.

Unfortunately, a political and market perfect storm is now on the way and may strike as early as Halloween 2019, marking a new “Halloween storm.” Get ready.

Today I’ll be discussing the components making up this perfect storm, and how I see them all coming together at the same time.

In my 40-plus years in banking and capital markets, I have lived through a number of financial fiascos that arguably qualify as perfect storms. 

Here’s a partial list:

1970: Penn Central bankruptcy, the largest in history at that time
1973–74: Arab oil embargo
1977–80: U.S. hyperinflation
1982–85: Latin American debt crisis
1987: One-day 22% stock market crash
1988–92: Savings and loan (S&L) crisis
1994: Mexican tequila crisis
1997: Asian financial crisis
1998: Russia/Long Term Capital Management (LTCM) crisis
2000:Dot-com crash
2007: Mortgage market collapse
2008: Lehman Bros./AIG financial panic.

I was not just a bystander at these events. From 1977–85, I worked at Citibank and dealt with inflation, currencies and Latin America from a front-row seat.

From 1985–93 I worked for a major government bond dealer that financed S&Ls and traded their mortgages.

From 1994–99, I was at LTCM and dealt in all the major international markets. I negotiated the LTCM rescue by Wall Street in September 1998.

In 1999–2000 I ran a tech startup, and in 2007–08 I was an investment banker and financial threat adviser to the CIA.

That’s a lot of action for one career, but it also makes the point that financial perfect storms happen more frequently than standard models expect.

Here’s what I learned: Every one of these episodes was preceded by mass complacency or euphoria.

Before the Arab oil embargo, we expected cheap oil forever. Before the Latin American debt crisis, countries like Brazil and Argentina were “the land of the future.”

- Source, Daily Reckoning via Jim Rickards

Four Reasons to Consider Gold In 2019

Here are just 4 of the largest current threats to the global economy, which all point to the viability of a Gold IRA to diversify your retirement portfolio:

1. Global Tensions and Conflicts

North Korea’s disarmament plans have ground to a halt. The U.S. decision to renege on the Iranian Nuclear Deal has tensions high and the recent U.S. backing of Jerusalem as Israel’s capital has further fanned the growing flames of perceived U.S. Mideast “interference.”

Another group of foreign diplomats are uneasy about U.S. support for Venezuela’s opposition leader, Juan Guaido. And today’s lower oil prices could become a distant memory if a host of Middle East relations do not improve and quickly. All of these factors can cause sudden chaos in the stock market, but rarely impact gold prices heavily.

2. U.S. National Debt

It’s not only concerning that we’ve passed the $22 trillion deficit mark, but even more concerning is the fact that the last $1 trillion was added in less than a year (for the first time ever). $22 trillion is more than the entire U.S. economy!

This condition is not only unsustainable, there appears to be no planned end in sight. Erosion of the dollar’s value continues as Baby Boomers continue to file for social security from a fund that’s been hemorrhaging for decades. China and Russia are lobbying and eager to fill a void being created by a continuing decline of the dollar’s value.

3. Banking Blunders and Bail-Ins

A big part of the 2008 financial meltdown had to do with a bank’s misuse of derivatives, which in 2018 achieved heights exponentially greater than 2008 levels. And for all the complaining about Dodd-Frank, the one thing that no one seems to be aware of is actually THE MOST IMPORTANT FACT: All bank deposits immediately become bank assets in the event of insolvency!

This means taxpayers are no longer a bank’s first line of defense. Instead, that “privilege” has been quietly dumped onto depositors. Your Checking or Savings accounts can now legally and without recourse be commandeered for the bank’s own financial needs.

4. An Oversold Stock Market

Top analysts have been warning about the growing possibility of a market crash even greater than the one experienced during the Great Depression. They hurry to point out the suspicious lack of “significant” corrections during the recent bull market, which became the longest in our history last year.

Just one factor in their concerns is the fact that public companies borrowed $1.1 trillion in cheap Fed money, made available by the Fed’s notorious Quantitative Easing program, which was earmarked for wage increases, infrastructure, and expansion. Then they spent $1.2 trillion on stock buyback programs that inflated stock prices, but did virtually nothing beneficial for the company, particularly in potential growth or even maintenance.

These warnings signs have led analysts predict a 70% correction this year. In fact, the CIA's Financial Threat Advisor Jim Rickards even stated on Money Morning that he believes a 70% drop is the best case scenario...

- Source, JPost

Crypto Is Here to Stay, Bitcoin Isn’t

Bitcoin is back! So say the true believers, even with Friday’s flash crash. But there less there than meets the eye.

Bitcoin has staged a notable comeback from its 2018 crash. From a level of about $4,000 through the month of March, 2019, bitcoin had a two-day 23% spike from $4,135 on April 1, 2019 to $5,102 on April 3, 2019.

Bitcoin then moved sideways in the $5,000 to $6,000 range until May 8, 2019 when it staged another three-day spike from $5,932 on May 8 to $7,255 on May 11, a 22% surge.

Combining the April 1 and May 8 spikes, the bitcoin price moved from $4,135 to $7,255 for a spectacular 75% price rally in six weeks.

By last Thursday morning, it soared even higher, to over $8,300.

This rally was bitcoin’s best price performance since its 83% collapse from $20,000 in late December 2017 to $3,300 in December 2018. That crash marked the collapse of the greatest asset price bubble in history, larger even than the Tulipmania of 1637.

The questions for crypto investors are what caused the recent rebound in the price of bitcoin and will it last? Is this the start of a new mega-rally or just another price ramp and manipulation? Has anything fundamental changed?

If you’re beginning to suspect these are leading questions, you’re right.

Of course, bitcoin technical analysts are out in force explaining how the 100-day moving average crossed the 200-day moving average, a bullish sign. They are also quick to add that the 30-day moving average is gaining strength, another bullish sign.

My view is that technical analysis applied to bitcoin is nonsense. There are two reasons for this. The first is that there is nothing to analyze except the price itself. When you look at technical analysis applied to stocks, bonds, commodities, foreign exchange or other tradeable goods, there is an underlying asset or story embedded in the price.

Oil prices might move on geopolitical fears related to Iran. Bond prices might move on disinflation fears related to demographics. In both cases (and many others), the price reflects real-world factors. Technical analysis is simply an effort to digest price movements into comprehensible predictive analytics.

With bitcoin (to paraphrase Gertrude Stein) “there is no there, there.” Bitcoin is a digital record. Some argue it’s money; (I’m highly skeptical it meets the basic definition of money).

Either way, bitcoin does not reflect corporate assets, national economic strength, terms of trade, energy demand or any of the myriad factors by which other asset prices are judged. Technical analysis is meaningless when the price itself is meaningless in relation to any goods, services, assets or other claims.

My other reason for rejecting the utility of technical analysis is that it has low predictive value when applied to substantial assets and no predictive value at all when applied to bitcoin.

If you follow technical analysis, you’ll see that every “incorrect” prediction is followed immediately by a new analysis in which a “double top” merely presages a “triple top” and so on.

Technical analysis can help clarify where the price has been and help with relative value analysis, but its predictive analytic value is low (except to the extent the technical analysis itself produces self-fulfilling prophesies through herd behavior).

That said, what can we take away from the recent bitcoin price rally, putting aside its flash crash for the moment?

The first relevant fact is that no one knows why it happened. There was no new technological breakthrough in bitcoin mining. None of the scalability and sustainability challenges have been solved. Frauds and hacks continue to be revealed on an almost daily basis. In short, it’s business as usual in the bitcoin space with no new reasons for optimism or pessimism...

- Source, The Daily Reckoning

James Rickards: The Trade Wars Are Back

President Trump shocked markets yesterday when he announced that a new, heavy round of tariffs on Chinese goods will take effect this Friday. Complacent markets had assumed that a trade deal would get done, that it was just a matter of sorting out the details. Now that is far from certain. Failing a last minute deal, which is certainly possible, the trade war is back. And it could get worse.

What most surprised me about the new trade war was not that it started, but that the mainstream financial media denied it was happening for so long. The media have consistently denied the impact of this trade war. Early headlines said that Trump was bluffing and would not follow through on the tariffs. He did. Later headlines said that China was just trying to save face and would not retaliate. They did.

Today the story line has been that the trade war will not have a large impact on macroeconomic growth. It will. The mainstream media have been wrong in their analysis at every stage of this trade war. And it did not see this latest salvo coming.

The bottom line is that the trade war is here, it’s highly impactful and it could get worse. The sooner investors and policymakers internalize that reality, the better off they’ll be.

For years I’ve been warning my readers that a global trade war was likely in the wake of the currency wars. This forecast seemed like a stretch to many. But it wasn’t.

I said it would simply be a replay of the sequence that prevailed from 1921–39 as the original currency war started by Weimar Germany morphed into trade wars started by the United States and finally shooting wars started by Japan in Asia and Germany in Europe.

The existing currency war started in 2010 with Obama’s National Export Initiative, which led directly to the cheapest dollar in history by August 2011. The currency war evolved into a trade war by January 2018, when Trump announced tariffs on solar panels and appliances mostly from China. Unfortunately, a shooting war cannot be ruled out given rising geopolitical tensions.

The reasons the currency war and trade war today are repeating the 1921–39 sequence are not hard to discern. Countries resort to currency wars when they face a global situation of too much debt and not enough growth.

Currency wars are a way to steal growth from trading partners by reducing the cost of exports. The problem is that this tactic does not work because trade partners retaliate by reducing the value of their own currencies. This competitive devaluation goes back and forth for years.

Everyone is worse off and no one wins.

Once leaders realize the currency wars are not working, they pivot to trade wars. The dynamic is the same. One country imposes tariffs on imports from another country. The idea is to reduce imports and the trade deficit, which improves growth. But the end result is the same as a currency war. Trade partners retaliate and everyone is worse off as global trade shrinks.

The currency wars and trade wars can exist side by side as they do today. Eventually, both financial tactics fail and the original problem of debt and growth persists. At that point, shooting wars emerge. Shooting wars do solve the problem because the winning side increases production and the losing side has infrastructure destroyed that needs to be rebuilt after the war.

Yet the human cost is high. The potential for shooting wars exists in North Korea, the South China Sea, Taiwan, Israel, Iran, Venezuela and elsewhere. Let’s hope things don’t get that far this time.

But the easiest way to understand the trade war dynamics is to take Trump at his word. Trump was not posturing or bluffing. He will agree to trade deals, but only on terms that improve the outlook for jobs and growth in the U.S. Trump is not a globalist; he’s a nationalist. That may not be popular among the elites, but that’s how he sets policy. Keeping that in mind will help with trade war analysis and predictions.

Trump is entirely focused on the U.S. trade deficit. He does not care about global supply chains or least-cost production. He cares about U.S. growth, and one way to increase growth is to reduce the trade deficit. That makes Trump’s trade policy a simple numbers game rather than a complicated multilateral puzzle palace.

If the U.S. can gain jobs at the expense of Korea or Vietnam, then Trump will do it; too bad for Korea and Vietnam. From there, the next step is to consider what’s causing the U.S. trade deficit. This chart tells the story. It shows the composite U.S. trade deficit broken down by specific trading partners:

The problem quickly becomes obvious. The U.S. trade deficit is due almost entirely to four trading partners: China, Mexico, Japan and Germany. Of those, China is 64% of the total.

President Trump has concluded a trade deal with Mexico that benefits both countries and will lead to a reduced trade deficit as Mexico buys more U.S. soybeans.

The U.S. has good relations with Japan and much U.S.-Japanese trade is already governed by agreements acceptable to both sides. This means the U.S. trade deficit problem is confined to China and Germany (often referred to euphemistically as “Europe” or the “EU”). The atmosphere between the U.S. and the EU when it comes to trade is still uneasy, but not critical.

But the global trade war is not global at all but really a slugfest between the U.S. and China, the world’s two largest economies. In the realm of global trade, the United States is an extremely desirable customer. In fact, for most, we are their best customer.

Think the still export-based Chinese economy can afford to sell significantly less manufactured goods across borders? Think that same Chinese economy can allow for a significant devaluation of U.S. sovereign debt? That’s their book, gang.

But China has finally come to the realization that the trade war is real and here to stay. Senior Chinese policymakers have referred to the trade war as part of a larger strategy of containment of Chinese ambitions that may lead to a new Cold War. They’re right.

Trump seems to relish the idea of bullying the Chinese in public. That’s certainly his style, but it’s also a risky strategy. To quote Sun Tzu: “Do not press a desperate foe too hard.”

China doesn’t like to be chastised publicly any more than anyone else, but culturally, saving-face may be more important to the Chinese. The Chinese are all about saving face and gaining face. That means they can walk away from a trade deal even if it damages them economically. Saving face is too important. But Trump is playing for keeps and will not back down either.

Unlike in other policy arenas, Trump has enjoyed bipartisan support in Congress. The Republicans have backed Trump from a national security perspective and the Democrats have backed him from a pro-labor perspective. China sees the handwriting on the wall.

This trade war will not end soon, because it’s part of something bigger and much more difficult to resolve. This is a struggle for hegemony in the 21st century. The trade war will be good for U.S. jobs but bad for global output. The stock market is going to wake up to this reality. The currency wars and trade wars are set to get worse.

Investors should prepare.

- Source, Jim Rickards

Jim Rickards: The Fed’s Vicious Cycle

We all know the outlines of how the Fed and other central banks responded to the financial crisis in 2008.

First the Fed cut interest rates to zero and held them there for seven years. This extravaganza of zero rates, quantitative easing (QE) and money printing worked to ease the panic and prop up the financial system.

But it did nothing to restore growth to its long-term trend or to improve personal income at a pace that usually occurs in an economic expansion.

Now, after a 10-year expansion, policymakers are considering the implications of a new recession. There’s only one problem: Central banks have not removed the supports they put in place during the last recession.

Interest rates are up to 2.5%, but that’s far lower than the 5% rates that will be needed so the Fed can cut enough to cure the next recession. The Fed has reduced its balance sheet from $4.5 trillion to $3.8 trillion, but that’s still well above the $800 billion level that existed before QE1.

In short, the Fed (and other central banks) have only partly normalized and are far from being able to cure a new recession or panic if one were to arise tomorrow. It will takes years for the Fed to get interest rates and its balance sheet back to “normal.”

Until they do, the next recession may be impossible to get out of. The odds of avoiding a recession until the Fed normalizes are low.

The problem with any kind of market manipulation (what central bankers call “policy”) is that there’s no way to end it without unintended and usually negative consequences. Once you start down the path of manipulation, it requires more and more manipulation to keep the game going. Finally it no longer becomes possible to turn back without crashing the system.

Of course, manipulation by government agencies and central banks always starts out with good intentions. They are trying to “save” the banks or “save” the market from extreme outcomes or crashes.

But this desire to save something ignores the fact that bank failures and market crashes are sometimes necessary and healthy to clear out prior excesses and dysfunctions. A crash can clean out the rot, put losses where they belong and allow the system to start over with a clean balance sheet and a strong lesson in prudence.

Instead, the central bankers ride to the rescue of corrupt or mismanaged banks. This saves the wrong people (incompetent and corrupt bank managers and investors) and hurts the everyday investor or worker who watches his portfolio implode while the incompetent bank managers get to keep their jobs and big bonuses...

- Source, Jim Rickards via the Daily Reckoning, Read More Here

Jim Rickards: Trump Attacks!

The trade war is back on. The trade deadline came and went at midnight last night without a deal. So 25% tariffs on $200 billion worth of Chinese goods took effect at 12:01. The tariffs had previously been set at 10%.

Based on Trump’s comments, 25% tariffs may possibly be applied to an additional $300 billion of Chinese goods.

China said it would respond with unspecified but “necessary countermeasures,” although negotiations continued today in Washington.

Some analysts say China can dump its large holdings of U.S. Treasuries on world markets. That would drive up U.S. interest rates as well as mortgage rates, damaging the U.S. housing market and possibly driving the U.S. economy into a recession. Analysts call this China’s “nuclear option.”

There’s only one problem.

The nuclear option is a dud. If China did sell some of their Treasuries, they would hurt themselves because any increase in interest rates would reduce the market value of what they have left.

Also, there are plenty of buyers around if China became a seller. Those Treasuries would be bought up by U.S. banks or even the Fed itself. If China pursued an extreme version of this Treasury dumping, the U.S. president could stop it with a single phone call to the Treasury.

That’s because the U.S. controls the digital ledger that records ownership of all Treasury securities. We could simply freeze the Chinese bond accounts in place and that would be the end of that.

So don’t worry when you hear about China dumping U.S. Treasuries. China is stuck with them. It has no nuclear option in the Treasury market.

How did we get here?

Trump’s trade representatives have complained that China had backtracked on previous agreements and that China was trying to renegotiate key points at the last minute. The Chinese are not accustomed to such resistance from U.S. officials. But Trump and his team are unlike previous administrations.

China assumed it was “business as usual” as it had been during the Clinton, Bush 43 and Obama administrations. China assumed it could pay lip service to trading relations and continue down its path of unfair trade practices and theft of intellectual property. Trump has proven them wrong.

Trump was never bluffing. He means business, which China is finally learning.

There’s still time to reach a deal, however, before the tariffs actually have any practical impact. The tariffs only apply to Chinese goods that leave port after last night’s deadline. That means goods already en route to the U.S. will not be affected...

- Source, The Daily Reckoning, Read More Here

Jim Rickards: The Fed's Options Are All Bad

The Federal Reserve is caught in a difficult situation of having to raise rates without causing another recession, said best-selling author Jim Rickards.

Unlike previous monetary cycles, the Fed is trying to raise rates in anticipation of a possible recession, even while the economy is not showing signs of overheating.

"The Fed is racing to get rates up to three and a half, four percent, wherever they can, before the next recession, even though the economy is weak. Normally, you would never raise rates in an economy that's as weak as we are right now but they're doing it anyway, because they're building up some capacity to cut rates in the next recession," Rickards told Kitco News.

Contrary to popular belief, the Fed's actions are reactionary to the economy, not prescriptive, and so is behind the curve on macroeconomic trends.

"The Fed never leads the economy. This notion that the Fed does things and the economy follows is not true. The Fed follows the economy, so they'll start out with coming out of a recession with very low rates and then unemployment will go down and inflation will tick up, capacity utilization will tick up, etc. and then the Fed watches and watches," he said.

Rickards said the last administration is to blame, as the Fed should have raised rates a little bit back in 2009, and not wait until 2015.

He added that the current Fed remains "patient" but may remove that word and change their dovish stance should the economy show more signs of growth.

- Source, The Street

James Rickards: Biggest Economic Crash of All Time Coming, Monetary Systems

James Rickards: Will Crypto or Fiat be the Future of Money?

Jim Rickards: Why Gold is Definitely Going to $10000

Jim Rickards sits down with Hedgeye CEO Keith McCullough to discuss why a cocktail of factors makes it more critical than ever for investors to protect their portfolios with gold.

- Source, Hedgeye TV

Jim Rickards: The Investing Secret Wall Street Won't Tell You

Best-selling author Jim Rickards has shown how an investor saving for retirement could do better holding gold than stocks, and in his new book, “Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos,” he outlines how gold is integral to his investment strategy. 

In Rickard’s study, two fictitious investors began saving with their 401k in 1999, with one buying stocks, and the other buying 100% gold; the second investor realized higher returns during this period. 

“Gold did very well, held its own and that’s something you’ll never hear from Harvard or the University of Chicago,” Rickards told Kitco News in the second part of this exclusive interview.

- Source, Kitco News

Jim Rickards Exclusive: The Aftermath Of The 2008 Crisis Is That We Never Really Escaped

The economy is vulnerable to economic “chaos” due to several monetary and policy mistakes made since the 2008 recession, said best-selling author Jim Rickards. 

His new book “Aftermath: Seven Secrets of Wealth Preservation In The Coming Chaos” details how the last economic crisis never really ended. “Technically, the recession was over in June 2009 and the U.S. economy has been expanding ever since. 

We’re coming up on 10 years of expansion, it’s one of the longest expansions in U.S. history and it’s one of the longest bull markets in stocks in U.S. history, so that’s true. 

But, it’s also been the weakest expansion in U.S. history. For 10 years average growth has been about 2.2%,” Rickards told Kitco News.

- Source, Kitco News

Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos

Jim Rickards: Prepare Now for the Aftermath

Jim Rickards and Albert Lu, the President & CEO of Sprott Money sit down to discuss the coming disaster on the horizon and how best to prepare for it? 

This is laid out clearly in Jim Rickards soon to be released book, Aftermath.

In his most prescriptive book to date, financial expert and investment advisor James Rickards shows how and why our financial markets are being artificially inflated and what smart investors can do to protect their assets.

What goes up, must come down. As any student of financial history knows, the dizzying heights of the stock market can't continue indefinitely, especially since asset prices have been artificially inflated by investor optimism around the Trump administration, ruinously low interest rates, and the infiltration of behavioral economics into our financial lives. 

The elites are prepared, but what's the average investor to do?

Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos

James Rickards: A Recipe for Massive Government Spending

I try to avoid partisan politics in my analysis. And I never try to tell people how to vote or what they should think. I trust my readers to make their own judgments. But sometimes I can’t avoid partisan politics because they can have a major impact on markets and the economy.

Leading Democratic presidential hopefuls Elizabeth Warren, Kamala Harris and Bernie Sanders have expressed desires to increase income taxes to 70% or even 90% on the rich, impose “wealth taxes” on their net worth and impose estate taxes that are equally onerous when they die.

The result would be that working people would pay state and local income tax on their wages, super-high income taxes on interest and dividends and annual wealth taxes and whatever was left over would be confiscated when they die.

In case you think these proposals are too extreme to become law, you might want to check out the polls. Recent polls show 74% of registered voters support a 2% annual wealth tax on those with $50 million of assets and 3% on those with $1 billion of assets.

Don’t assume you’re exempt just because your annual income is lower. Those tax thresholds are on wealth, not income, and could include stocks, bonds, business equity and intangible business equity for doctors, dentists and lawyers.

Another poll shows 59% of voters support the 70% income tax rate proposed by Rep. Alexandria Ocasio-Cortez (D-New York). Politicians go where the votes are. Right now, the votes are in favor of much higher taxes on you.

The history of these taxes is that the rates start low and the thresholds start high, but it’s just a matter of time before rates rise, thresholds drop and everyone is handing over their wealth.

But taxes become very unpopular when too many people get clipped. And politicians are very sensitive to that. Now some Democrats are calling for a system that would allow them to spend much, much more money on social programs without appreciably raising taxes. For politicians, it’s a dream come true — if it could work.

The leading Democratic candidates for president and numerous members of Congress have come out in favor of Medicare for All, free child care, fee tuition, a guaranteed basic income even for those unwilling to work and a Green New Deal that will require all Americans to give up their cars, stop flying in planes and rebuild most commercial buildings and residences from the ground up to use renewable energy sources only.

The costs of these programs are estimated at $75–95 trillion over the next 10 years. To put those costs in perspective, $20 trillion represents the entire U.S. GDP and $22 trillion is the national debt.

It used to be easy to knock these ideas down with a simple rebuttal that the U.S. couldn’t afford it. If we raised taxes, it would kill the economy. If we printed the money, it would cause inflation. Those types of objections are still heard from mainstream economists and policymakers, including Fed Chair Jay Powell.

But now the big spenders have a simple answer to the complaint that we can’t afford it. Their answer is, “Yes, we can!” That’s because of a new school of thought called Modern Monetary Theory, or MMT.

Daily Reckoning managing editor Brian Maher previously discussed MMT here and here.

This theory says that the U.S. can spend as much as it wants and run the deficit as high as we want because the Fed can monetize any Treasury debt by printing money and holding the debt on its balance sheet until maturity, at which time it can be rolled over with new debt.

What’s the problem?

Bernanke printed $4 trillion from 2008–2014 to bail out the banks and help Wall Street keep their big bonuses. There was no inflation. So why not print $10 trillion or more to try out these new programs?

There are serious problems with MMT (not the ones Jay Powell and mainstream voices point to). But very few analysts can really see the flaws. I’ll be in an MMT debate with a leading proponent in a few weeks, where I will point out what I believe to be the biggest flaws with MMT. To my knowledge, no one else has raised them.

For now, get used to the rise of MMT. It will be a central feature of the 2020 election campaign. The disastrous consequences are a little further down the road.

- Source, Jim Rickards via the Daily Reckoning

The Real Problem With Modern Monetary Theory

MMT supporters will point to 2008 and say, “Just look at QE. In 2008, the Federal Reserve Balance sheet was $800 billion. But as a result of QE1, QE2, and QE3, that number went to $4.5 trillion. And the world didn’t end. To the contrary, the stock market went on a huge bull run.We did not have an economic crash. And again, inflation was muted.”

Fed chairman Jay Powell has criticized MMT, for example. But its advocates say Powell and other Fed officials hoist themselves on their own petard. That’s because they are the ones who actually proved that MMT works. They point to the fact that the Fed printed close to $4 trillion and nothing bad happened. So it should go ahead and print another $4 trillion.

This is one of the great ironies of the debate. The Fed criticizes MMT, but it was its very own money creation after 2008 that MMT advocates point to as proof that it works.

Their only quibble is that the benefit of all that money creation went to rich investors, the major banks and corporations. The rich simply got richer. MMT advocates say it will simply redirect the money towards the poor, students, everyday Americans, people who need healthcare and childcare. It would basically be QE for the people, instead of the rich.

And it will go into the real economy, where it will boost productivity and finally give us significant growth.

When I first encountered these arguments, I knew they weren’t right. Both my gut feeling and my more rigorous approach to my own theory of money told me MMT was wrong. But I must admit, their arguments were more difficult to answer than I expected. I had a tough time uncovering the logical flaws.

Their points are internally consistent, and they did have a point. After all, the Fed did create all that money and it didn’t produce a calamity. Who’s to say they couldn’t do a lot more of it?

In other words, the Keynesian argument does not hold water when you look at the facts or certainly recent economic history.

Without doing any more serious thinking about it, I probably would have lost a debate with any leading MMT proponent who’s done a lot of work on it, despite “knowing” they were wrong. I couldn’t easily refute their basic arguments.

You can never win a debate if you don’t understand your opponent’s position. Over the past several years I got dragged into endless gold versus bitcoin debates, and I always thought they were silly because gold is gold, and bitcoin is bitcoin. Contrasting them never made sense to me, but that’s what everybody wanted to hear, so I participated in a lot of gold versus bitcoin debates.

I won every debate according to the judges or the audience, but the point being I had to understand bitcoin in order to see its shortcomings. I wasn’t about to debate somebody about bitcoin and get blindsided or embarrassed because I didn’t understand their arguments. I had to become a complete expert on bitcoin to win these debates.

The same applies to MMT. If you’re going to debate somebody on MMT, you’d better know it better than they do or you’re going to lose that debate. It just so happens that I’ll be debating a leading MMT proponent on April 3, in just a few weeks. So I had to immerse myself in it to learn it inside and out.

I knew I had to go beyond the standard arguments that we can’t afford it, that it would explode the deficit, etc. I’m happy to say that I worked out an answer refuting MMT, but it wasn’t easy. It took a lot of hard thinking. Today I’m giving you a preview of what I’ll argue at the upcoming debate.

Here’s what it comes down to…

The real problem with MMT can be traced to its very definition of money. The MMT advocates say they know what money is. Money derives its value from the fact that you need it to pay your taxes. In the U.S. case, money is dollars.

But their definition of money is flawed. In other words, the whole theory is built on quicksand. And this is the point that everyone is missing, including the usual critics. No one else has raised it.

The basis of money, the definition of money, has nothing to do with paying taxes. I can think of a hundred ways to hold money and store wealth where you don’t owe any taxes. Here’s one example…

If you buy a share of stock and stick it in your portfolio for 10 years without selling it, how much do you owe in taxes? Zero. You don’t owe any taxes until you sell it. This is one of the reasons why Warren Buffet is so rich, by the way. He pays very little taxes...

- Source, Jim Rickards via the Daily Reckoning, read more here