3 Minute Gold News
A Quick Read for Busy People
A synopsis of an interview with Jim Rickards, New York Times bestselling author of The Death of Money, Currency Wars, and the newly released The New Case for Gold by Alix Steel and Scarlet Fu at Bloomberg.
Jim is the editor of Strategic Intelligence, Chief Global Strategist for West Shore Funds, former general counsel for Long Term Capital Management, and a consultant to the U.S. Intelligence community and U.S. Department of Defense.
Topics:
Cyber Financial Warfare
Central Banks Trust Gold
Liquidity
China
Paper Vs. Physical
Jim Rickards
The gold debate has been going on for decades and centuries, but there are 21st century reasons for owning gold.
The number 1 reason:
CYBER FINANCIAL WARFARE
Vladamir Putin has a 6,000 member cyber brigade. These are not criminal gangs, they are Russian military and intelligence working day and night to destroy, disrupt and erase digital assets.
When Jim runs into billionaires they say they have stocks and bonds. No they don’t. They have electrons.
It’s digital wealth and it can be wiped out by Putin, Syria, Iran, North Korea and other countries.
A good example is a few days ago Bangladesh had $100 million disappear. One of the poorest countries in the world. They had it on deposit at the Federal Reserve in New York.
The safest bank in the world.
And the money disappeared.
So if you don’t have some assets that are tangible it can all be wiped out.
Jim recommends 10% in physical gold, real estate, fine art and silver for example.
There are a bunch of old reasons for owning gold but that is one of the new reasons.
CENTRAL BANKS TRUST GOLD
Why does the U.S. have 8,000 tonnes of gold? They should have more, but why do they have that large amount?
Jim believes it would be best to have a gold standard in either the strict traditional sense or else as a benchmark.
For example, when people say gold is up or down it just means that a higher dollar price for gold is a lower value for the dollar. A lower dollar price for gold means the dollar is stronger.
Gold’s value is usually inverse to the dollar.
It’s a chameleon. Sometimes it’s a commodity, sometimes it’s an investment and sometimes it’s money.
Right now it’s acting as money.
Think of it as a horse race. You’ve got the euro, the yen, the dollar and gold as horses going around the track.
The dollar and gold are both showing some strength because of a little bit of a flight to quality. Right now the Fed’s dovishness will lead to a weaker dollar.
The U.S. dollar is on a ten-year high so Jim expects a weaker dollar and a stronger euro, stronger yen and stronger gold as the dollar weakens.
LIQUIDITY
Gold is very liquid — you can sell it in a heartbeat.
In comparison to gold’s liquidity look at the bond market. In October 2015 there was a flash crash in yield, so there was no liquidity in the U.S. government bond market. Primary dealers are stuck with inventory that they often can’t sell. Jim’s never seen gold not have a bid.
It’s volatile but it’s very liquid.
CHINA
China is the largest gold producer. They have 450 tonnes of indigenous output so they don’t have to import all of the gold they want.
They are also importing enormous amounts of gold.
China lies about their gold holdings. You can look at Hong Kong exports and mining output and it’s far greater than what the Chinese government says they have. So there’s a lot going on that’s not revealed.
China still wants to buy 3,000 tonnes to reach parity with the U.S. holdings. That’s like all the swimming pools filled with gold. It’s 10% of all the official gold in the world.
That’s why they don’t talk about it. If you were out to buy 3,000 tonnes you wouldn’t want anyone to know it because the price would go up.
The U.S. has 8,000 tonnes and China has between 4,000 – 5,000 tonnes. They need another 3,000 tonnes to have parity, so that when the system collapses they’ll have a good seat at the table.
Think of it as a poker game.
You want a good pile of chips when you sit down at the table.
PAPER GOLD VS. PHYSICAL GOLD
Paper gold is not gold — it’s an Exchange Traded Fund (ETF). When you buy an ETF it’s like buying stock on the New York Stock Exchange.
It can be digitally hacked and they can shut down the stock exchange.
People say that can never happen, but the New York Stock Exchange was closed for five months from July to December in 1914. It closed in Hurricane Sandy. It closed after 9/11. It closes every weekend.
With paper gold you don’t own gold. It’s a share. You have to buy and sell it.
But you don’t own the gold and you’re not going to get the gold.
You have COMEX gold futures, and if all the longs stood for delivery the COMEX would terminate the contract. They would cash settle it and you wouldn’t get the gold.
They only have 1% of the gold relative to the open interest.
All the paper gold contracts give you price exposure when you don’t need it and they’re going to terminate it when you want it the most.
You’re not going to get the gold.
PRICE TARGET AND WHEN
Gold is going to go to $10,000 U.S. per ounce.
That is the implied non-deflationary price.
In other words, if you’re going to go back to a gold standard you need a gold reference what does the price of gold have to be to support world trade, world commerce and the money supply?
That’s eighth grade math and not difficult to figure.
The blunder would be to go to a gold standard at the wrong price.
That would be highly deflationary, and that’s the mistake that Winston Churchill made in 1925.
The implied non-deflationary price is low end $10,000 per ounce and high end, if you used Global M2 with 100% percent backing (which Jim does not recommend), then the price of gold would be $50,000.
That’s where gold would end up when confidence in paper money is lost.
And that will be in the next crisis.
The New Case for Gold is available now at Amazon.
Jim Rickards can be found on Twitter and at James Rickards Project.
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In my final week and a half of academic degree work at Simon Fraser University in Vancouver, Canada. Very much looking forward to full time art + media. Please excuse the delay while the last finals for Communications Theory and Publishing are written. New branding, music, products, commentary and website coming soon.
Elaine Diane~
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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
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 international waves. More dealing to come. More standing in line for those who owe. Who owes? There’s a long line of nations in debt and this is far from done.
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Preparing for the Fall live boutique 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.
When a nation leaves the gold standard and sound money, and borrows to go to war, then 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 wisdom we need. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. 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. Naked short selling is like betting that your neighbour’s house will burn down. But in this scenario it happens to burn down. If the bankers win then 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 and 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.
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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.
Elaine Diane Taylor 