3 Min. Gold News – Jim Rickards – Fox Business – May 28, 2014

3 Minute Gold News

A Quick Read for Busy People

A 3 minute synopsis of the interview with Jim Rickards, author of the New York Times bestselling book The Death of Money, by Deirdre Bolton from Fox Business News.

Topics:

China’s Crackdown on Social Media
Investing in China
Chances of Blood on the Streets Again in China?
Shadow Banking in China
How to Invest in China

Jim Rickards

Fox Business News
Risk & Reward with Deirdre Bolton
Interview with Jim Rickards
May 28, 2014

I really like the way Deirdre forms her questions. A good interview to watch.

CRACK DOWN ON CHINA’S SOCIAL MEDIA

China is investigating smartphone apps for “rumour spreading”.

This crackdown is a good reminder that it’s not a Chinese government — it’s a communist government.

We gloss it over and say they are modernizing, but they are communist — ruthless, stone killers. We saw that in Tiananmen Square where they killed thousands of innocent students.

There has been economic progress since then but no political progress.

We have a Western mindset on Twitter and the Chinese versions of the app.

As far as the Chinese are concerned power and control come first.

Jim met recently in Rome with a top Chinese ‘princeling’, who is about Jim’s age and the grandson of one of the Long March veterans of Mao Zedong.

He told Jim that the thing the leadership of China fears the most is the combination of Twitter and mobile apps.

Mobile apps use wireless so are more difficult to control than those going through the internet backbone.

CHANCES OF BLOOD ON THE STREETS AGAIN IN CHINA?

There’s enormous income inequality in China — it’s extreme and it’s socially destablizing.

You have an unstable credit situation, an unstable social situation, income inequality, and the Communist Party trying to keep a lid on it.

The first thing we’re going to see is metaphorical ‘blood on the streets’ in terms of a credit crisis.

We’ll see runs on the bank.

They have Wealth Management Products (WMPs) that are just like our Collateralized Debt Obligations (CDOs).

They’ve been sold to the Chinese middle class — the peasants aren’t buying any, and the billionaires are smart enough to buy gold and get it out of the country.

The Chinese middle class buy the WMPs from banks but they’re not guaranteed by the banks — and they are starting to default.

The WMPs are junk CDOs and there’s nothing behind them — they’ll never be able to be paid off.

SHADOW BANKING IN CHINA

There’s also the issue of corporations lending to corporations. There’s more money in the shadow banking system every day and no one knows exactly how much, but it’s in the trillions of dollars.

The WMP have been sold, we don’t know what the corporate-to-corporate lending is, we don’t know what the provincial debt is — some is regular debt and some is ‘vendor financing’ (“I owe you money but I don’t pay you”).

So there’s a pyramid of bad claims in China. They’ve got a lid on it for now and maybe they will for a little while longer.

INVESTING IN CHINA

The way to get exposure in China is to buy a good U.S. company that knows its way around China. Jim says IBM is a good example.

IBM is one of the few companies where China needs them more than they need China. They have a close relationship so it’s good way to participate in Chinese growth without putting your money in China.

…………………………………………………

Wag the Dog (Drums of War and Blood on the Streets)
words and music Elaine Diane Taylor
© 2014 Intelligentsia Media, Inc.
All rights reserved.
Available on a soon-to-be-released album

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 available on iTunes

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