3 Min. Gold News – Jim Rickards – Financial Sense Interview – Sept. 21, 2013

3 Minute Gold News

A Quick Read for Busy People

3 minute synopsis of a recent video interview with Jim Rickards, author of Currency Wars, senior managing director at Omnis, by Jim Paplava of Financial Sense News

Topics:

Financial War vs. Currency War

Financial Warfare

Japan

Gold

Monetary Collapse

New Monetary System

Jim Rickards

Financial Sense News
Jim Paplava’s Big Picture
Interview with Jim Rickards
September 21, 2013

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FINANCIAL WAR VS. CURRENCY WAR

Financial wars are different from currency wars.

Currency wars are predominantly economic. So, a country through economic policy trying to cheapen its currency, and you generally end up with inflation. That is the economic area of currency war.

Financial war has more to do with national security, strategic rivalry, and actually using finance as a weapon. The same way you would use a cruise missile or a submarine.

The Pentagon did the first ever financial war game in 2009.

Jim was involved in the planning and participated on the China team. The Pentagon, the Intelligence community, the Treasury, the Federal Reserve (FED), Wall Streeters and think tankers were involved.

Since then, some of the hypothetical ideas have played out in the real world.

One scenario looked at if Russia and China acquired gold, and then used the gold to launch a gold backed currency.

This was not the Chinese yuan or the Russian ruble used as a new reserve currency, instead this was a new currency backed by gold, and Russia saying that if you wanted their natural resources and China saying if you wanted their manufactured goods, you could only pay for them with their new gold backed currency.

This could be a way that China and Russia could reduce or eliminate the U.S. dollar as the world’s reserve currency.

You cannot have a strong national security without a strong national currency.

If you look back at the British empire, at Charlamagne’s empire in the 9th century A.D., and all of the strong empires, they  have been associated with strong, sound money.

If you weaken the dollar then you weaken U.S. national security.

Back in 2009, when Jim proposed this, he was laughed at and ridiculed, but since then Russia has increased their gold reserved by 65%.

Russia has gone from about 600 tonnes of gold to over 1,000 tonnes.

China has increased its gold reserves, but no one knows exactly how much because they keep it a secret. They have gone from about 1,000 tonnes to somewhere in the range of 3,000 to 4,000 tonnes by Jim’s estimation.

Jim says that Russia and China are behaving exactly how he hypothesized in 2009, so we need to pay attention.

He says it’s more than a financial transaction, it’s setting up for the end of the U.S. dollar.

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FINANCIAL WAR

The United States is the main aggressor.

Jim says the U.S. used financial war to destabilize Iran. The U.S. has not invaded Iran, apart from covert operations, but financially the U.S. kicked Iran out of the dollar payment system. Then, with the European partners, kicked them out of the European payment system, something called SWIFT (Society for Worldwide Interbank Financial Telecommunication).

Then Iran could not use any hard currency payments. So they could ship oil, but they couldn’t get paid for it.  They could try to import things, but they couldn’t pay for them.

Iran tried to do gold swaps and barter with India, but the U.S. had caused hyperinflation, a run on the banks, a collapse of the Iran currency by well over 50%, and greatly disrupted the Iranian economy.

Jim suspects that the shut down of NASDAQ in August for three hours was perhaps Iran using cyber warfare to fight back.

The U.S. has also crashed the Syrian currency.

So, financial wars are being fought all over the world as we speak.

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JAPAN

Japan is using monetary policy and fiscal policy to depreciate the yen against the U.S. dollar. The yen has fallen against the dollar.

What happened in Asia in 1997 was an emerging markets crisis. We might see a replay, not because of Japan, but because of the FED. The FED announced no tapering, as Jim had predicted, and the market took it as more money printing, more inflation and a weaker dollar.

The stock market went up and the gold market went up, and also the U.S. dollar crashed after the announcement. so the emerging market currencies got stronger.

So the FED might trigger a crisis not unlike 1997.

What Japan is doing, says conventional wisdom, is they are trying to weaken the yen to help exports.

They are weakening the yen, but helping Japanese exports is a by-product, the real reason is to import inflation in the form of higher import prices.

This is also what the United States is doing: weaken the dollar and import inflation.

Japan and the U.S. are both desperate to get inflation.

We had out of control inflation in the 70s, took a large part of the 80s to get it back under control, and have been fairly stable for the last 25-30 years.

Inflation is exactly what the Central Banks want because of their debt.

Japan and the U.S. both have no prospect of paying off their debt in a timely way or in a sustainable way without inflation.

Inflation decreases the real value of the debt and makes it easier to pay off, because you pay ii off in cheaper dollars or cheaper yen.

So both of these nations are trying to get inflation, and trying to cheapen their currencies. This raises import prices.

The U.S. imports more than it exports, so inflation means we pay more for all imported manufactured goods.

Japan and the U.S. are doing the same thing but they can’t both go down against each other. So they’re trying to get the U.S. dollar to go down against all major trading partners except Japan, and get the yen to go down against everybody.

That’s how desperate the Central Banks are to avoid deflation.

Deflation is a Central Banks worst nightmare.

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INFLATION VS. DEFLATION

The reason gold has not responded to all of the Quantitative Easing is because we have inflation and deflation at the same time.

The deflation is natural, it comes from the depression we are currently in. De-leveraging, reducing balance sheets, and asset sales push down prices, which adds to the stress and it feeds on itself.

The inflation is coming from policy. The Fed has printed two and a half trillion dollars in the last four years, and is printing at the rate of a trillion a year. This is very inflationary.

The deflation people don’t understand why we don’t have more deflation and the inflation people don’t understand why we don’t have more inflation.

The truth is we have both at the same time and they are canceling each other out.

So it looks like price stability but the pressure is unstable and it’s going to break and go either way.

Jim thinks it will go in the direction of inflation.

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GOLD

Gold hasn’t gone higher because we haven’t seen the inflation yet.

We haven’t seen the inflation because, aside from the money printing, the velocity of the U.S. dollar is imploding and people are not borrowing and lending and spending, and that’s because of the deflationary forces.

So it makes the monetary policy easy to forecast.

Because you know the FED wants inflation and they’re not getting it, they’re going to try harder and continue with the money printing until they get the inflation they want. That is when gold takes off.

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MONETARY COLLAPSE

There may be something happen very suddenly to move forward the International Monetary Fund (IMF)’s Special Drawing Rights (SDR) as the new global reserve currency. Jim doesn’t think this will happen unless there is a loss of confidence in the dollar.

Jim sees either:

1. The FED keeps printing until they get inflation, which he predicts will very quickly get out of control, gold takes off, and there’s a loss of confidence in the dollar.

2. The FED keeps printing and they don’t get inflation, but there is a loss of confidence in the FED’s ability. This could happen very slowly at first, and then very quickly.

The loss of confidence sees inflation taking off, velocity taking off, interest rates taking off, bond markets crashing, stock markets crashing, then the Russians and Chinese come in from the sidelines with their gold.

At that point the only entity left in the world that can save the system is the IMF and SDRs.

The Bank of England and the Bank of Japan are doing the same thing as the FED.

If the dollar crashes it will take all the monetary currencies with it.

Jim expects the crash of the whole monetary system.

It has happened three times in the last hundred years.

1914 – 1939 – 1971

It happens and it’s not the end of the world.

We don’t all end up in caves eating canned goods.

It just means the major players all sit down and rewrite the rules and come up with a new system.

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NEW MONETARY SYSTEM

Jim’s interest is in what the new system will be.

He leans towards either the SRD, where the IMF will print money and it will be inflationary and no one will know where it’s coming from.

Or else a return to the gold standard. This would mean getting the price right. Some say there isn’t enough gold in the world. Jim thinks this is nonsense.

At $7,000 to $8,000 per ounce there is enough gold to support world trade.

If you do that then you’ve really devalued the U.S. dollar by 75% and that’s what Jim expects.

Nothing happens in isolation.

The world of $7,000 gold is also the world of $400 oil and $100 silver.

It’s not that these things are suddenly more valuable it’s just that the dollar has collapsed and you have to pay more dollars to get them.

Or else, you have a combination new system, like a gold backed SDR.

Jim sees this playing out over several years and not immediately.

He says that when the price of gold spikes there won’t be any available for the average investor.

The gold is being put away by China, Russia, other Central Banks and smart investors.

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FED TAPERING

The FED said that tapering QE was data dependent so he correctly called that the FED would not taper last week based on the data.

Let’s see what the data says in the next months.

Jim says that he buys gold and he buys the dips in price.

When the price of gold went down earlier this year, the Chinese bought 600 tonnes from the Perth Mint.

He doesn’t recommend more than 20% of a person’s portfolio in gold – 10% for the conservative investor and 20% for the aggressive investor.

That’s your insurance and portfolio protection.

Jim says if he’s wrong then people don’t come out too badly, and if he’s right then they preserve the value of their whole portfolio.

He suggests you don’t read the papers about the daily volatility. Buy gold and put it away.

If you wait too long and the price really takes off, you’ll find shortages and you won’t be able to get it.

The Rise and Fall of Empires (We Know How it Goes)

words and music Elaine Diane Taylor
© 2009 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
available on iTunes

……………………………………

Another Week on Wall Street
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns

Another Week on Wall Street

See the bankers wave the Wall Street wands
See the conjured piles of paper green
Now they’re betting all their tricks go wrong
They’re betting the world as you know it
If they win
You lose the whole world as you know it

Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tee, hee, hee

Heyo heyo, just another week on Wall Street
Heyo heyo  just another week on Wall Street

A little grease (Greece) is floating out to sea
Little PIGS (Portugal, Italy, Greece, Spain) are bobbing up and down
So send a storm and we’ll see
when the tide goes out who’s naked on the beach

Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tea, hee, hee

Heyo heyo, just another week on Wall Street
Heyo heyo  just another week on Wall Street

Who’s that wizard hiding behind that hedge?
Who’s that wizard hiding behind that hedge (fund)?

See the bankers wave the Wall Street wands
See the conjured piles of paper green
Now they’re betting all their tricks go wrong
They’re betting the world as you know it
If they win
You lose the whole damn world as you know it

Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tea, hee, hee

Heyo heyo, just another week on Wall Street
Heyo heyo  just another week on Wall Street