3 Min. Gold News – Jim Rickards – Inflation Steals – Bloomberg – August 29, 2015

3 Minute Gold News

A Quick Read for Busy People

A synopsis of an interview with Jim RickardsNew York Times bestselling author of The Death of Money and Currency Wars, by Bloomberg Business.

Jim is the Chief Global Strategist for West Shore Funds, former general counsel for Long Term Capital Management, and a consultant to the US Intelligence community and the US Department of Defense.

Topics:

Inflation Steals
Best Policy?
What Should the Fed Do?

Rickards - Brisbane

Jim Rickards

Interview Link

 

INFLATION STEALS

The Fed’s been trying Mick Jagger-nomics; “You can’t always get what you want”.

The Fed wants inflation but they can’t get it.

Ben Bernanke told Jim recently in Korea that QE was an experiment. It was a failed experiment because to get inflation you need velocity (you need people to spend and not save or pay debts), and that’s psychological.

The Fed has a 2% inflation target because they want to steal money from savers and give it to bankers.

That 2% sounds tame, but it cuts the value of the dollar in half in thirty five years, and half again in another thirty five years. So it’s a 75% devaluation over a lifetime.

It steals from anyone who saves or has a fixed income, like retirees, and it enriches bankers and debtors because it reduces the value of the money they owe.

BEST POLICY?

The Fed should instead be targeting zero and then they should just get out of the way.

For monetary stability they should be targeting zero interest rates, don’t fight the currency wars and don’t try to micro-manage the economy.

The Minneapolis Fed President, Marayana Kocherlakota, just said publicly that the Fed was nervous about ever exceeding their 2% inflation target, and that they’re treating the 2% as a ceiling.

But Jim has been told by a Fed president privately that they wouldn’t mind seeing 3.5% inflation. They have to get inflation or else they can’t pay off their debt. They have to devalue their debt.

They want to do it slowly — like a kid seeing $50 in their mom’s wallet and thinking she won’t notice if they only take $2.

If the Fed promises 2% inflation and delivers 2% then there’s no change in expectations (so no change in velocity). So what they have to do is lie to you. They have to promise you 2% and deliver 3%. Now it’s a shock and you think, “Oh gee…I better go buy a car or a house now.” That’s how the game is played.

Many central banks have an inflation mandate, but in 1978 Hubert Humphrey co-sponsored the Humphrey-Hawkins Act so the US central bank now has a dual mandate (price stability and full employment).

But from 1913 to 1978 the Fed had a single mandate, and the European Central Bank has a single mandate.

When you say you have an unemployment goal then you have to micro-manage the whole economy to create jobs. The Fed can’t create jobs — entrepreneurs create jobs — but they think they can create jobs. So what it does is give them a mandate to be a central planner for the whole economy.

If they raise interest rates in September, which Jim doesn’t think they will do, then it will be a historical blunder which will cause an emerging markets crisis.

The stock market discounts the blunder — if it looks like they’re going to raise rates then the market crashes. The Fed comes out and says, “Not so fast”, and then the market goes up. So the stock market is up or down depending on whether they think Yellen will raise rates or not.

But if the Fed doesn’t raise rates they might lose credibility.

So they either lose credibility or they create a catastrophy. That’s what happens when you manipulate the market for six years — you paint yourself in a corner and can’t escape the room.

WHAT SHOULD THE FED DO?

The Fed should ease.

There’s five ways to do it:

1. QE
2. Rejoin the currency wars and cheapen the dollar
3. Helicopter money
4. Forward Guidance
5. Negative interest rates (pretty radical and not expected)

They should have raised rates in 2010 because there was plenty of cash.

 

Jim Rickards can be found on Twitter and at James Rickards Project.

 

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From the Cariboo Gold Rush Trail

Gold is $1,133 US per ounce.

All is well. It’s pouring rain today. Mamma bear and baby bear casually crossed the road near my home yesterday. It’s scales and modes on the guitar, and Mick Jagger on the turntable. Blowtorch is up and running.

IMG_6117

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Not Much of a Holiday
words and music Elaine Diane Taylor
© 2015 Intelligentsia Media, Inc. All rights reserved.
SOCAN/ASCAP
Single available on iTunes

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AlbumCover.PreparingfortheFall

 

Preparing for the Fall album is available on iTunes — featuring Wag the Dog, Black Swan Dive,  American Pie and Gods of the Copybook Headings.

 

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

Single featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.

 


The Gods of the Copybook Headings
words by Rudyard Kipling and music by Elaine Diane Taylor
©2014 Intelligentsia Media Inc.
SOCAN/ASCAP
from the album Preparing for the Fall available on iTunes

 

 

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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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.

 

 

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