Monday, May 25, 2020

The Gold Chronicles with Jim Rickards and Alex Stanczyk


New Book under development on the Pandemic and Depression *Why Scientists without expert knowledge of the economy may not be the best source for determining economic policy 
*Why discernment of the various views of scientists with opposing views on how to deal with Coronavirus is important *Unemployment Claims have exceeded 38m in the US 
*There has never been a time when the stock market does not accurately reflect what is happening in the real economy 
*S&P 500 is a cap weighted index where a few major companies dominate the index. Major companies which are doing well do not reflect the stock market as a whole or the rest of the economy *Algorithms that decide the majority of trading in markets today were written before the Pandemic 
*Deflation, Inflation, Hyperinflation 
*The psychology of inflation and what leads to increase of velocity of money - quantity theory of money versus phase transitions in psychology 
*In a deflationary environment where the Fed has printed close to $10T but still cant get inflation leaves one tool left in the toolkit.. raising the price of gold 
*Raising the price of gold would require open market operations in gold - Fed printing money to buy gold or to sell gold in order to maintain a specific price range measured in USD 
*Raising the price of gold as a tool to get inflation in the USD during prolonged and massive deflation is not a theory, it has been used in the past 
*Expectations of continuing deflation in the short to mid term, but inflation must be created, the trick for the Fed is making sure it sticks the landing 
*Scenarios for gold price and inflation numbers if the Fed overshoots and ends up with higher inflation than it wants *Censorship and deplatforming of people from major media platforms such as YouTube and Twitter 
*The polarization of views of people around the world in terms of freedom vs authoritarian approaches to governance, and where it is leading 
*Essential versus Nonessential Businesses and Occupations *United States Code: Law enforcement officers, judges, public officials violating Constitutional rights under color of law versus emergency powers granted during threats to national security *Reparations for China such as seizing/cancelling UST’s or delisting Chinese company stocks on US exchanges 
*Will reparations move the US and China closer to kinetic warfare

Friday, May 22, 2020

Jim Rickards: Don’t Believe the Happy Talk

Nothing like what we’re witnessing has ever happened before. Even the savviest analysts cannot yet internalize what happened.

As I explained earlier, comparisons to the 2008 crisis or even the 1929 stock market crash that started the Great Depression fail to capture the magnitude of the economic damage of the virus. You may have to go back to the Black Plague of the mid-14th century for the right comparison.

Unfortunately the economy will not return to normal for years. Some businesses will never return to normal because they’ll be bankrupt before they are even allowed to reopen.

Businesses like restaurants, bars, pizza parlors, dry cleaners, hair salons and many similar businesses make up 44% of total U.S. GDP and 47% of all jobs. This is where many of the job losses, shutdowns and lost revenues occurred.

The U.S. government response to the economic collapse has been unprecedented in size and scope. The U.S. has a baseline budget deficit of about $1 trillion for fiscal year 2020. Congress added $2.2 trillion to that in its first economic bailout bill. A second bailout bill added an additional $500 billion. Another bill may add another $2 trillion to the deficit.

Combining the baseline deficit, enacted legislation and anticipated legislation brings the fiscal 2020 deficit to $5.7 trillion. That’s equal to more than 25% of GDP and will push the U.S. debt-to-GDP ratio to as high as 130% once the lost output ($6 trillion annualized) is taken into account. The previous record debt for the U.S. was about 120% of GDP at the end of World War II.

This puts the U.S. in the same category as Greece, Lebanon and Japan when it comes to the most heavily indebted countries in the world.

The Federal Reserve is also printing money at an unprecedented rate. The Fed’s balance sheet is already above $6.7 trillion, up from about $4.5 trillion at the end of QE3 in 2015. The first rescue bill for $2.2 trillion included $454 billion of new capital for a special purpose vehicle (SPV) managed by the U.S. Treasury Department and the Fed.

Since the Fed is a bank, it can leverage the SPV’s $454 billion in equity provided by the Treasury into $4.54 trillion on its balance sheet. The Fed could use that capacity to buy corporate debt, junk bonds, mortgages, Treasury notes and municipal bonds and to make direct corporate loans.

Once the Fed is done, its balance sheet will reach $10 trillion.

That much is known. What is not known is how quickly the economy will recover. The best evidence indicates that the economy will not recover quickly, and an age of low output, high unemployment and deflation is upon us.

Here’s why the economic recovery will not exhibit the “pent-up demand” and other happy-talk traits you hear about on TV…

The first reason the economic downturn will persist is the lost income for individuals. Unemployment compensation and PPP loans will only scratch the surface of total lost income from layoffs, pay cuts, reduced hours, business failures and individuals who are not only unemployed but drop out of the workforce entirely.

In addition to lost wages through layoffs and pay cuts, many other workers are losing pay in the form of tips, bonuses and commissions. Even a fully employed waitress or salesperson cannot collect tips or sales commissions if there are no customers. This illustrates how the economy is tightly linked so that problems in one sector quickly spread to other sectors.

In addition to lost individual income, there is a massive loss of business income. Earnings per share of publicly traded companies are not only declining in the second quarter (and likely the third quarter) but many are negative.

Lost business income will be another source of lower stock valuations and a source of dividend cuts. Reduced dividends are also a source of lost income for individual stockholders who rely on dividends to pay for their retirements or medical expenses.

Programs such as PPP and other direct government-to-business loans will not come close to compensating for the losses described above. The loans (which can turn into grants) will help for a month or two but are not a permanent solution to lost customers.

For still other firms, the loans won’t help at all because the firms are short of working capital and will simply close their doors for good and file for bankruptcy. This means the jobs in those enterprises will be permanently lost.

From these straightforward events (lost individual income, lost business income, dividend cuts and bankruptcies) come a host of ripple effects.

Once the government aid is distributed, many recipients will not spend it (as hoped) but will save it. Such savings are called “precautionary.” Even if you are not laid off, you may worry that your job is still in jeopardy. Any income you receive will either go to pay bills or into savings “just in case.”

In either case, the money will not be used for new spending. At a time when the economy needs consumption, we will not get it. The economy will fall into a “liquidity trap” where saving leads to deflation, which increases the value of cash, which leads to more saving. This pattern was last seen in the Great Depression (1929–40) and will soon be prevalent again.

- Source, Jim Rickards

Friday, May 15, 2020

Insights from Jim Rickards: Gold Price Manipulation, How it's Done and Will it Continue For Much Longer?


Jim Rickards argues that the price of gold is manipulated. Today, we examine his view on gold price manipulation, how it occurs and whether the suppressing of gold prices can be sustained. 

After all, if you’re buying gold you want to understand all of the factors that can influence its price. 

We then explore arguments made by Real Vision Co-Founder Grant Williams exploring the gold leasing mechanism which he likens to a pyramid scheme. 

Taking on board the views of these experts we determine whether gold price manipulation can be sustained.



Monday, May 11, 2020

James Rickards: This Crisis Will Affect Us for Generations, Expect a Very Weak, Slow Rebound



James Rickards is the New York Times bestselling author of Aftermath, The Road Road to Ruin, The Death of Money, Currency Wars, and The New Case for Gold, which have been translated into sixteen languages. He is the editor of the newsletter Strategic Intelligence and is a member of the advisory board of the Center for Financial Economics at Johns Hopkins University. As an adviser on international economics and financial threats to the Department of Defense and the U.S. intelligence community, he served as a facilitator of the first-ever financial war games conducted by the Pentagon. He lives in New Hampshire.

Monday, May 4, 2020

James Rickards: Get Ready for Social Disorder

"Yet even this three-system analysis I just described (pandemic > economy > politics) does not go far enough. The next phase has been little noticed and less discussed.

It involves social disorder. An economic breakdown is more than just economic. It leads quickly to a social breakdown that involves looting, random violence, fraud and decadent behavior.

The Roaring ’20s in the U.S. (with Al Capone and Champagne baths) and Weimar Germany (with riots and cabaret) are good examples.

Looting, burglary and violence in the midst of a state of emergency are the shape of things to come.

The veneer of civilization is paper-thin and easily torn. Most people don’t realize how fragile it is. But they’re going to learn that lesson, I’m afraid.

Expect social disorder to get worse long before it gets better."



- Source, James Rickards

Friday, May 1, 2020

James Rickards: Geopolitical and Monetary Impact of the China Virus?


James Rickards, New York Times bestselling author of The Death of Money and Currency Wars, gives his opinion about the possible demise of fiat currencies.

How is this all going to play out and how far are governments going to take their money printing?

Will the fiat based system survive the coronavirus crisis, or will it implode under all this newly created debt, out of thin air?

- Video Source, Jay Taylor Media

James Rickards: Complex Systems Collide, Disease and Financial Contagion


Zooming out a bit, and as I’ve argued before, the pandemic is a prime example of complex systems colliding into one another…

Investors and everyday citizens are focused on how the COVID-19 pandemic (one complex dynamic system) is crashing into the economy (another complex dynamic system) and influencing the political process and the upcoming U.S. presidential election (still another complex dynamic system).

Analyzing the operations of one complex dynamic system is difficult enough; most analysts can’t do it because they’re using the wrong paradigms.

Analysis becomes far more challenging when multiple complex systems interact with each other and produce feedback loops. That’s where the real so-called “Black Swans” reside.

And this crisis is the blackest swan most people alive today have ever seen, especially if Rogoff’s insight is correct — 150 years is a very long time.

That’s not to minimize in any way recent events like 9/11 or the 2008 financial crisis. Both were devastating. But neither led to a virtual lockdown of the entire economy like we’re seeing now. The current crisis simply has no precedent.

What we’re seeing is a full-fledged global contagion.
Biological and Financial Contagions

Let’s discuss the word “contagion” for a minute because it applies to both human populations and financial markets — and in more ways than you may expect.

There’s a reason why financial experts and risk managers use the word “contagion” to describe a financial panic.

Obviously, the word contagion refers to an epidemic or pandemic. In the public health field, a disease can be transmitted from human to human through coughing, shared needles, shared food or contact involving bodily fluids.

An initial carrier of a disease (“patient zero”) may have many contacts before the disease even appears.

Some diseases have a latency period of weeks or longer, which means patient zero can infect hundreds before health professionals are even aware of the disease. Then those hundreds can infect thousands or even millions before they are identified as carriers.

In extreme cases, such as the “Spanish flu” pandemic of 1918–20 involving the H1N1 influenza virus, the number infected can reach 500 million and the death toll can run over 100 million.

A similar dynamic applies in financial panics.

It can begin with one bank or broker going bankrupt as the result of a market collapse (a “financial patient zero”).

But the financial distress quickly spreads to banks that did business with the failed entity and then to stockholders and depositors of those other banks and so on until the entire world is in the grip of a financial panic as happened in 2008.

Still, the comparison between medical pandemics and financial panics is more than a metaphor.

Disease contagion and financial contagion both work the same way. The nonlinear mathematics and system dynamics are identical in the two cases even though the “virus” is financial distress rather than a biological virus.

But what happens when these two dynamic functions interact? What happens when a biological virus turns into a financial virus?

We’re seeing those effects now...

- Source, James Rickards

Tuesday, April 28, 2020

Jim Rickards: Worst Recession in 150 Years


The stock market had another big day today, spurred by the Fed’s massive recent liquidity injections.

But you really shouldn’t be terribly surprised by the rally. Even the worst bear markets see substantial bouncebacks. And you can expect the market to give back all of its recent gains in the months ahead as the economic fallout of the lockdowns becomes apparent.

This bear market has a long way to run. And we could actually be looking at the worst recession in 150 years if one economist is correct. Let’s unpack this…

My regular readers know I have a low opinion of most academic economists, the ones you find at the Fed, the IMF and in mainstream financial media.

The problem is not that they’re uneducated; they have the Ph.D.s and high IQs to prove otherwise. I’ve met many of them and I can tell you they’re not idiots.

The problem is that they’re miseducated. They learn a lot of theories and models that do not correspond to the reality of how economies and capital markets actually work.

Worse yet, they keep coming up with new ones that muddy the waters even further. For example, concepts such as the Phillips curve (an inverse relationship between inflation and unemployment) are empirically false.

Other ideas such as “comparative advantage” have appeal in the faculty lounge but don’t work in the real world for many reasons, including the fact that nations create comparative advantage out of thin air with government subsidies and mercantilist demands.
Not the Early 19th Century Anymore
It’s not the early 19th century anymore, when the theory first developed. For example, at that time, a nation that specialized in wool products like sweaters (England) might not make the best leather products like shoes (Italy).

If you let England produce sweaters and Italy make shoes, everybody was better off at the end of the day. It’s a simple example, but you get the point.

But in today’s highly integrated and globalized world, where you can simply relocate a factory from one country to the next, comparative advantage has much less meaning. You can produce both sweaters and shoes in China as easily as you can produce them in England and Italy (and much more cheaply besides).

There are many other examples of lazy, dogmatic analysis among mainstream economists, too many to list. Yet there are some exceptions to the rule.

A few economists have developed theories that are supported by hard evidence and do a great job of explaining real-world behavior. One of those economists is Ken Rogoff of Harvard.
The Worst Recession in 150 Years

With his collaborator, Carmen Reinhart and others, he has shown that debt-to-GDP ratios greater than 90% negate the Keynesian multiplier through behavioral response functions.

At low debt ratios, a dollar borrowed and a dollar spent can produce $1.20 of GDP. But at high ratios, a dollar borrowed and a dollar spent will produce only $0.90 of GDP.

This is the reality behind the phrase “You can’t borrow your way out of a debt crisis.” It’s true.

Meanwhile, the U.S. debt-to-GDP ratio was about 105% even before the crisis. It’s only going higher. We’re just digging a deeper hole for ourselves.

So when Ken Rogoff talks (or writes), I listen. In his latest article, Rogoff offers a dire forecast for the recovery from the New Depression resulting from the COVID-19 pandemic.

He writes, “The short-term collapse… now underway already seems likely to rival or exceed that of any recession in the last 150 years.”

That obviously includes the Great Depression and many other economic crises.

This is something you should really consider before you decide the coast is clear and it’s time to jump back into stocks.

- Source, Jim Rickards via the Daily Reckoning

Friday, April 24, 2020

James Rickards: Trump Says “No” to World Money


Over the course of 13 years as a media commentator and nine years as a bestselling author, I’ve had frequent occasion to state the following:

“In 1998, Wall Street came together to bail out a hedge fund. In 2008, the Federal Reserve stepped forward to bail out Wall Street. Each crisis was worse than the one before. In the next crisis, who will bail out the Fed?”

This was more than just rhetoric. It was a clinical description of a pattern of worsening crises on an approximately 10-year tempo, along with escalating bailouts.

Now the worst economic crisis in U.S. history is here and the Fed itself is in need of a bailout.

But what is the source of that bailout?

We now know part of the answer. A few weeks ago, the U.S. Congress passed a $2.2 trillion bailout bill called the CARES Act. This is the law that provided $349 billion in small-business loans, which are forgivable if the employer does not lay off its employees.

That fund has dried up already with most businesses getting either no money or not enough to survive more than a few weeks.

Also buried in that law was a $425 billion bailout fund for the Treasury to recapitalize the Fed. Since the Fed operates like a bank, they will leverage that $425 billion of new capital into $4.25 trillion of new money printing to buy corporate debt, municipal bonds, mortgages and other assets in order to keep liquidity in the system.

Still, that’s also a temporary solution when many more trillions of dollars of new money will be needed.

U.S. GDP is expected to lose an annualized $6 trillion or more in output in the second quarter. I estimate that 50% of retail and 90% of office rents aren’t being paid right now. Many small businesses will fail and probably never reopen.

I had always suggested that the IMF has the only clean balance sheet and would be the only source of liquidity in the world once the Fed was tapped out.

That’s exactly what we’re seeing now. The world is turning to the IMF for help. And that means printing the world money called special drawing rights (SDRs) to bail out the global financial system in the current economic and financial crisis.

SDRs were used in a small way during the 2008 financial crisis. They did not have much impact because the quantity was relatively small (about $250 billion equivalent) and it took a long time to get done. The SDRs were issued in August 2009, almost a year after the acute phase of the crisis and after a recovery had already begun.

Still, the 2009 issuance was a good dry run in preparation for the next crisis. Now the next crisis is here.

The world has never been so deeply in debt.

Societies with low debt burdens are robust to disaster. They can mobilize capital, raise taxes, increase spending and rebuild when the crisis is over.

But heavily indebted societies are much more brittle. They just don’t have that flexibility. Meanwhile, panicked creditors demand repayment that causes distressed sales of assets, falling markets and default.

That’s the situation we’re facing today.

Still, nothing this momentous happens without a heavy injection of politics, especially while Donald Trump and his “America First” agenda are in place.

A normal SDR printing exercise requires that the total SDRs be issued to all IMF members in proportion to their voting rights in the IMF. This means that U.S. adversaries such as Iran and China would get part of the bailout money along with more needy countries in Africa and Latin America.

The U.S. is now holding up the new issuance of new SDRs for exactly this reason.

We’ll see how this impasse gets resolved. Perhaps new SDRs will be issued right away. But as the depression lingers and the Fed’s impotence is exposed, the issue of printing a trillion SDRs will be back on the table.

China may have their own conditions such as a diminution in the role of the dollar as a global reserve currency. The U.S. may be more desperate when the time comes. Either way, this issue will not go away.

SDRs were originally intended as a kind of “paper gold.” Once the IMF starts the printing presses, investors will probably favor real gold as the proper antidote.

Below, I show you why gold is coming back to the global monetary system. As you’ll see, It can be done either in an orderly fashion, or a chaotic fashion.

- Source, James Rickards via the Daily Reckoning

Friday, April 17, 2020

James Rickards: Are We Facing the Greatest Depression? Worst Economic Crash in History?


Just how dire of a situation are we looking at? Will the COVID-19 outbreak lead to one of the greatest economic depressions of the modern era?

How far will governments go to bailout its people and its businesses?

Nothing like this has ever been attempted before and the ramifications could be felt for years to come.

Join James Rickards and Pippa Mamgren as they take on these questions, plus many more in their recent interview with Trigger Nometry.

- Source, Trigger Nometry

Monday, April 13, 2020

Jim Rickards on How to Protect Your Wealth During the COVID-19 Crisis


Jim Rickards speaks with our friend, the publisher of Paradigm Press, Pete Coyne about the COVID-19 Crisis. 

As is often the case, Jim Rickards has been one step ahead of mainstream analysts through the entire COVID-19 crisis. 

He predicted it would be global catastrophe in early February, well before markets caught the fever. So what does Jim see happening next? 

The answer is unsettling: A complete monetary system shutdown. Starting in the US. Then spreading outwards. At the end of such a scenario, the entire global financial system shuts down, and any Federal Reserve intervention may no longer be effective. 

It’s worth pointing out that this is a scenario Jim has highlighted for several years as the bookend of this historic bull market. 

The difference now is, it appears to be in motion. So what, if anything, can you do to shelter your wealth?

Thursday, April 9, 2020

James Rickards: Defending Your Wealth During This Global Crisis, A Strategy Guide


Join Hedgeye CEO Keith McCullough for a very special conversation with Strategic Intelligence editor James Rickards.

Keith and Jim dive deep into the current market chaos, key economic ramifications, the failure of central banks to arrest the recent decline and how investors can protect their wealth amidst the market tumult.

- Source, Hedgeye TV

Thursday, April 2, 2020

Jim Rickards Has Been Warning About an Economic Collapse for Years, Now it is Here


Financial advisor, commentator and author of books like Aftermath, Currency Wars and the Road to Ruin, and with a Twitter following of over 130,000, Jim Rickards has been warning of the day markets seize up, in a new different crisis. 

He spoke to Ticky Fullerton from New England where he is holed up with family and was asked what he made of the US government's massive $2 trillion stimulus.

Sunday, March 29, 2020

Jim Rickards: Everyone Should at Least Own a Monster Box of Physical Silver, In Case of an Economic Crash


Markets were down again today, what a surprise. The Dow lost another 600 points, finishing the day at 18,591.

Meanwhile, gold was up about $75 today. Physical supply is drying up and dealers are running out.

That’s why I’ve been warning my readers for years to get their gold before the crisis hits. Once it does (and it has), you won’t be able to get any.

What about silver?


You Should Get a “Monster Box”

Silver’s dynamics are a little bit different than gold because there are some industrial applications, but there’s no question that it’s a monetary metal.

And I always recommend that people have a “monster box.” A monster box is 500 American Silver Eagles, fine pure silver that comes directly from the Mint. It comes in a green case and is sealed.

The 500 coins at retailer commission will run you about $12,000 right now, but everybody should have one.

You ought to have a monster box of silver because if the power grid goes down, which could happen for a lot of reasons, the ATMs won’t work and neither will credit cards.

But if you walk into a store with five or six silver coins, you’ll be able to get groceries for your family.

Believe me, that’ll be legal tender when the time comes, so I definitely recommend silver.

- Source, James Rickards

Wednesday, March 25, 2020

James Rickards: It’ll Get a Whole Lot Worse Before It Gets Any Better


We’re well into the coronavirus pandemic at this point. As of this writing, there are 360,765 reported infections and 15,491 deaths worldwide.

Over the next few days, you may be certain that those numbers will be significantly higher.

That’s how pandemics work. The cases and fatalities don’t grow in a linear fashion; they grow exponentially.

It’s widely acknowledged that this pandemic will get much worse before it gets better. There’s no doubt about that.

It didn’t take long for the coronavirus crisis to turn into an economic and financial crisis.

The Worst Collapse Since the Great Depression

The U.S. is falling into the worst economic collapse since the Great Depression in 1929. This will be worse than the dot-com collapse of 2000–01 and worse than the Great Recession and global financial crisis of 2008–09.

Don’t be surprised to see second-quarter GDP drop by 10% or more and for the unemployment rate to race past 10% on its way to 15% or higher.

The questions for economists are whether the lost output will be permanent or temporary and whether U.S. growth will return to trend or settle on a new path that is below the pre-virus trend.

Some lost expenditure may just be a timing difference. If I plan to buy a new car this month and decide not to buy it until August, that’s just a timing difference; the sale is not permanently lost.

But if I don’t go out for dinner tonight and then do go out a month from now, I’m not going to order two dinners. The skipped dinner is a permanent loss.

Unfortunately, 70% of the U.S. economy is based on consumption and the majority of that consists of services rather than goods. This suggests that much of the coronavirus impact will consist of permanent losses, not timing differences.

More important is the question of whether growth returns to trend by next year or follows a new lower trend. (Bear in mind that “trend” for the past 11 years has been 2.2% growth compared with average growth in all recoveries since 1980 of 3.2%; any decline in trend growth would be from an already low base.)

This is unknown, but the result will be as much psychological as policy driven.

The Fed’s Bazooka Is Empty

In situations like this, the standard policy response is for the Fed to cut rates, which it has certainly done.

The Fed has also launched massive amounts of quantitative easing.

In addition, they have guaranteed or offered credit facilities to banks, primary dealers, money market funds, the municipal bond market and commercial paper issuers so far.

Now the central bank has taken the unprecedented step of committing to buy as many U.S. government bonds and mortgage-backed securities as needed to keep the market functioning.

The problem is that the Fed’s programs won’t work as a form of stimulus. We’re seeing a supply shock as the economy grinds to a standstill. What’s everyone going to buy with all the money?

Still, they may have done things exactly backward.

Mohamed El-Erian, chief economic adviser at Allianz, says that the Fed should have focused on payment system problems and liquidity first but should not have cut rates.

Interest rates were already quite low. Once the Fed goes to zero as they did, they are incapable of cutting rates further (leaving aside negative rates, which also don’t provide stimulus).

El-Erian argues the Fed should have saved their rate cuts in case they are needed more acutely in the weeks ahead. Too late now. The interest rate bullets were fired. Now the Fed’s bazooka is empty at the worst possible time.

No Stimulus Bill

Meanwhile, Congress is working to pass a “stimulus” bill to fight the economic effects of the coronavirus pandemic.

Negotiations stalled this morning as Democrats want to insert provisions that would give tax credits to the solar and wind industry, give more power to unions and introduce new emissions standards for the airline industry.

“Democrats won’t let us fund hospitals or save small businesses unless they get to dust off the Green New Deal,” said Senate Majority Leader Mitch McConnell.

Once again, I need to emphasize the point: The economic impact of coronavirus could be devastating.

If consumers get used to not spending and decide that increased savings and debt reduction are the best ways to prepare for another virus or natural disaster, then velocity will fall and growth will be weak no matter how much money the Fed prints or the Congress spends.

The bottom line is that these spending bills provide spending but they do not provide stimulus. That’s up to consumers. And right now consumers are hunkered down.

It may be that the last of the big spenders just left town.

- Source, James Rickards via The Daily Reckoning

Monday, March 23, 2020

Here’s what Jim Rickards Tells People Who Think it’s Just the Flu


Comparing the current outbreak to the flu is like comparing apples to oranges, said best-selling author Jim Rickards. 

“I think last year, 20,000 people died of the flu, and so far in the United States, we have about 100 fatalities, and they say it’s not a big deal. But that completely misses the point,” Rickards said, pointing to the uncertainty around the disease’s contagion factor, how it spreads, and current lack of a viable vaccine.

- Source, Kitco News

Friday, March 20, 2020

Jim Rickards: Economic Freeze is Here, Get Gold, Silver If You Can and Get Ready


We are potentially entering an “Ice-9” situation where the entire world may “freeze” over economically, said Jim Rickards, best-selling author of “The Road to Ruin” and “Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos.” 

“If you shut down the New York stock exchange, and I can’t sell stocks and get cash, I’m going to sell my money market funds or redeem my money market funds. 

Then you’ve got to shut down the money market funds industry, and then people say ‘ok, I’ll go to the banks or the ATMs,’” he said. 

“And then you’ve got to shut down the banks so the point is, it spreads from exchange to money markets, to brokerage accounts, to banks, and you end up shutting down the entire system.”

- Source, Kitco News

Thursday, March 12, 2020

Gold’s Ups and Downs

King Midas lusted after it. The Incas worshipped it. Shiny flakes of it set off a 19th-century rush to California and families in India use it to store wealth on the arms of their daughters. Gold’s allure remains as untarnished as the noble metal itself. But its price is subject to manias and periods of ambivalence. Since the turn of the millennium, gold has seen a seven-fold rally, a 45% crash and sustained periods where its price moved very little. The drivers of sentiment change over time, and understanding how they shift can be as revealing about the collective psyche of global investors as it is about the nature of bullion itself. Just what is it that keeps investors coming back to gold?

The Situation


Bullion’s time-honored appeal as a haven from unexpected events is demonstrated again and again: It surged to a seven-year high as the coronavirus began to sweep the globe in early 2020, and briefly spiked after Donald Trump’s upset victory in the U.S. presidential election in 2016. In between there were two years of steady prices, with every rally capped as gold approached $1,350 an ounce. That began to change in 2019, when slowing global economic growth, worries over tensions in the Middle East and a trade war between the world’s biggest economies dented the belief that riskier assets would continue climbing. Holdings in bullion-backed exchange-traded funds hit a record, hedge funds bet on higher prices and central banks piled in. In February 2020, Goldman Sachs Group Inc. said that gold was acting as a haven of last resort, and predicted that the price could top $1,800 an ounce within months if the virus outbreak worsens. With interest rates and bond yields at historic lows, the opportunity cost of owning gold has largely evaporated.

The Background

Discarded as a monetary system when its peg to the dollar ended in the 1970s, gold spiked to $850 in 1980 on a bout of inflation. Prices slumped in the following two decades as central banks around the world shrank their reserves and miners locked in prices for future production. The launch of the first gold ETF in 2003, which made it possible for retail and equity-market investors to directly access the metal via their stockbrokers, set off a wave of gold buying that lifted prices for almost a decade. Then the 2008 financial crisis sent prices steadily up to a record high in 2011 as money was parked in havens on fear that bond-buying by central banks would lead to hyperinflation. Even so, some investors never warmed to gold. Legendary business guru Warren Buffett expressed his disdain for the metal because it has no inherent yield and isn’t productive like, say, companies or farmland. He wrote in 2012 that investors in gold are motivated by their “belief that the ranks of the fearful will grow.”

The Argument

More than perhaps any other investment, bullion acts as an echo chamber for anxieties about the global financial system and the ability of central bankers to keep economic growth going. Gold bears say it is a relic of history and that there are better ways of hedging against uncertainty, including financial instruments such as derivatives. Bulls say it offers them a simpler way to protect against a wider range of risks. Demand for gold is supported by rising incomes in China, India and other Asian countries, where families often buy it for dowries and there are fewer safe stores of wealth. In the West, some fans of gold, known as “gold bugs,” believe it should be restored to its place as the guarantor of government-issued currencies. Even one of Trump’s nominees for the Federal Reserve was historically an advocate of returning to the gold standard. But ultimately, gold’s reputation for withstanding the effects of inflation — at the cost of sacrificing yield — comes into its own when interest rates on bonds drop below the rate of general price increases. Compared with the trillions of dollars’ worth of bonds around the world now delivering negative returns, gold is shining once again.

The Reference Shelf

• Peter Bernstein explores the history of the metal in his book, “The Power of Gold.”

• Comments from former U.S. Federal Reserve Chairman Ben S. Bernanke on not understanding gold.

• Richard Nixon ends the convertibility of the dollar into gold on August 15, 1971.

• The World Gold Council website has explanations of everything from the gold standard to central bank gold agreements.

• Supply and demand figures.

• Industry facts and specifications from the London Bullion Market Association.

• “The New Case for Gold,” a 2016 book by James Rickards, argues that gold is still an important tool for wealth preservation.


- Source, Washington Post

Monday, March 9, 2020

James Rickards: “Mandate of Heaven” in Jeopardy

The U.S. markets are closed today for Presidents Day. If you have the day off, I hope you’re enjoying your long weekend.

But one event is taking center stage in the world that affects not only basic survival for millions of people, but the health of the global economy overall.

Of course, I’m talking about the coronavirus outbreak currently playing out before our eyes in China.

China’s economy was slowing substantially before the outbreak of the highly contagious and deadly virus last fall. This slowing was the predictable result of excessive debt levels, Trump’s retaliation in the trade wars, and China’s encounter with what development economists call the “middle-income trap.”

Developing economies can grow at double-digit rates as they move from low-income (about $3,000 annual per capita income) to middle-income (about $10,000 annual per capita income).

The main requirements are limits on corruption, a large pool of available labor, and an attractive legal environment for foreign direct investment. Once investment is used for infrastructure and labor is mobilized, large-scale basic manufacturing can commence.

This powers growth and the accumulation of hard currency reserves from export earnings.

The difficulty begins when an economy tries to move from middle-income to high-income (about $18,000 annual per capita income). That move requires more than cheap labor and infrastructure investment. It requires applied technology to produce high-value added products.

Only Taiwan, South Korea and Singapore have made this transition, (excluding Japan after World War II, and oil-exporting nations).

This explains why China has been so focused on stealing U.S. intellectual property.

Trump has been closing that avenue. China cannot generate the needed technology through its own R&D. China is stuck in the middle-income trap and a slowdown in growth is the inevitable result.

The story gets worse for China.

As of Friday, the total reported number of people infected by the coronavirus was 64,435. And the death toll was up to 1,383, including three people outside of China.

Those figures are official statistics released by China and other countries around the world where the virus has spread.

However, there is substantial medical, anecdotal, and model-based evidence that the actual infection rate and death rate may be ten to twenty times higher than those official statistics.

Over 60 million Chinese in several major cities are under “lock-down” where individuals are confined to their homes and may only leave once every three days to buy groceries.

Streets are empty, stores are closed, trains and planes are not moving, and factories are shut. The Chinese economy is slowly grinding to a halt.

This not only affects China’s economy as a whole, but the contagion filters down into individual companies that are dependent on China both for supply chain inputs and final sales.

And it will have a rippling effect on the U.S. economy also. This story has a long way to run.

- Source, James Rickards via the Daily Reckoning

Thursday, March 5, 2020

James Rickards: The Democrats Are in Complete Disarray

President Trump delivered his State of the Union speech last night. He talked a lot about the booming economy and stock market, which are his main strengths heading into this year’s election.

The visuals said it all, as Republicans were on their feet cheering much of the night, while Democrats remained seated in obvious disgust.

House Speaker Nancy Pelosi provided the most dramatic theater of the night, ripping up her copy of the president’s speech in front of the nation.

The president didn’t mention impeachment. But he was acquitted in the Senate on both the abuse of power and the obstruction of Congress charges late this afternoon. The vote on the abuse of power charge was 52-48, with Mitt Romney being the only Republican to vote for conviction. The obstruction charge broke down 53-47.

The outcome was never in doubt, and is just another blow for Democrats. Trump has all the momentum right now.

Meanwhile, chaos in Monday’s Iowa caucus has further compounded the difficulties Democrats face in their efforts to defeat Trump in November. Much of the trouble in Iowa surrounded glitches with an app that was used to report the caucus results.

Many who downloaded the app to their smartphones received error messages or experienced difficulties in following its instructions. The party’s backup phone system also reportedly failed, adding to the problems.

Widespread reporting issues resulted in mass confusion, leaving the ultimate winner still undecided.

In an early vote count, Bernie Sanders held a slight lead in the popular vote, with Pete Buttigieg leading in state delegates. As of early today, 71% of precincts have reported in. They show Buttigieg with 26.8% of state delegates, followed by Sanders, with 25.2%. Elizabeth Warren has 18.4%, with Joe Biden trailing at 15.4%.

The results are a big red flag for Biden, who fell short of the critical 15% threshold in some precincts. It was a clear failure. Now he has to go to New Hampshire with no momentum whatsoever. It’s not over yet, but it’s not looking good for Biden at this point.

Many have suggested the Democratic Party establishment intentionally skewed the results to obfuscate Sanders’ good showing and to avoid embarrassing establishment favorite Joe Biden.

Democrat Party officials naturally deny the charge, arguing that the glitches with the app were just that — glitches, and that there’s nothing else to it. But I’m not convinced.

I believe Bernie Sanders probably won Iowa, then Iowa’s Democratic establishment ginned up a “systems failure” to deny him his big moment and stop his momentum going into New Hampshire. Get used to this. Democrats are out to stop Bernie.

The surge of Bernie Sanders in the Iowa caucus and New Hampshire primary polls have mainstream Democrats in a panic. Bernie is vibrant and authentic, but he’s also a hard core socialist who took his honeymoon in the Soviet Union during the height of the Cold War.

Election outcomes are always uncertain, but Sanders looks like a sure loser to Donald Trump in critical heartland swing states like Pennsylvania, Ohio, Michigan, and Wisconsin.

What about Elizabeth Warren?

She is no better with her equally socialist outlook and support for open borders, nationalized medicine and the Green New Deal. Meanwhile, Buttigieg is only 38 years old and was the mayor of a small city with no other political experience.

And the other Democrats are doing poorly in the polls. Tulsi Gabbard is as much disliked by Democrats as she is opposed by Republicans. The party has nowhere to turn among the frontrunners.

It’s true that Biden is ahead (barely) in national polls. The Real Clear Politics poll-of-polls (one of the most accurate available) shows Biden with 27% nationally and Sanders with 21.8%. But that’s almost inside the margin of error and Sanders has been surging lately. Besides, national polls don’t matter because we don’t have national elections; we go state-by-state. When you get to important state polls, Sanders is dominating.

He beat Biden solidly in Iowa, and is ahead 25.6% to Biden’s 17.6% in New Hampshire. No candidate has ever won Iowa and New Hampshire without becoming their party’s nominee. With the Iowa caucus results still not final, it’s possible Sanders could still win both states. The Democratic establishment is having fainting spells as a result.

If Sanders continues to surge and Biden continues to fade, expect mainstream Democrats to coalesce around Michael Bloomberg as the moderate alternative to Sanders. But there’s only one problem with Bloomberg — he’s not really a moderate.

Bloomberg supports late-term abortions and has called for gun confiscation. Those positions may be OK with Democrats, but they get no support among Republicans and moderate independents from the Midwest.

In addition, Bloomberg wants to impose a surtax of 5% on high-income individuals. The problem with taxes like that is the money is usually wasted and the tax itself can slow investment in the economy. Also, taxes of this kind always start out aimed at the “wealthy” but sooner or later trickle down to affect the middle class by amendments or inflation in tax brackets.

Bloomberg may appear moderate to Democrats frightened by Bernie Sanders, but he appears extreme to everyday Americans. That’s one more reason why Trump is on a path to victory in November regardless of what Democrats do in the meantime.

The only factor that can realistically derail Trump, barring the unforeseen, is a recession between now and November. That’s unlikely. While the economy is sluggish, my models aren’t telling me that a recession is likely before the election. So Trump is on track for reelection. Even some of Trump’s harshest critics agree he stands an excellent shot this fall…

Mara Liasson, for example, is an NPR reporter and well-known Trump-basher. If you support Trump or just want to get a read on the electoral landscape, your first reaction might be to skip an article by a Democrat partisan. But that would be a mistake. In a recent article, Liasson exhibits her usual Trump attacks, but she does so in a context that takes the Democrats to task for such weak opposition.

She points out that Trump has a “locked-in base” (which is true). That gives Trump considerable leeway to expand his support since he does not have to worry about his base. Importantly, she recognizes that presidential elections are decided by the Electoral College, not by a majority of the popular vote.

This means Trump could lose the popular vote by as much as 5 million votes (in 2016 he lost to Hillary Clinton by 3 million votes) and still win reelection by the Electoral College. This is because Democrat votes are heavily concentrated in New York and California. Those states are certain to vote Democratic, but millions of extra votes over a simple majority are wasted because they provide no additional electoral votes.

Meanwhile, Trump’s support is spread more evenly among important states like Wisconsin, Michigan, Florida and Pennsylvania that collectively give him an Electoral College edge.

Finally, Liasson points out that turnout is critical. It doesn’t matter if you have fewer supporters as long as you have higher turnout. That’s another Trump advantage that does not show up in opinion polls. Liasson may be a Trump-basher, but she has practically written the playbook for how Trump will win.

And right now, he’s on course to.

- Source, James Rickards

Monday, March 2, 2020

Jim Rickards: Coronavirus Slams Chinese Economy

How bad is the coronavirus pandemic in China? It’s worse than the Chinese government knows and worse than the world believes.

Here are the official statistics on the coronavirus (technically COVID-19) as of today: There are 75,685 confirmed infections worldwide, with 98% of that total in China alone. Of those cases, 82.5% are in the single province of Hubei, mostly centered in the city of Wuhan, with 11 million residents.

Of the over 75,000 worldwide cases, there have been 2,236 deaths; that’s a mortality rate of roughly 2.5%. If a 2.5% mortality rate sounds low, it’s not. That’s roughly comparable to the Spanish flu pandemic of 1919–20 that killed 50 million people by some estimates.


Coronavirus has reached pandemic proportions in China. Over 60 million people are locked down, which means they cannot leave their homes except once every three days to buy groceries. Streets are empty, stores are closed, trains and planes are not operating. The Chinese economy is slowly grinding to a halt.

While the disease has been predominately centered in China, and Wuhan in particular, there have been significant outbreaks in Singapore (58 cases), Hong Kong (56 cases), Thailand (33 cases) and Japan (29 cases including one fatality). Approximately 218 cases have been identified among those trapped on cruise ships where all passengers are under quarantine. Fifteen cases have been identified in the United States.

These statistics barely scratch the surface of what is happening with coronavirus in China. There is good reason to believe that the actual incidence of the virus may be five–10 times the official numbers.

Tencent (a popular internet search and social media platform in China) reported on Feb. 1, 2020, that actual infections were 154,000 and deaths from the disease were 24,589. (A screenshot of the Tencent release is shown below; source: Taiwan News).

The infection figure was approximately 10 times what the official figure was on the same date.

The death toll was more than 300 times the official figure. Applying this death toll to total infections gives a fatality rate of 16%, which is over seven times the official fatality rate.


There is no reason for a high-profile platform such as Tencent either to fabricate data or incite panic. It is reasonable to conclude that these figures are close to actual data. The Tencent posting was suppressed by the Chinese government within minutes of what may have been an accidental release of accurate data.

The preeminent U.K. medical journal The Lancet also published an article on Jan. 31, 2020, using hard data (city populations, incidence of travel, estimated transmissibility, etc.) and a reliable SEIR model (susceptible, exposed, infected, resistant).

That article estimated total infections of 75,815 in Wuhan as of Jan. 25. That figure is 17 times the official figure of 4,400 available on Jan. 27. The multiple of the estimate by The Lancet to the official figure is roughly in line with the multiple of the Tencent release to official data five days later.

Using either The Lancet or Tencent as a baseline suggests that the official infection and death rates are grossly understated.

Anecdotal evidence is consistent with the view that official data are materially understated.

Many bodies have been picked up off the streets and sent for cremation without blood samples or autopsies. It is highly likely that these victims died from coronavirus but are not included in official counts because no tests were performed.

Authorities are running out of body bags and refrigerated trucks, so bodies are simply being wrapped in plastic sheets and hauled away in ordinary vans.

A shortage of face masks, latex gloves and testing kits has also emerged. This means that doctors and medical personnel are highly susceptible to infection. It also means that patients who complain of fever and difficulty breathing are sent away because officials have no way to test them for coronavirus.

These developments simultaneously inflate the number of infected and deflate the official count.

The story gets worse. Wuhan, the city that is ground zero for coronavirus infections, is also the location of the sole bioweapons laboratory for the Chinese military and Chinese Communist Party.

One of the scientists at the laboratory is Zhengli Shi, a virologist. Shi formerly worked at a laboratory at the University of North Carolina, where he engineered a hypervirulent bat-based coronavirus that bears a striking resemblance to the COVID-19 coronavirus, including gene sequences not found in nature.

These linkages at least suggest that the outbreak of the coronavirus in Wuhan may be linked to an accidental release of the virus from the biological weapons laboratory located there.

If this thesis is correct, the coronavirus may be difficult to contain with vaccines or drug therapies since it would have been engineered to be highly resistant to such treatments.

What impact will the coronavirus pandemic have on the Chinese economy and global supply chains, especially in the technology sector?

Right now my models are telling me that the impact of coronavirus on the Chinese economy is orders of magnitude greater than most analysts estimate. In fact, the Chinese economy, second largest in the world, may be grinding to a halt.

The following excerpt from an article by Ambrose Evans-Pritchard in The Telegraph on Feb. 12, 2020, tells the tale:


Property sales in 30 big cities released every day… have collapsed to zero and have yet to show a flicker of life.

Property is a slow-burn issue compared to ruptured manufacturing supply chains, but by March it will start to bite for developers with dollar debts on Hong Kong’s funding market. Companies deemed “stressed” (borrowing costs above 15%) have to repay $2.1 billion of offshore dollar notes next month. Standard & Poor’s says they rely on a constant flow of sales to cover past debts.

Some 25 provinces and municipalities were supposed to go back to work this week but this clashed head on with virus control measures. Companies may not reopen plants unless they can track the exact movements and medical data of each worker and comply with a 14-day quarantine period where necessary (we now learn the incubation may in fact be 24 days). Officials dare not be lenient after Xi Jinping’s latest tirade.

The Guangzhou authorities have ordered plants to remain closed until early March in large parts of the city with warnings of ferocious penalties. Apple supplier Foxconn has yet to restart its core iPhone plants in Zhengzhou and Shenzhen. Just 10% of its workers have turned up. Caixin reports that Foxconn may wait until March before restarting.

Meanwhile the near complete shutdown of Shanghai’s manufacturing hub in Songjiang belied early claims that 70% of plants were going back to work.

This article contains valuable vignettes of what is happening in China, but they barely scratch the surface. An even bigger story is the extent to which the disruption in China from coronavirus is not only slowing the Chinese economy but is also disrupting global supply chains and slowing output around the world.


This chart prepared by the Johns Hopkins University based on official data provided by China and other nations shows the total number of confirmed cases of coronavirus infection as of Feb. 14, 2020 (orange line). Wall Street was encouraged by a prior update that showed 44,700 confirmed cases. Then cases increased by over 15,000 in a single update. The resulting near-vertical slope of the graph blew up Wall Street wishful thinking and triggered a downdraft in stock markets worldwide. As of Feb. 15, confirmed cases had increased to 64,447. The pandemic is far from under control and spreading quickly.

Production shutdowns in China are reducing exports of high-tech inputs from South Korea, Japan and Germany. Likewise, the extreme reductions in exports from China (due to plant closures) are hurting sales by European and U.S. distributors and retail outlets.

Independent of production and sales bottlenecks, there are massive transportation bottlenecks as vessels and crews are quarantined or refuse to enter Chinese ports at all.

The tech sector may be the hardest hit of all. In addition to coronavirus disruption, the U.S. Department of Justice last week indicted China’s largest telecommunications device and network provider, Huawei, on racketeering charges.

The Pentagon also reversed a prior determination and agreed that the Commerce Department can put Huawei on an export control list, which prohibits sales of processors and other high-tech components to Huawei by U.S. firms.

These measures are certain to invite retaliation by China against U.S. firms in the tech supply chain.

This story isn’t going away anytime soon.

- Source, James Rickards via the Daily Reckoning

Friday, February 28, 2020

James Rickards: “1984” Has Come to China

You’re probably familiar with George Orwell’s classic dystopian novel Nineteen Eighty-Four; (it’s often published as 1984). It was written in 1948; the title comes from reversing the last two digits in 1948.

The novel describes a world of three global empires, Oceania, Eurasia and Eastasia, in a constant state of war.

Orwell created an original vocabulary for his book, much of which is in common, if sardonic, usage today. Terms such as Thought Police, Big Brother, doublethink, Newspeak and memory hole all come from Nineteen Eight-Four.

Orwell intended it as a warning about how certain countries might evolve in the aftermath of World War II and the beginning of the Cold War. He was certainly concerned about Stalinism, but his warnings applied to Western democracies also.

When the calendar year 1984 came and went, many breathed a sigh of relief that Orwell’s prophesy had not come true. But that sigh of relief was premature. Orwell’s nightmare society is here today in the form of Communist China…

China has most of the apparatus of the totalitarian societies described in Orwell’s book. China uses facial recognition software and ubiquitous digital surveillance to keep track of its citizens. The internet is censored and monitored. Real-life thought police will arrest you for expressing opinions opposed to the government or its policies.

Millions of Chinese have been arrested and sent to “reeducation” camps for brainwashing (the lucky ones) or involuntary organ removal without anesthetic (the unlucky ones who die in excruciating pain and are swiftly cremated as a result).

While these atrocities are not going to happen in the U.S. or what passes for the West these days, the less extreme aspects of China’s surveillance state could well be. And while you might not be arrested for expressing unpopular opinions or challenging prevailing dogmas (at least not yet), you could face other sanctions. You could even lose your job and find it nearly impossible to find another.

You can certainly be banned from social media…

Anything seems to go on social media (primarily Facebook, Twitter, Instagram, Snapchat, YouTube and a few other platforms) — unless you’re a conservative personality or politico. That’s where the censorship begins.

Many conservative social media participants have had their acco‌unts closed or suspended, not for threats or vulgarity but for criticism of “progressive” views (albeit criticism with some sharp edges).

Meanwhile, those with progressive views can say almost anything on social media, including the implicit endorsement of violence. But nothing happens.

Other conservatives report being the targets of “shadow banning.” That’s where your acco‌unt is open and seems to operate normally, but unbeknownst to you, much of the network is being blocked from seeing your posts and popular features such as “likes” and “retweets” are being truncated and not distributed.

It’s like being a pro athlete who finds out the stadium is empty and no tickets are being sold. That’s bad enough. But Twitter took the war on conservatives a step further.

Well, one of the most widely followed acco‌unts on Twitter is none other than Donald J. Trump’s, with 68 million followers. President Trump uses Twitter to announce policy initiatives and personnel changes and to offer pointed criticism of political opponents. It’s a major platform for him.

Last month Trump issued a tweet that identified the so-called “whistleblower” of the Ukraine phone call that led to his impeachment. That’s not as big a deal as it sounds because everyone in Washington knew who the whistleblower was (you can look his name up on the web), and he wasn’t even a real whistleblower because he didn’t meet statutory requirements.

Still, Twitter blocked Trump’s tweet. Twitter blamed a temporary system “outage,” but that claim was highly suspicious. Later, Trump’s tweet was restored, but the original acco‌unt that Trump linked to had been deleted. No one ever said that politics was fair.

But Twitter’s blatant interference in the election could have adverse consequences for the company in Trump’s second term.

And a few social media companies are now de facto censors, taking over the job from the government. Given their massive media footprint, they wield extraordinary influence over the American public.

They’re in essence becoming propaganda outfits.

It’s not just here of course. Canada, for example, is actively pursuing digital surveillance to track the activities of law-abiding citizens.

A report for the Bank of Canada says that financial information gathered from digital transaction records could be used for “sharing information with police and tax authorities.”

If all transactions are digital (including credit and debit cards), authorities can track your whereabouts, buying habits, restaurant choices and much more. They could also reveal your political orientation and personal associations.


- James Rickards via the Daily Reckoning

Wednesday, February 26, 2020

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


“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.”

- Source, Hedgeye

Thursday, February 20, 2020

James Rickards: A June Rate Cut is Coming and the Market is Not Pricing it In


James Rickards talks about what he sees coming next for the markets, with Sprott Media. 

He talks about how a June rate cut is likely coming and how the markets and precious metals are not correctly pricing this in.

Can the Fed advert the next major recession that is just over the horizon? Join James Rickards to find out the answers to this and much more.

- Source, Sprott Media

Monday, February 10, 2020

James Rickards Ultimate Forecast for Investing in 2020


The macroeconomic growth forecast for 2020 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

Tuesday, February 4, 2020

Disease Contagion and Financial Contagion Both Work the Same Way

The comparison between medical pandemics and financial panics is more than a metaphor.

Disease contagion and financial contagion both work the same way. The nonlinear mathematics and system dynamics are identical in the two cases even though the “virus” is financial distress rather than a biological virus.

But what happens when these two dynamic functions interact? What happens when a biological virus turns into a financial virus?

We’re seeing it happen in China.

It’s the time of the Lunar New Year holiday in China, China’s most important public holiday. It’s traditionally a time of widespread celebration.

But, for many Chinese cities, not this year.

Many major Chinese cities have been shut down, with no citizens allowed to leave, and their transportation systems have been closed.

Retails sales are also suffering as consumers remain home instead of risking contagion with trips to the store.

The disease is causing financial panic in China at a time when it can least afford it. GDP growth has hit a wall and investors have curtailed new investment.

Could it unleash a global financial panic that ultimately results in a lockdown of the banking system?

It’s possible, but it’s far too soon to say. This is the type of catalyst that could take a year to build.

But it definitely bears watching...

- Source, James Rickards

Sunday, February 2, 2020

James Rickards: Contagion!

The world is confronting the effects of the “coronavirus.” It likely originated in Wuhan, China, where it jumped from animals to humans at a local food market. It has since spread to other parts of China and beyond.

So far, there are 2,886 confirmed total cases of the coronavirus. All but 61 of them are in mainland China. The death toll so far is 81.

But cases have also been found in France, the U.S., Canada, Australia, Japan, South Korea and elsewhere. That list includes the world’s three largest economies (the U.S., China and Japan).

For many, it recalls the SARS outbreak of 2003, which also originated in China. It ultimately killed 774 people and infected more than 8,000 in different parts of the world.

Not surprisingly, global markets are on edge over fears of the “coronavirus” contagion spreading. And the U.S. stock market sold off today.

The Dow lost 454 points. The S&P and Nasdaq also had awful days. But gold has a good day, up over $10 to $1,582, as investors looked for safety.

But let’s discuss the word “contagion,” because it applies to both human populations and financial markets — and in more ways than you may expect.

There’s a reason why financial experts and risk managers use the word “contagion” to describe a financial panic.

Obviously, the word contagion refers to an epidemic or pandemic. In the public health field, a disease can be transmitted from human to human through coughing, shared needles, shared food or contact involving bodily fluids.

An initial carrier of a disease (“patient zero”) may have many contacts before the disease even appears.

Some diseases have a latency period of weeks or longer, which means patient zero can infect hundreds before health professionals are even aware of the disease. Then those hundreds can infect thousands or even millions before they are identified as carriers.

In extreme cases, such as the “Spanish flu” pandemic of 1918–20 involving the H1N1 influenza virus, the number infected can reach 500 million and the death toll can run over 100 million.

A similar dynamic applies in financial panics.

It can begin with one bank or broker going bankrupt as the result of a market collapse (a “financial patient zero.”)

But the financial distress quickly spreads to banks that did business with the failed entity and then to stockholders and depositors of those other banks and so on until the entire world is in the grip of a financial panic as happened in 2008...

- Source, James Rickards, read more here

Thursday, January 30, 2020

James Rickards: In Today’s World, Everyone’s a Potential Casualty of Financial Warfare

Following the killing of Soleimani on Iraqi soil, Iraq threatened to expel all U.S. troops from Iraq. Trump answered in two parts.

He said U.S. troops would not leave until Iraq repaid the U.S. for building bases and other infrastructure in Iraq. Trump also warned that Iraq’s access to its account at the Federal Reserve Bank of New York could be terminated.

That would make it impossible for Iraq to purchase and sell oil in dollars. It could also cause Iraq to lose access to about $3 billion currently held in that account.

Iraq has heard the U.S. threats loud and clear. As of now, U.S. troops are still in Iraq and not planning to leave anytime soon.

The fact that Iraqi policy could be conditioned without a shot being fired shows the raw power of financial warfare.

The trouble is private businesses and investors can get caught in the crossfire of financial warfare.

According to one survey, last year saw a 42% increase in cyberattacks on private companies around the world (attributable to foreign governments).

About 20% of businesses reported daily attacks, many in the banking and financial services sectors. Only 6% of businesses in the survey claimed they weren’t targeted by a cyberattack in 2019.

You as an investor trying to mind your own business or build wealth or expand your portfolio may get caught in the crossfire of a financial war. So you have to take that into account in your portfolio allocations and risk management.

In today’s world, everyone’s a potential casualty of financial warfare.

- Source, James Rickards via The Daily Reckoning

Monday, January 27, 2020

Jim Rickards: Don’t Mess With the United States Financially

I’ve been documenting financial warfare in my articles for years, but it still doesn’t get the mainstream attention it deserves.

Because as you’ll see below, it can directly impact your wealth.

Financial warfare tools include account seizures and freezes, expulsion from global payment systems, secondary fines and penalties on banks that do business with targeted entities, embargoes, tariffs and many other impositions.

These tools are amplified by the unique role of the U.S. dollar, which is the currency behind 60% of global reserves, 80% of global payments and almost 100% of transactions in oil.

The U.S. controls the banks and payments systems that process dollar transactions. This leaves the U.S. well positioned to impose dollar-related sanctions.

Much has been made of the recent killing of Iranian terrorist mastermind Qasem Soleimani. Many say it was an act of war. But guess what, folks?

We’ve been in a full-scale war with Iran for two years now. It’s just that most people don’t realize it.

It’s not a kinetic war with troops, missiles and ships (except Iran’s use of terrorist bombs and the U.S.’ use of drones). And it’s severely damaged the Iranian economy, which has led to protests against the regime.

From the U.S. side, it’s a financial war. People need to stop thinking about financial sanctions as an extension of trade policy, for example.

This is warfare. It’s just a different form of warfare.

It’s critical to understand that financial war is not a sideshow. It may actually be the main event in today’s deeply connected and computerized world.

North Korea is also the current target of a U.S. “maximum pressure” campaign, where harsh sanctions are applied to a wide range of banks, companies and individuals.

As with Iran, sanctions have been instrumental in destabilizing the regime and bringing North Korea to the bargaining table to discuss its nuclear weapons programs.

Now, Iraq is the latest country to feel the sting of U.S. dollar sanctions...

- Source, Jim Rickards via The Daily Reckoning

Friday, January 24, 2020

New Gold Standard? Chaos

Don't expect the US to expect it...

OVER the past century, monetary systems change about every 30 to 40 years on average, says Jim Rickards, writing in The Daily Reckoning.

Before 1914, the global monetary system was based on the classical gold standard.

Then in 1945, a new monetary system emerged at Bretton Woods. I was at Bretton Woods this past summer to commemorate its 75th anniversary.

Under that system, the Dollar became the global reserve currency, linked to gold at $35 per ounce. In 1971 Nixon ended the direct convertibility of the Dollar to gold. For the first time, the monetary system had no gold backing.

Today, the existing monetary system is nearly 50 years old, so the world is long overdue for a change. Gold should once again play a leading role.

I've written and spoken publicly for years about the prospects for a new gold standard. My analysis is straightforward.

International monetary figures have a choice. They can reintroduce gold into the monetary system either on a strict or loose basis (such as a "reference price" in monetary policy decision making).

This can be done as the result of a new monetary conference, a la Bretton Woods. It could be organized by some convening power, probably the US working with China.

Or they can ignore the problem, let a debt crisis materialize (that will play out in interest rates and foreign-exchange markets) and watch gold soar to $14,000 per ounce or higher, not because they wanted it to but because the system is out of control.

I've also said that the former course (a conference) is more desirable, but the latter course (chaos) is more likely. A monetary conference would be far preferable. Why not avoid the train wreck rather than clear up the wreckage? But will probably be ignored until it's too late. Either way, the price of gold soars.

The same force that made the Dollar the world's reserve currency is working to dethrone it. It was at Bretton Woods that the Dollar was officially designated the world's leading reserve currency – a position that it still holds today.

Under the Bretton Woods system, all major currencies were pegged to the Dollar at a fixed exchange rate. The Dollar itself was pegged to gold at the rate of $35 per ounce. Indirectly, the other currencies had a fixed gold value because of their peg to the Dollar.

Other currencies could devalue against the Dollar, and therefore against gold, if they received permission from the International Monetary Fund (IMF). However, the Dollar could not devalue, at least in theory. It was the keystone of the entire system – intended to be permanently anchored to gold.

From 1950-1970 the Bretton Woods system worked fairly well. Trading partners of the US who earned Dollars could cash those Dollars into the US Treasury and be paid in gold at the fixed rate.

Trading partners of the US who earned Dollars could cash those Dollars into the US Treasury and be paid in gold at the fixed rate.

In 1950, the US had about 20,000 tons of gold. By 1970, that amount had been reduced to about 9,000 tons. The 11,000-ton decline went to US trading partners, primarily Germany, France and Italy, who earned Dollars and cashed them in for gold.

The UK Pound Sterling had previously held the dominant reserve currency role starting in 1816, following the end of the Napoleonic Wars and the official adoption of the gold standard by the UK Many observers assume the 1944 Bretton Woods conference was the moment the US Dollar replaced Sterling as the world's leading reserve currency.

In fact, that replacement of Sterling by the Dollar as the world's leading reserve currency was a process that took 30 years, from 1914 to 1944.

In fact, the period from 1919-1939 was really one in which the world had two major reserve currencies – Dollars and Sterling – operating side by side.

Finally, in 1939, England suspended gold shipments in order to fight the Second World War and the role of Sterling as a reliable store of value was greatly diminished. The 1944 Bretton Woods conference was merely recognition of a process of Dollar reserve dominance that had started in 1914.

The significance of the process by which the Dollar replaced Sterling over a 30-year period has huge implications for you today. Slippage in the Dollar's role as the leading global reserve currency is not necessarily something that would happen overnight, but is more likely to be a slow, steady process.

Signs of this are already visible. In 2000, Dollar assets were about 70% of global reserves. Today, the comparable figure is about 62%. If this trend continues, one could easily see the Dollar fall below 50% in the not-too-distant future.

It is equally obvious that a major creditor nation is emerging to challenge the US today just as the US emerged to challenge the UK in 1914. That power is China. The US had massive gold inflows from 1914-1944. China has been experiencing massive gold inflows in recent years.

Gold reserves at the People's Bank of China (PBOC) increased to 1948.31 tonnes in the fourth quarter of 2019. For comparison, it held 1,658 tonnes in June, 2015.

But China has acquired thousands of metric tonnes since without reporting these acquisitions to the IMF or World Gold Council.

Based on available data on imports and the output of Chinese mines, actual Chinese government and private gold holdings are likely much higher. It's hard to pinpoint because China operates through secret channels and does not officially report its gold holdings except at rare intervals.

China's gold acquisition is not the result of a formal gold standard, but is happening by stealth acquisitions on the market. They're using intelligence and military assets, covert operations and market manipulation. But the result is the same. Gold's been flowing to China in recent years, just as gold flowed to the US before Bretton Woods.

China is not alone in its efforts to achieve creditor status and to acquire gold. Russia has greatly increased its gold reserves over the past several years and has little external debt. The move to accumulate gold in Russia is no secret, and as Putin advisor, Sergey Glazyev told Russian Insider has said, "The ruble is the most gold-backed currency in the world."

Iran has also imported massive amounts of gold, mostly through Turkey and Dubai, although no one knows the exact amount, because Iranian gold imports are a state secret.

Other countries, including BRICS members Brazil, India and South Africa, have joined Russia and China in their desire to break free of US Dollar dominance.

Sterling faced a single rival in 1914, the US Dollar. Today, the Dollar faces a host of rivals. The decline of the Dollar as a reserve currency started in 2000 with the advent of the Euro and accelerated in 2010 with the beginning of a new currency war.

The Dollar collapse has already begun and the need for a new monetary order will need to emerge. The question is whether it will be an orderly process resulting from a new monetary conference, or a chaotic one.

Unfortunately, it'll probably be chaotic. Don't count on the elites to act in time.

- Source, Bullion Vault