3 Minute Gold News
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A 3 minute synopsis of the interview with Jim Rickards, author of Currency Wars: The Making of the Next Global Crisis and the forthcoming book The Death of Money: The Coming Collapse of the International Monetary System, by Erin Ade from RT Boom Bust
Confidence in the US Dollar
Where the Fiat System is Going
Jim definitely believes gold is money.
Other things can be money also. You look at history, and culture, and anthropology, from time to time feathers have been money, clam shells have been money, paper can be money, gold can be money –money is not limited to one particular kind of item.
The key factor is confidence.
Jim is an advocate for gold, and thinks all investors should have some portion of their investable assets in gold. He recommends 10 – 20%. Not 50% or 100%.
The world has used gold as money for thousands of years and may do so again in the future.
There’s no reason paper can’t be money, but only if people have confidence in it. Is the confidence and trust being abused, and will the confidence be lost? Those are questions that paper dollar holders have to ask themselves.
CONFIDENCE IN THE DOLLAR
Right now people have confidence in the dollar, but it is being very quickly eroded for a number of reasons:
1. Money printing by the FED is causing inflation.
We haven’t seen a lot of consumer price inflation, but we’re seeing bubbles in stocks and housing and elsewhere.
We’re seeing inflation. It’s just asset inflation instead of price inflation.
The FED have taken their balance sheet from about $800 billion to over $4 trillion in the last four years.
What would happen if we had a liquidity crisis tomorrow, next month or next year?
What’s the FED going to do? Take it to $8 trillion? $12 trillion?
There’s a political, psychological and confidence limit to what they can do, and we’re pretty much at the outer limits of that.
2. A lot of people are ready to turn their back on the dollar.
Russia is ready to turn their back on the dollar if we have escalation of financial warfare as it relates to Ukraine.
China is buying thousands of tons of gold – a 200, 300, 400% increase in their purchase of gold.
Iran has been importing gold from Turkey.
If you look around the world a lot of people are ready to turn their back on the dollar. They haven’t done it yet, but when the confidence is lost it can be lost very quickly, and investors need to be prepared for that.
WHERE THE FIAT SYSTEM IS HEADED
Jim says to imagine an avalanche.
When an avalanche happens, and it kills some unfortunate people on the way or buries a village, do we blame a snowflake that caused it or do we blame the unstable snow itself?
Jim thinks you blame the unstable system of snow itself.
Same is true with the dollar.
There may be a catalyst that causes a collapse of the dollar, but it almost doesn’t matter what it is.
What matters is we’ve created an unstable system. We have a dynamic that is capable of very rapid catastrophic collapse.
The problem is that things can be going along fine, and then confidence can be lost very quickly. The collapse can come very quickly and unexpectedly – whether it’s the failure of an exchange, the failure of a firm, a prominent suicide, a default or fraud. Who knows.
It doesn’t matter in Jim’s view.
What matters is we have an unstable system.
In order to make the system more stable we can break up the big banks, ban derivatives, stop the money printing, and remove some of the structural impediments to growth in the US economy.
Jim doesn’t see any of those things being done.
When will the confidence be eroded?
Could be next month, or next year, or three years from now. But Jim thinks sooner rather than later. We just can’t keep going on this path.
There’s going to be some kind of money in the future.
– a unit of account
– a medium of exchange
– a store of value
The store of value is the most important part.
With a unit of account you could count things with bottle caps or baseball cards – or bitcoin. With medium of exchange it’s all digital.
Bitcoin is a digital currency but so is the dollar. We might have some paper dollars in a purse or wallet to buy a coffee at Starbucks, but the vast majority of transactions we do are digital transactions.
As a society we will have some kind of money, and being a society with a new kind of money is certainly possible.
Jim does not believe we will be a moneyless society.
Ebarter is possible but money is useful.
Jim’s not anti-money; he’s just anti-debasement of money. Debasement of money is what’s going on in the Federal Reserve.
Another Week on Wall Street
words and music Elaine Diane Taylor
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from the album Coins and Crowns available on iTunes