3 Minute Gold News
A Quick Read for Busy People
A 3 minute synopsis of the interview with Jim Rickards, author of The Death of Money: The Coming Collapse of the International Monetary System and portfolio manager at West Shore Funds, by Erik Schatzker and Stephanie Ruhle from Bloomberg Television.
This is a hard hitting but sharp interview.
Risk of Collapse
Why Care How Much the FED Prints
Economy Not Recovering
2 Second Attention Span
Make Money or Preserve Wealth
RISK OF COLLAPSE
The system is now larger than 2008 — make the system bigger and you’re going to have a bigger collapse.
Are you going to believe Jim or the FED? Jim has a better track record.
The biggest problem in the world is deflation.
The world wants deflation but central banks and governments cannot have deflation — it increases the Debt-to-GDP ratio, destroys tax collection, creates bad debts and hurts the banks.
So central banks will do anything to avoid deflation.
The way they do this is to print money. But if you print too much money then you’ll collapse confidence in the U.S. dollar.
The U.S. dollar is ultimately backed by confidence, as also said by Paul Volcker.
The FED is insolvent on a Mark to Market basis.
Jim came to this conclusion himself, but insiders have also told him this privately (they won’t say it publicly).
Money is a perpetual non-interest-bearing note issued by an insolvent central bank. How long can that go on before people walk away from it.
We’ve been in a depression since 2007.
If the FED had not done everything they’ve done, then things would have been much worse than they were in 2010. No question about that — unemployment would have been higher and growth would have been lower.
But we should have been much stronger today.
We should be having 7% growth now. We can’t have 7% for a long time, but we can for a short time while people come back into the work force.
Instead we’re Japan — we’ve got 1.9% growth.
Jim thinks it’s better to have a little pain up front and then have robust growth.
Everyone wants a “V” shape recovery, but you can’t have a “V” unless you get to the bottom. We didn’t get to the bottom because the FED truncated the “V”.
WHY SHOULD PEOPLE CARE HOW MUCH MONEY THE FED PRINTS?
The FED’s safety net of printing has holes in it.
If the money printing could go on indefinitely then Jim would agree with people who say that investors should not care how much is printed.
But it can’t go on indefinitely.
The FED could legally print more than the $4 trillion they’ve already created — $8 trillion, $12 trillion, $16 trillion — legally they can.
Jim’s point is that if they do then it will destroy confidence.
Why doesn’t the FED just forgive the Treasury debt? They could do it legally but what would that do to the confidence?
ECONOMY NOT RECOVERING
They do a one-year forward forecast each year, and they have been wrong by orders of magnitude every year.
Jim cares about unlimited printing of money, bad forecasting, and destroying confidence.
We should all care.
THE CURSE OF THE 2 SECOND ATTENTION SPAN
People are investing based on what they think is going on right now, because they have “The Curse of the 2 Second Attention Span”. But when the stock market is down 30% a couple of years from now they can kiss those investments goodbye.
Warren Buffet is getting out of stocks and into hard assets as fast as he can — railroads and oil.
In Chapter 3 of The Death of Money Jim says the FED has manipulated every market in the world with zero interest rates.
He doesn’t want to be in manipulated markets. He’d rather be in things that retain their value.
March 9, 2009 was the bottom of the equity market. Since then the S & P has returned 170%. Gold is up 40% and hedge funds are up 20%.
This is exactly the chart Jim expects to see if the market is manipulated by zero interest rates and margins sending stocks higher, and gold being manipulated lower.
The IMF sold 400 tonnes of gold in 2010. We know 200 tonnes went to India and Sri Lanka.
Where did the other 200 tonnes go that they dumped on the market?
They are funded by U.S. taxpayers but they are not being transparent.
If you manipulate stocks higher and manipulate gold lower, then you’ll see the chart from 2009 looking as it does. If you look back from 2000 you’ll see a very different chart .
MAKE MONEY OR PRESERVE WEALTH
Do you want to make money or do you want to preserve wealth?
You could make money today and lose is tomorrow, or you can preserve wealth.
We talk about the old money and the new money. Some Europeans have wealth in their family for 400 or 500 years.
They survived the Thirty Years War, Napoleon and World War I by doing this:
A third — a third — a third.
One third gold. One third art. One third land.
And a little cash to run your jet and your yacht. :)
That’s how you preserve wealth for the long run.
If you want a short pop go buy some stocks.
Another Week on Wall Street
words and music Elaine Diane Taylor
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from the album Coins and Crowns