Losses are going to cascade through the system

A “subprime” oil crisis may be looming. If so, shale oil companies and the banks that lent to them will be ground zero. Your 401(k) or pension plan will be the aftermath. And the poisoned fallout will radiate throughout the economy.

“Losses are going to cascade through the system,” says former CIA financial analyst Jim Rickards. “There are unforeseen consequences and hidden losses. I am not so sanguine that this is going to work out so smoothly in the end .… This looks like the beginning of [a crisis].”

These wild gyrations in the price of oil have real-world effects on world economies. Everyone in the sector is stung.

- Source, The Trumpet

Warren Buffett and Hugo Stinnes

Hugo Stinnes is practically unknown today, but this was not always so. In the early 1920s he was the wealthiest man in Germany, at a time when Germany was the third largest economy in the world. He was a prominent industrialist and investor with diverse holdings in Germany and abroad. He was also a close associate of the leading politicians of the time. Chancellors and cabinet ministers of the newly formed Weimar Republic routinely sought his advice on economic and political problems.

In many ways, Stinnes played a role in Germany similar to the role Warren Buffett plays in the U.S. today – an ultra-wealthy investor whose opinion is eagerly sought on important political matters, who exercises powerful behind-the-scenes influence, and who seems to make all the right moves when it comes to playing markets.

Students of economic history know that the period 1922 to 1923 in Germany was the worst period of hyperinflation experienced by a major industrial economy in modern times. The exchange rate between the German paper currency, the Reichsmark, and the dollar went from 208 to 1 in early 1921 to 4.2 trillion to 1 in late 1923, at which point the Reichsmark became worthless and was swept down sewers as litter. Why was Stinnes not wiped out during this hyperinflation?

Stinnes was born in 1870 into a prosperous German family that had interests in coal mining. He worked in mines to obtain a practical working knowledge of the industry and took courses in Berlin at the Academy of Mining. Later he inherited his family’s business and expanded it by buying his own mines.

He then diversified into shipping, buying cargo lines. Stinnes used his own vessels to transport his coal within Germany along the Rhine River, and from his mines abroad. His vessels also carried lumber and grains. His diversification included ownership of a leading newspaper, which he used to exert political influence. Prior to the Weimar hyperinflation, Stinnes borrowed vast sums of money in Reichsmarks.

When the hyperinflation hit Stinnes was perfectly positioned. His hard assets in coal, steel, and shipping retained their value. It didn’t matter what happened to the Germany currency, a hard asset is still a hard asset and does not go away even if the currency goes to zero. Stinnes’s international holdings also served him well because they produced profits in hard currencies, not worthless Reichsmarks. Stinnes kept some of these profits offshore in the form of gold held in Swiss vaults so he could escape both hyperinflation and German taxation. Finally he repaid his debts in worthless Reichsmarks, making them disappear.

Not only was Stinnes not harmed by the Weimar hyperinflation, his empire prospered and he made more money than ever. He expanded his holdings and bought out bankrupt competitors. Stinnes made so much money during the Weimar hyperinflation that his German nickname was Inflationskönig, which means Inflation King. When the dust settled and Germany returned to a new gold backed currency, Stinnes was one of the richest men in the world, while the German middle classes were destroyed.

Interestingly, we see Warren Buffett using the same techniques today. It appears that Buffett has studied Stinnes carefully and is preparing for the same kind of financial calamity that Stinnes saw coming.

Buffett recently purchased major transportation assets in the form of the Burlington Northern Santa Fe Railroad. This railroad consists of hard assets in the form of rights of way, adjacent mining rights, rail, and rolling stock. The railroad makes money moving hard assets such as ore and grains.

Buffett next purchased huge oil and natural gas assets in Canada. Buffett can now move his Canadian oil on his Burlington Northern railroad in exactly the same way that Stinnes moved his coal on his own ships in 1923. Buffett is also a major holder in ExxonMobil, the largest energy company in the world.

For decades, Buffett owned one of the most powerful newspapers in the U.S., the Washington Post. He sold that stake recently to Jeff Bezos of Amazon, but still retains communications assets. Buffett has also purchased large offshore assets in China and elsewhere that produce non-dollar profits that can be retained offshore tax-free.

A huge part of Buffett’s portfolio is in financial stocks in banks and insurance companies that are highly leveraged borrowers. Like Stinnes in the 1920s, Buffett can profit when the liabilities of these financial giants are wiped out by inflation, while they nimbly redeploy assets to hedge their own exposures.

In short, Buffett is borrowing from the Stinnes playbook. He’s using leverage to diversify into hard assets in energy, transportation and foreign currencies. He’s using his communications assets and prestige to stay informed on behind-the-scenes developments on the political landscape. Buffett is now positioned in much the same way that Stinnes was positioned in 1922. If hyperinflation were to hit the U.S. today, the result would be the same for Buffett as for Stinnes. His hard assets would explode in value, his debts would be eliminated, and he would be in a position to buy out bankrupt competitors. Of course, the middle classes in the U.S. would be wiped out as they were in Germany.

Stinnes saw the German hyperinflation coming and positioned accordingly. Buffett is following the Stinnes playbook. Perhaps Buffett sees the same hyperinflation in our future.

It’s not too late for investors to take some of the same precautions as Stinnes and Buffett. In the short run, deflation has the upper hand. But, it’s just a matter of time before central banks slay the deflation monster and open the door to much higher inflation. Do not rely on your fixed dollar assets like savings, insurance and pensions. Diversification into energy, mining, transportation, gold, land and fine art will serve you well. Also don’t be afraid to build up a cash position. Critics will say that cash has “no yield” these days. But cash in a portfolio helps to reduce volatility and gives you the ability to pick up bargains when the inevitable financial traumas emerge.

- Source, Jim Rickards via Darien Times

Jim Rickards Says Russia Is Funding ISIS

The Japanese QE experiment, Rickards on China and Merkel on investing

Our lead story: Just yesterday, we told you that QE was done – the Fed closed the door on its third program of large scale asset purchases to expand its balance.

- Source, Russia Today

Jim Rickards on Economic Crisis in America and Europe & Collapse Oil Prices

Jim Rickards on Economic Crisis in America and Europe & Collapse Oil Prices
The coming 'tsunami of debt' and Collapse of the US economy in 2015.

- Source, Russia Today

Jim Rickards China Wants The SDR

Jim Rickards discusses the ongoing currency wars, the United States, China and the upcoming SDR.

The Smartest Man in the FINANCIAL WORLD Stansberry Research

JIM RICKARDS : The Smartest Man in the FINANCIAL WORLD Stansberry Research.

Jim Rickards The Golden Truth

Jim Rickards is a financial lawyer with a doctorate and other advanced degrees. He’s a New York Times best-selling author and a hedge fund manager. He's been sought out for his currency expertise by: CNBC, Fox, CNN, NPR, the Financial Times, the New York Times and the Washington Post, just to name a few.
And he serves as an advisor to the Office of the Director of National Intelligence, which oversees the CIA, the NSA, and 14 other U.S. intelligence agencies.

Get Your Gold Now Before It’s Too Late

(Video cannot be uploaded, click image to watch)

Kitco News is kicking off its Outlook 2015 coverage with an interview with bestselling author Jim Rickards to see what he thinks will happen to the U.S. economy in the coming year and how it may affect gold. “We’re absolutely in a currency war,” he tells Daniela Cambone. “In 2011, we saw the weak dollar; today, we see the strong dollar. I expect a year from now we’ll see the weak dollar again.” Recent strong economic data out of the U.S. has many analysts expecting ...

- Source, Kitco

 

Jim Rickards on Europe and the US economy

Erin sits down with Jim Rickards – author of “The Death of Money” and chief global strategist at West Shore Funds – to discuss the US and Europe. In October, data coming out of the US demonstrated lower mortgage yields and a surge in refis added to 4-year lows in gas prices to give consumers more disposable income. Jim tells us what he thinks of the new data and also gives us his thoughts on divisions at the ECB. He also projects how far Chinese growth will have to fall in order to make a successful rebalancing a possibility and gives us his prediction on what will happen if oil prices continue to stay weak.

- Source, Russia Today

Jim Rickards on Russia and the most important stories of 2014

Inflation in Japan dropped to a 14-month low in the month of November. The disinflation comes as a relief to consumer who, since April, have been struggling with an increased consumption tax, which put a squeeze on many household finances. It was the first consumption tax in 17 years. However, the latest fall in the core consumer price index – to 0.7% in November, down from 0.9% in October – will cause some concerns for the central bank, which has staked its credibility on hitting a 2% inflation rate within two years. Erin weighs in.

Then, Erin is joined by Jim Rickards – chief global strategist at West Shore Funds and author of “The Death of Money.” Jim tells us if he thinks the Ruble rout is a crisis similar to those of 1998 or 2008 and gives us his take on the strong dollar.

After the break is Defining Moments, featuring comments made by recent Boom Bust guests David Collum, Jim Grant, Steve Hanke, Eswar Prasad on IBM, the Federal Reserve in 1920, emerging markets, Raghuram Rajan, and US GDP.

And in The Big Deal, Erin and Edward Harrison are taking a look at some of the biggest deals of 2014. Enjoy!

- Source, Russia Today

Jim Rickards - In the Year 2024

As I awoke this morning, Sunday, Oct. 13, 2024, from restless dreams, I found the insect-sized sensor implanted in my arm was already awake. We call it a “bug.” U.S. citizens have been required to have them since 2022 to access government health care.

The bug knew from its biometric monitoring of my brain wave frequencies and rapid eye movement that I would awake momentarily. It was already at work launching systems, including the coffee maker. I could smell the coffee brewing in the kitchen. The information screens on the inside of my panopticon goggles were already flashing before my eyes.

Images of world leaders were on the screen. They were issuing proclamations about the fine health of their economies and the advent of world peace. Citizens, they explained, needed to work in accordance with the New World Order Growth Plan to maximize wealth for all. I knew this was propaganda, but I couldn’t ignore it. Removing your panopticon goggles is viewed with suspicion by the neighborhood watch committees. Your “bug” controls all the channels.

I’m mostly interested in economics and finance, as I have been for decades. I’ve told the central authorities that I’m an economic historian, so they’ve given me access to archives and information denied to most citizens in the name of national economic security.

My work now is only historical, because markets were abolished after the Panic of 2018. That was not the original intent of the authorities. They meant to close markets “temporarily” to stop the panic, but once the markets were shut, there was no way to reopen them without the panic starting again.
My work now is only historical, because markets were abolished after the Panic of 2018.

Today, trust in markets is completely gone. All investors want is their money back. Authorities started printing money after the Panic of 2008, but that solution stopped working by 2018. Probably because so much had been printed in 2017 under QE7. When the panic hit, money was viewed as worthless. So markets were simply closed.

Between 2018–20, the Group of 20 major powers, the G-20, abolished all currencies except for the dollar, the euro and the ruasia. The dollar became the local currency in North and South America. Europe, Africa and Australia used the euro. The ruasia was the only new currency — a combination of the old Russian ruble, Chinese yuan and Japanese yen — and was adopted as the local currency in Asia.

There is also new world money called special drawing rights, or SDRs for short. They’re used only for settlements between countries, however. Everyday citizens use the dollar, euro or ruasia for daily transactions. The SDR is also used to set energy prices and as a benchmark for the value of the three local currencies. The World Central Bank, formerly the IMF, administers the SDR system under the direction of the G-20. As a result of the fixed exchange rates, there’s no currency trading.

All of the gold in the world was confiscated in 2020 and placed in a nuclear bomb-proof vault dug into the Swiss Alps. The mountain vault had been vacated by the Swiss army and made available to the World Central Bank for this purpose. All G-20 nations contributed their national gold to the vault. All private gold was forcibly confiscated and added to the Swiss vault as well. All gold mining had been nationalized and suspended on environmental grounds.

The purpose of the Swiss vault was not to have gold backing for currencies, but rather to remove gold from the financial system entirely so it could never be used as money again. Thus, gold trading ceased because its production, use and possession were banned. By these means, the G-20 and the World Central Bank control the only forms of money.

Some lucky ones had purchased gold in 2014 and sold it when it reached $40,000 per ounce in 2019. By then, inflation was out of control and the power elites knew that all confidence in paper currencies had been lost. The only way to re-establish control of money was to confiscate gold. But those who sold near the top were able to purchase land or art, which the authorities did not confiscate.

Those who never owned gold in the first place saw their savings, retirement incomes, pensions and insurance policies turn to dust once the hyperinflation began. Now it seems so obvious. The only way to preserve wealth through the Panic of 2018 was to have gold, land and fine art. But investors not only needed to have the foresight to buy it… they also had to be nimble enough to sell the gold before the confiscation in 2020, and then buy more land and art and hang onto it. For that reason, many lost everything.

Land and personal property were not confiscated, because much of it was needed for living arrangements and agriculture. Personal property was too difficult to confiscate and of little use to the state. Fine art was lumped in with cheap art and mundane personal property and ignored.

Stock and bond trading were halted when the markets closed. During the panic selling after the crash of 2018, stocks were wiped out. Too, the value of all bonds were wiped out in the hyperinflation of 2019. Governments closed stock and bond markets, nationalized all corporations and declared a moratorium on all debts. World leaders initially explained it as an effort to “buy time” to come up with a plan to unfreeze the markets, but over time, they realized that trust and confidence had been permanently destroyed, and there was no point in trying.

Wiped-out savers broke out in money riots soon after but were quickly suppressed by militarized police who used drones, night vision technology, body armor and electronic surveillance. Highway tollbooth digital scanners were used to spot and interdict those who tried to flee by car. By 2017, the U.S. government required sensors on all cars. It was all too easy for officials to turn off the engines of those who were government targets, spot their locations and arrest them on the side of the road.

In compensation for citizens’ wealth destroyed by inflation and confiscation, governments distributed digital Social Units called Social Shares and Social Donations. These were based on a person’s previous wealth. Americans below a certain level of wealth got Social Shares that entitled them to a guaranteed income.

Those above a certain level of wealth got Social Donation units that required them to give their wealth to the state. Over time, the result was a redistribution of wealth so that everyone had about the same net worth and the same standard of living. The French economist Thomas Piketty was the principal consultant to the G-20 and World Central Bank on this project.

By 2017, the U.S. government required sensors on all cars.

To facilitate the gradual freezing of markets, confiscation of wealth and creation of Social Units, world governments coordinated the elimination of cash in 2016. The “cashless society” was sold to citizens as a convenience. No more dirty, grubby coins and bills to carry around!

Instead, you could pay with smart cards and mobile phones and could transfer funds online. Only when the elimination of cash was complete did citizens realize that digital money meant total control by government. This made it easy to adopt former Treasury Secretary Larry Summers’ idea of negative interest rates. Governments simply deducted amounts from its citizens’ bank accounts every month. Without cash, there was no way to prevent the digital deductions.

The government could also monitor all of your transactions and digitally freeze your account if you disagreed with their tax or monetary policy. In fact, a new category of hate crime for “thoughts against monetary policy” was enacted by executive order. The penalty was digital elimination of the wealth of those guilty of dissent.

The entire process unfolded in small stages so that investors and citizens barely noticed before it was too late. Gold had been the best way to preserve wealth from 2014–18, but in the end, it was confiscated because the power elites knew it could not be allowed. First, they eliminated cash in 2016. Then they eliminated diverse currencies and stocks in 2018. Finally came the hyperinflation of 2019, which wiped out most wealth, followed by gold confiscation and the digital socialism of 2020.

By last year, 2023, free markets, private property and entrepreneurship were things of the past. All that remains of wealth is land, fine art and some (illegal) gold. The only other valuable assets are individual talents, provided you can deploy them outside the system of state-approved jobs.