3 Minute Gold News
A Quick Read for Busy People
The following is an exclusive Q & A with Jim Rickards, New York Times bestselling author of The Death of Money.
Those Just Starting Out
Artists and Economics
Alarm Level for an Avalanche
3 Minute Gold News
Elaine Diane Taylor
June 25, 2014
World events are complicated, but the further back we stand the larger the patterns we can see. It’s the slower moving cycles and shifts that can have the bigger impact, and sometimes they ‘finally’ arrive very suddenly with a hard-to-foresee catalyst.
Jim Rickards has been kind enough to offer his insights into the coming change to the U.S. dollar reserve currency status, and how this change will affect every one of us.
From my view, it’s part of our move from a mechanical age into an electric age.
This very slow shift is affecting everything from money and power structures, to time, space, careers and the concept of what a nation is.
We’re shifting from a phonetic assembly line of printed words, cars, factories, roads, thoughts, “cause and effect” and political hierarchy, into a field of instant contact, information, 3D printing, news, ideas, persuasion and power.
Money is a form of media in both line and field — a medium of exchange or transfer.
I create music and music “videos” that are one image or a ‘field’, with the recording done in one live take — a field as opposed to an assembly line. The words convey the changing empire and power issues.
As change happens to any empire or closed system, along with new media and technology, there are struggles for power in a large and small sense. Music and money, as technologies of media and an extension of ourselves, can be used to mediate what’s happening and better prepare (and even enjoy things) inside a larger upheaval.
I’m privileged to have Jim Rickards take the time to give his insights.
Jim is very well respected, well connected, well educated and experienced in financial matters at a high level. He’s able to translate economic concepts into field perception and insight, and then state it in a way that is well cited, non-alarmist, and touches the non-economic reader as well as the economic-immersed.
“The Snowflake and the Avalanche” should be Jim’s first children’s book and set of art prints. Hmmm…. :)
Please give Currency Wars and The Death of Money a read.
The Death of Money is available for purchase here: http://amzn.to/1bwpYS6
You’ll understand more of where you’re standing and how the times are changing.
I encourage you to follow Jim on Twitter @JamesGRickards for his up-to-the-second views on what’s really going on out there financially and geopolitically.
His “just right” sarcasm is always appreciated.
Thank you for the great Q & A, Jim.
With the events you see potentially coming in The Death of Money, and the U.S. dollar collapsing 90% or more in value, can you give some suggestions to a person who is just starting out and in their early or mid twenties.
For a person who is a student or doesn’t have disposable income, per se, will the effect of the collapse be severe enough that they should change their plans now, or do whatever they can to prepare? And if so, how should they do this? Buy some silver or a pantry of food before inflation comes?
Being financially prepared is a bit different from the more broadly defined “prepper” movement.
It does make sense to keep some food, water, batteries, first aid supplies and other basics around in the event of a power grid outage or natural disaster. But I’ve always thought of this as something that would get you through a few days of disruption. I’ve never seriously considered trying to stock up for months of survival amidst social disorder.
Historically, when things get that bad, people abandon cities for the country where they can grow their own food, fetch their own water, and live simply in a pre-industrial mode.
The key to that is not to have big supplies, but to have skills and somewhere to go.
Buying a few acres of good land with a stream someplace you can get to in a day by bicycle sounds like a better plan to me than than tons of canned goods. And it might not be a bad investment if things don’t get that bad!
My speciality is really financial preparation rather than preparation for other kinds of disasters.
It sounds apocalyptic to say the dollar could go down 90% but it’s really not. The value of a U.S. dollar has declined 95% since the Fed was created in 1913. It declined 50% in a short five-year stretch from 1977 to 1981. It declined 95% if measured against gold from 1971 to 1980. So these kinds of dollar collapses have happened before, sometimes quickly, sometimes slowly.
When the collapse comes, it’s not necessarily the end of the world.
It just means that power elites will re-write the “rules of the game” and produce sets of winners and losers.
The winners are usually banks, hedge funds, bondholders and other elites. The losers are usually people with savings, pensions, annuities, insurance policies, and middle-class jobs.
The key for everyday citizens is to make sure they are on the winning side when the dollar collapse comes.
Someone in their twenties with not much disposal income may actually come out OK because they don’t have a lot of savings or investments or other financial assets subject to devaluation. As Bob Dylan said, “If you ain’t got nothing, you got nothing to lose.”
One asset that does resist inflation is education. That’s something the central banks cannot devalue. If money collapses you just demand a higher price for whatever talent you have to offer. In that way, an education is “inflation proof.”
My best advice for younger people is to work on their education or be an entrepreneur or both.
When you do have some earnings, try to save a little each paycheck even if you have trouble making ends meet. As soon as you have $10,000 saved, buy one ounce of gold as insurance against the kind of collapse we’re talking about.
Keep putting part of your pay in savings and keep putting 10% of your savings in gold.
The rest can stay in cash until you have enough to buy some land.
I’d keep away from buying a house or buying stocks until the crash comes. After the crash, there will be some bargains for those who survived with cash and gold.
Many of my readers and followers are artist-minded, and not trained in economics or geopolitics. They see patterns and cycles more than numbers and percentages. Do you have a way to explain these events, and the changes that could be coming in the not-to-distant future, to someone who does not understand inflation or unemployment figures, doesn’t own stocks or gold, or doesn’t really know what the currency market or a Central Bank is? I’d like to find a way to tell artists that there is something they can do to help themselves and position themselves better for this currency crash.
Actually artists, writers and musicians are much closer to the rhythm of markets and the turning of financial cycles than trained economists.
This is because most of what economists are trained in is the false sciences of Keynesian multipliers, efficient markets, normally distributed risk, equilibrium dynamics and stochastic random processes. Every one of those things is either completely false or is a good technique being misapplied to finance.
The typical Ph.D. economist is not uneducated but is miseducated.
Capital markets are actually complex systems rather than equilibrium systems.
Complex systems are ubiquitous in nature in things like earthquakes, severe weather, tsunamis, solar flares, and avalanches.
Complex systems also exhibit a relationship between the frequency and severity of events that corresponds to a power curve when graphed as a degree distribution or a fractal when graphed as a time series of events.
Here’s an image of a fractal:
So, if this image is a better representation of events in capital markets than anything being produced at the Fed, which it is, then who knows more about economics: artists or economists?
Music theory concepts like”major keys” and “minor keys” are a good way to understand depressions compared to normal growth. Depressions are composed in minor.
If you want to understand how capital markets functions, read books like “How Nature Works” by Per Bak or “Six Degrees” by Duncan Watts. For the master class, try “A New Kind of Science” by Stephen Wolfram. All of these books are richly illustrated (by artists) and the math is not too difficult.
Above all, artists should trust their intuition. If government tells them things are fine and their intuition says that things are not, I would trust the intuition and distrust the government.
As for being an artist, my rule is that when it comes to your own money, everybody has a Ph.D!
Do you see the coming events as being severe enough to post a warning level like the DEFCON warning levels? So something like ‘ECON Yellow’, or ‘ECON Orange’? :) I could put a colour warning on the 3 Minute News Site! — a visual cue for the newbie. Is there a time coming where a family would benefit from stopping all extras and doing everything they can to have some kind of asset aside, and how would you advise the person who is brand new to the idea of a currency war?
The idea of posting warning levels using a multi-tiered, multi-colored system is an interesting one.
The difficulty is that our economic problem exists in two dimensions: severity and time.The severity is the easy part.
The next financial crisis will be unprecedented in its severity and will overwhelm central bank bailouts to the point where the entire world, including the U.S., will have to turn to the IMF for a bailout, which will come in the form of world money with the technical name “special drawing right” or SDR.
The result will by hyperinflationary. The timing is unknowable.
It’s the problem I call the “snowflake and the avalanche.” A seasoned climber or alpinist can look at unstable snowpack and see that there is severe avalanche danger. But it’s impossible to know if it will happen tomorrow or next month and no one ever knows just which snowflake starts the whole thing coming down.
In fact, the collapse could happen tonight or it could happen years from now.
But that’s all the more reason to prepare now.
If you wait until the actual panic takes hold, it will be too late to buy gold because there will be none available. It will be hoarded by everyone from central banks to small holders with just a few coins.
There may be some warning signs along the way, and the financial collapse will not happen in a single day but will play out over a few weeks or months, but the assets most in demand then such as gold, silver, art and land will be unavailable or priced out of reach.
It’s not as if we are waiting for mistakes to be made. The mistakes have already been made. We’re just waiting for the catalyst to start the collapse process and reveal the mistakes.
In that sense, using the U.S. Defense Readiness Conditions (DEFCON) method, we are at DEFCON 1, Exercise Name “COCKED PISTOL”, which means that we are at maximum readiness, with nuclear war imminent, color code WHITE.
But that does not mean the nuclear war has started. It just means that we’re ready for one, waiting for a triggering event.
Another Week on Wall Street (Fiat Currency and Inflation)
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
from the album Coins and Crowns available on iTunes