3 Min. Gold News – Jim Rickards – ABC – September 15, 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 Ticky Fullerton at ABC TV in Australia.

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:

Fed September Policy
October Surprise?
If Fed Raises Rates
G20
Credibility vs. Catastrophe

 

Rickards - Brisbane

Jim Rickards

Interview Link

 

FED SEPTEMBER POLICY

The Fed will not raise interest rates in September.

The data is weak. The Fed has said they’re data dependent and they’re nowhere near their targets.

The third quarter looks like it’s going to come in well below 2% growth and the Year-to-Date GDP growth is 1.9 % which is nowhere near their 2.5% target. The unemployment rate has come down but labour force participation is lousy and declined last month, real wages are going nowhere, and monthly job creation looks like it peaked last year.

If you look at the data behind the happy talk in the US it’s very weak.

OCTOBER SURPRISE?

The FOMC (Federal Open Market Committee) meets eight times each year to set the policy rate but only four of those meetings have press conferences. Conventional wisdom says they won’t raise rates when there’s no press conference — there’s one in September and then not again until December.

But last spring the Fed had a teleconference and told reporters not to assume an increase would be announced at a press conference meeting. So at the September meeting they might say to not rule out a rate hike in October.

The US is flirting with a recession and the Fed needs to ease instead of tighten. But they’re probably not there yet. They’re often the last to know because their models are obsolete.

So expecct more of the same.

They won’t raise interest rates in September but they’ll keep talking tough and say, “It could be any month now. Maybe October!” But that’s the wrong policy at the wrong time. They should probably be talking about QE4.

There are five policy tools they could use to ease:

1. Print money —also called QE4.
2. Negative Interest Rates — Done in Europe but Jim doesn’t expect it in the US.
3. Helicopter Money — goes to the people instead of banks — the Treasury issues bonds and the Fed buys the bonds and bypasses the banks.
4. More Forward Guidance — Go back to saying “We’re going to be patient.” letting markets know they aren’t going to raise anytime soon, which they were doing, and then stopped in Spring when they changed it to “Anytime soon.”
5. Currency Wars — try to cheapen the US dollar against other currencies

Jim expects they won’t do any of them yet. He expects they’ll keep doing tough talk and say, “Anytime soon.”

IF THE FED RAISES INTEREST RATES

Raising US interest rates now would be a historic blunder and create a meltdown in emerging markets.

There are huge amounts of money (capital flight) already leaving China, Malaysia, Korea, Indonesia, other countries in that region, as well as elsewhere around the world.

It already looks uncomfortably close to what happened in 1997 and 1998 with the Asian Financial Crisis. That crisis started in Thailand, but it spread to Korea, Indonesia and ultimately to Russia, where it ended up in Jim’s lap at Long Term Capital Mangement when their hedgefund melted down.

If the Fed raises rates just 25 basis points then, contrary to market expectations, you have to bring the entire Fed Funds Futures forward. By readjusting and bringing forward all the expectations then it’s like doing two or three rate increases at once. That’ll make the US dollar much stronger and perhaps cause an emerging markets meltdown.

That will put pressure on countries like Australia where their commodities exports will slow down.

G20

Each year the G20 has a different leader. Last year it was Australia, this year it’s Turkey and next year it’s China.

They’ve issued statements in the past about the currency wars and it hasn’t done anything. No multilateral organization is going to come out in favour of currency wars, but currency wars happen anyways.

Australia and Canada cut their rates, Malaysia devalued their currency by 30% in a matter of months, and China famously cut their defacto peg to the US dollar in early August. Jim expects China will devalue the yuan again before all is said and done.

Currency wars don’t have a logical conclusion except systemic reform or systemic collapse, and there’s no move to systemic reform at the moment.

There’s more volatility to come.

CREDIBILITY VS CATASTROPHE

The Fed’s problem is that if they don’t raise interest rates after all this warning then they’ll lose credability. But the data is so weak that if they do raise rates they could cause a catastrophic meltdown.

So they’ll have to leave their credability in shreds to avoid a catastrophe.

The time to raise interest rates was 2010, which Jim said at the time. At the end of 2009 he said they should raise rates 25 basis points because there was no liquidity crisis at the time.

They should have raised them in stages in 2010 and 2011 when the economy was strong enough to bear it. If they’d done it back then they would have the room to cut now when the US needs to — they missed an entire interest rate cycle.

Now they have to choose between their credability and a catastrophe.

But that’s what happens when you manipulate interest rates for seven years — you paint yourself into a corner.

 

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

 

……………………………………….

11021557_10152833698045893_3823811563098842481_o

From the Cariboo Gold Rush Trail

Gold is $1,103 US per ounce today.

The Akzonobel Global Aesthetic Center annually gets together the top design professionals to choose the next year’s “Colour of the Year”

They base it on the coming major global social developments.

Next year’s colour? “Cherished Gold”.

Screen Shot 2015-09-15 at 11.14.46 AM

Home in Seton again after a weekend on the beautiful coast of Vancouver Island.  Tonight I’ll be playing again at a house event in Lillooet.

Orca_Nanaimo

Eagle_Lillooet

Deer_Lillooet

……………………………………….

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

About the Greek bank holiday and long lines to get a few euros for the day. Debt deals behind closed doors. The media telling us what opinions to have. China building islands in the South China Sea and claiming all the waves. More dealing to come. More standing in line for those who owe. Who’s next? There’s a long line of nations in debt and this is far from done.

……………………………………….

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.

……………………………………….

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.

When a nation leaves a gold standard or sound money and borrows to go to war hunger goes up, hope goes down, anger goes up, then it all goes down.


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

The copybooks of the early 1900s gave us all the words of wisdom we need. All the empires who followed the gods of the marketplace instead of the copybooks have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The words are Rudyard Kipling’s. One of my gurus.

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

See the bankers wave their Wall Street wands and conjure piles of paper green. They’re making bets that the market will lose. Naked short selling is like betting that your neighbour’s house will burn down, and then it happens to burn down. If they win we lose the whole world as we know it. I wrote this in 2009, with a lyric “A little grease (Greece) is floating out to sea and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm then we’ll see, when the tide goes out who’s naked on the beach“, and it’s coming on now. The world is changing as we know it.

……………………………………….

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

 

Please feel free to leave a comment. Email addresses are not publicly shown.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s