3 Minute Gold News – Jim Rickards – May 6, 2016

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 bestseller The New Case for Gold, by Max Keiser at The Keiser Report.

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.

by: Elaine Diane Taylor

PART 2

Topics:

Where’s the Gold and Who Owns It?
Next Global Financial Crisis
World Money
Gold

 

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Jim Rickards with Max Kieser

 

Interview Link

Jim is in at 13 min. but Stacy Herbert‘s analysis at 4:28 with Max is really good and recommended.

 

WHERE IS THE GOLD AND WHO OWNS IT?

You have to separate gold that the United States owns and gold that the United States holds for other countries.

The United State’s gold is not at the Federal Reserve bank in New York — little tiny pieces but not much at all.

The U.S. gold is in two main locations:

1. Fort Knox
2. West Point

There’s sometimes a debate over who controls the gold. It’s the U.S. army — Fort Knox and West Point are both army bases.

But technically the gold belongs to the U.S. Treasury, and the Federal Reserve has a certificate they got in exchange for their gold.

There are 6,000 tonnes of gold buried beneath the Federal Reserve bank in New York, but that gold isn’t the United State’s gold. That gold belongs to Germany, the Netherlands, Japan, the IMF — basically countries from around the world.

That’s the gold that’s at risk of confiscation if there is an extreme situation.
It won’t happen on a nice, calm sunny day. But in a global financial crisis worse than 2008, which Jim expects is coming, the U.S. if necessary will do whatever it takes.

NEXT GLOBAL FINANCIAL CRISIS

It will be much worse than it was in 2008.

If you go back to 1998 and the Russian Long Term Capital Management (LTCM) crisis, Jim was the lead council (lawyer) and negotiated that bail out. He was on the phone with the Fed and the Treasury and had a front row seat.

LTCM owed $1.3 trillion to the Wall Street banks and was very close to failure. If they had failed then Jim would have just slept in the day after the negotiation. It would have been fine if the banks would have taken the $1.3 trillion onto their balance sheets. But they couldn’t. The markets weren’t that deep. It would have taken down every stock and bond market in the world.

The Fed bailed out Long Term Capital Savings to save themselves.

Come forward to 2008 and there was a bigger financial catastrophe.

They were days away from a sequential collapse of every major bank in the world.

What happened?

The central banks bailed out the banks.

So in 1998 Wall Street bailed out a hedge fund. In 2008 central banks bailed out Wall Street. Each bail out was bigger than the one before it.

WORLD MONEY

In 2018 it’s going to be the central banks that are in distress.

Who’s going to bail them out?

There’s only one clean balance sheet left in the world and that’s the IMF.

So the IMF will issue their world money called the SDR (Special Drawing Rights), to bail out the central banks.

Jim says that if he’s wrong it will be because it happens sooner than he expected. He gave it a two to three year horizon and it could be happening earlier.

Max Keiser coined the phrase, “Anything that can get rolled up will get rolled up.” This is exactly what’s happened.

In 1998 a hedge fund got rolled up into Wall Street balance sheets. In 2008 Wall Street got rolled up into central bank balance sheets. If you keep the ten year tempo then in 2018 the central banks will get rolled up into the IMF balance sheet.

Where do you go from there? There’s nothing bigger than the IMF.

If the roll up of central banks by the IMF is a result of a collapse of confidence in invented central bank money then why should people have any more confidence in world money?

It could collapse very quickly.

If the SDR works it will only be because very few people understand it. It’s just a different form of fiat money.

People will question why they should have confidence in it and that’s when you get back to gold.

All the monetary horses are running around the track — dollars, yen, euros, bitcoin, gold, SDRs — and at the end you may only have two horses left: Gold and SDRs.

As Max explains his roll up thesis, if you have ten bonds that are about to fail you can package them together and roll them up into one new bond, and create a maturity and a yield that essentially makes everyone whole with a longer maturity and a lower yield.

So Long Term Capital Management, a hedge fund, was rolled up into banks, then in 2008 the distressed banks were rolled up into central banks. Next comes a central bank roll up into SDRs.

So Jim says when the central banks fail they will go to the IMF and roll it up and the IMF will create, say, $100 trillion SDRs.

This keeps the fiat game rolling on for another period of time but these events are happening faster than Jim originally thought.

CHINA and the SDR

China has announced a new SDR trading platform. They’re going to roll it out in July.

The only SDR trading platform that Jim’s aware of today is inside the IMF. They have a trading desk. They hand out SDRs to the members of the IMF by quota, meaning the U.S. gets 16% and China gets 5% for example. And Hungary would get a little bit because they’re a member of the IMF, for example.

China’s yuan is not ready to be a global reserve currency — not even close.

But the SDR is.

In the short run, China is not pushing the yuan as the reserve currency but they are pushing the SDR as the reserve currency. Last November the IMF voted to include the yuan, starting this September 2016, in the basket of currencies making up the SDR.

The SDR is not backed by anything — it is pure fiat currency. The basket of currencies are used to determine the value of the SDR.
Right now the SDRs on China’s bank balance sheet exceed the amount they are allocated in their quota so where did they get the excess?

They are already trading for SDRs. They’re selling U.S. dollars and buying SDRs.

They want corporations to denominate debt in SDRs instead of dollars because it will run the dollars off the road; de-dollarization.

GOLD

Max believes there’s a collision course that could go two ways:

A.) The SDR roll up works.
B.) The fiat system collapses and there’s a revaluation for gold at a price that isn’t deflationary.

Jim used to estimate that the price of gold would need to be $7,000 per ounce in order to use it as a reserve, but he now says it would need to be $10,000 per ounce because central banks have printed more money since then.

This happened in 1933 (the longest period of sustained deflation in U.S. history) — and the U.S. government raised the price of gold by 75%.

The government raised the price back then because they needed inflation.

Today, gold will go up whether it goes A.) or B.).

Either way.

It will go up because governments take it up to cause inflation, or else they will get inflation using SDRs and gold will go up because of the inflation.

Either way gold goes up.

 

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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Gold today is $1,287.70 U.S. per ounce.

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The sound of the move to gold is now just above a whisper. There’s very little buzz about it fall again and lots of alt-media and mainstream media saying it’s going up.

Here’s a quote from a Reuter’s article:

TORONTO, May 6 Canada’s main stock index rose on Friday as gold shares rallied after data tempered Federal Reserve rate hike expectations, while energy stocks also gained after oil prices turned higher.

The most influential movers on the index included Barrick Gold Corp, which rose 3.6 percent to C$23.83, and Goldcorp Inc, which advanced 2.8 percent to C$24.78.

Spot gold rose 0.8 percent after weaker-than-expected U.S. jobs data boosted expectations the Fed will delay further interest rate increases.

 

Christine has a club
with a special basket filled with hawks and doves
who join up left and right
to draw their claws and fight
and when no one has any feathers left
we’ll see what Christine’s going to do next

from the single Going to Do Next available soon on iTunes.

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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AlbumCover.PreparingfortheFall

Preparing for the Fall live boutique album 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.

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