3 Min. Gold News – Jim Rickards – Bloomberg TV – Oct. 14, 2013

3 Minute Gold News

A Quick Read for Busy People.

3 minute synopsis of the recent video interview with Jim Rickards, author of Currency Wars, Senior Managing Director at Tangent Capital, by Deirdre Bolton from Bloomberg TV.

Topics:

De-Americanize Call from China
China Buying Gold
The IMF and Special Drawing Rights
Yuan as Reserve Currency
Should You Buy Gold?

Jim Rickards

Bloomberg TV
Deirdre Bolton
Interview with Jim Rickards
October 14, 2013

In an offical Chinese publication, (so nothing gets in it without approval of the government),  there was a signed op-ed calling for De-Americanization.

It talked about a lot of things, including military intervention, but focused very specifically on the role of the dollar as the reserve currency and how that has, in effect, been abused by the United States.

When you do military analysis you ask yourself two things: intentions and capabilities.

The intentions are clear – China wants out of the dollar.

But they don’t have the capability. They can’t abolish the dollar in the short run, and Jim believes this is a five year project, which they are now persuing in earnest.

CHINA BUYING GOLD

The way China is preparing is by buying massive amounts of gold.

Gold creates a hedge for them.

China has $3 trillion dollars in reserve positions. Jim believes they have more but they don’t expose it all. About half of the $3 trillion is in U.S. Treasury Securities.

China owns 11% of all of the public debt of the United States. They definitely own more than they want to own, but they can’t get out and they know that. If they tried then it would trash the market or the President would stop them, so they can’t.

But if you have both Treasuries and gold then you have a hedge.

If the Treasuries pay off and inflation is not bad, then China makes money on their Treasuries.

But if the U.S. trashes its dollar or creates inflation to pay them off, then China makes money on the gold.

So they have a hedge position.

The US dollar hit an all time low in July 2011, while gold hit an all time high in August 2011. This is the last time we were at this empasse.

Even with gold 30% off of its all time high, China has been buying thousands of tonnes of gold. Even one hundred tons is a big order, and they have been buying thousands of tonnes over the last four years.

So either the Chinese are dopes, which Jim very highly doubts, or else they are thinking ahead, which is typical of the Chinese.

COMEX GOLD PRICE VS PHYSICAL DEMAND

What is baffling alot of people is how come the COMEX price is so low but physical demand is huge. Not only are Central Banks buying it, but everyday citizens from Yemen to Yokohama are buying it as fast as they can.

Jim believes this is competely consistent.

If you have Central Banks, hedge funds and other factors pushing the price of gold below the intrinsic price, then everyone is going to go and buy it.

If bread is $3 a loaf, and the government mandates that bread is $2 a loaf, then there’s not going to be any bread on the shelves. Everyone is going to buy all the bread.

THE IMF AND SPECIAL DRAWING RIGHTS

No one knows more about the SDR (Special Drawing Rights) and where that’s going than the IMF (International Monetary Fund) Managing Director Madam Christine Lagarde. But she knows that the SDR is not quite ready.

The IMF are preparing it, and they have a ten year plan to make the SDR the world’s global reserve currency. But they’re not ready to roll it out yet.

So Lagarde is saying that the dollar has to hang in there. They’re saying “Please don’t mess up with the dollar because we’re not ready yet.”.

They’re getting it ready and gold is a big part of that as well.

YUAN AS THE RESERVE CURRENCY?

China does not want the yuan as a reserve currency.

To be a reserve currency you need to open your capital account, and there is a large infrastructure that goes with it. China does not have it and it would take at least ten years to develop.

They actually don’t want it because then they would have to open up their economy.

What China wants is to get rid of the dollar, but they don’t want the yuan. What they want is the SDR, the Special Drawing Rights of the IMF.

They also want larger votes in the IMF, which they think they’re entitled to because of the size of their economy.

The US is blocking that.

David Lipton and the Secretary of the Treasury are blocking China getting more votes.

So there’s a shoving match between the US and China behind the scenes at the IMF.

SHOULD YOU BUY GOLD?

The Chinese bought several hundred tonnes at the lows around June 2013. It was about $1,250.

Jim would do what the Chinese do: buy the dips.

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

A featured in Episode 1 of the bestselling author Mike Maloney’s documentary series – Hidden Secrets of Money

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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

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