3 Minute Gold News
A Quick Read for Busy People
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
SNOWFLAKES & AVALANCHES
THE DEATH OF MONEY
The U.S. runs budget deficits year after year. In the last 50 years they’ve only run three or four surpluses.
The U.S. has $20 trillion of debt.
The Treasury can’t just go out and borrow as much as they want. The U.S. Congress limits the Treasury’s ability to borrow. That limit is called the “debt ceiling”.
When the Treasury borrows the limit and wants to borrow more, which they want to do, they have to raise the ceiling. That requires a legislative act by Congress.
Officially the debt ceiling ran out on March 15, 2017. The Treasury has no authority to borrow beyond the ceiling limit.
So how does the Treasury fund the deficit?
They have a little wiggle room just like a family budget does. They have some different accounts or can sell a few things in the short term. Plus this is tax season, so Americans are paying their taxes and the Treasury has more coming in than going out so they don’t have to borrow anything at the moment.
But that’s temporary. Once we get past April then more money will be going out than coming in.
Jim believes they’ll run out of their wiggle room options and hit a hard ceiling by about August, if not sooner. Then the question of whether Congress will let them borrow more money will come to the foreground.
The thing to watch for is the strings Congress will attach for a vote.
The debt ceiling has to do with how much the Treasury can borrow. But the Congress also has to authorize a budget saying how the Treasury can spend.
The Treasury is late with their budget which was due last October, and their ability to just keep going with the last budget expires April 28th. They’ll need another OK from the Congress to keep going with the last budget or approve a new one.
Congress might attach strings that stop the approval and shut some things down and make things more and more inconvenient.
SNOWFLAKES & AVALANCHES
These events are just snowflakes that add themselves to the already unstable snow pack, which is the financial system as a whole — the size of the too-big-to-fail banks, $4 quadrillion of derivatives, and the inter-connectedness of the system.
The snow pack is massively unstable.
And each snowflake is building towards an avalanche.
What does it take to start an avalanche of major loss of confidence in the system?
The system is vulnerable to collapse and it will collapse sooner rather than later. This debt ceiling event might not be the trigger but the whole snow pack is unstable.
Jim recommends investors put 10% of their investable income in physical gold that’s stored outside the system.
With physical gold in a safe place outside the banking system if nothing bad happens you won’t be hurt financially with just 10%, but if some of these scenarios play out then that gold will be your security blanket and you’ll be glad you have it.
SYSTEM SHUT DOWN
Here’s the two most recent systemic financial crises, where the whole system came close to being shut down:
1. ) In 1998 where a crisis in Asia in 1997 spread to Russia in 1998 and involved the hedge fund Long Term Capital Management (LTCM).
Jim was the lawyer who was involved with the Treasury and banks in negotiating a bail out for LTCM by the banks in order to save the banking system, and in particular Lehman Brothers (which then failed in 2008).
They were hours away from the sequential shut down of all of the major markets in the world.
2.) In 2008 it was the same thing. They were days away from the sequential collapse of every major bank in the world.
Both times there was a rescue.
In 1998 Wall Street banks bailed out a hedge fund. In 2008 the Central Banks bailed out the Wall Street banks. What happens the next time? A ten year tempo would mean 2018, though it’s unstable enough that it could happen tomorrow, or maybe it will last into 2019.
The Central Banks around the world haven’t normalized after going into debt to bail out the system in 2008. So next time they’re severely restrained from saving the system.
So where’s the next rescue going to come from?
It’ll be one of two places:
1. Some kind of a gold standard
2. The IMF with their Special Drawing Rights world money (SDRs).
The trouble is that with either solution, or any other solution the elites come up with, it will take some time to implement.
They’ll have to come up with a new system. What will they do in the meantime if there’s a crisis?
They’ll lock down the system.
They’ve done is many times before. They’ll close the banks (bank holiday), suspend money market funds, suspend redemptions, close the stock exchange.
They’ll say it’s temporary – just like Richard Nixon said when they suspended converting U.S. dollars into gold.
That was 45 years ago.
So maybe the temporary shut down of the financial system is only 45 days or maybe longer, but they’re going to suspend these institutions. Maybe you’ll be able to get enough money out per day at the ATM to pay for gas and groceries while they sort it out.
Jim calls the shut down Ice-9 after the book Cat’s Cradle, where one drop of Ice-9 liquid freezes a body of water, which spreads to rivers, lakes, oceans and freezes the whole world because it’s interconnected.
In 2008, Ben Bernanke and Hank Paulson were concerned about a financial collapse because they saw people taking their money out of money market funds.
There was a law saying the government could not suspend redemptions so they had to give people their money back.
Now they’ve changed the law and money market funds can suspend redemptions.
That’s what they’ll do.
So people will try to take their money out of the bank instead. So the government will temporarily close the banks. Then people will try to cash in their stocks. So they’ll have to close the stock exchange as well.
It’s like Ice-9. Freezing system by system until the whole thing is shut down.
We’ve seen it in Cyprus and we’ve seen it in Greece.
It happened in the U.S. in 1914, when they closed the New York Stock Exchange for five months.
In 1933 every bank in the U.S. was closed.
It’s happened before and it’ll happen again when everyone wants their money back at once — which is the definition of a financial panic.
ONE WORLD GOVERNMENT
There’s no question that the global elite want a world government.
Their plan is proceeding slowly, and they believe that way no one will notice.
The SDR was invented in 1969 so these things aren’t coming out of the blue. They’re working torward global taxation and world money slowly.
They’re going to give corporations a global tax ID and they’re going to have a shared data base. Global taxation plans are well on their way. With global governance they’ve already got the United Nations and the G20.
The issue of Climate Change is a vehicle for global governance because climate is global and has no borders.
If there’s a global problem then you can put forward global solutions.
For example, Christine Lagarde, the head of the IMF, always talks about climate change in her speeches. Why? Why is the head of the monetary fund concerned with climate change, when their role is exchange rates and international monetary issues?
Because it’s a vehicle for talking about global solutions.
DEATH OF MONEY
The paperback was just released and has brand new material in it and a new preface. It talks about the issue of global government.
Jim talks about what he sees coming in order to try to alert people, but it’s the financial elites that are coming up with the solutions.
The people in charge believe their Ice-9 solution will work.
In 1933 when Roosevelt closed the banks and confiscated the gold the people went along with it. It was in the depth of the Great Depression and people trusted the government.
That trust is long gone.
Jim’s not so sure their plans will work the way they want because they’re running an old playbook.
He’s looking two or three moves ahead and believes people may have money riots if they shut down the banks and limit funds.
He believes you can see a shut down coming because they’ll try to buy some time while they’re setting up a new system.
But the government has martial law types of responses if there’s social unrest. The U.S. is operating under a state of emergency today. Bush declared it after 911 and it wasn’t unreasonable then. Bush renewed it every year and then Obama renewed it every year for the eight years he was in office. It comes up for renewal in September again.
Jim’s book The Road to Ruin documents these things. Jim’s books have between one and two hundred footnotes and hundreds of pages of sources.
The elites did not see a Donald Trump win coming.
What we see now is extreme resistance to him.
Trump didn’t get a honeymoon for his first 100 days — he got a burning bed. He’s facing resistance from the deep state, the Resistance (like the group Obama has put together), the media and even some in his own party.
It’s not that they’re in it together but it’s a network and there’s coordination together against him.
(The video interview goes into depth on this.)
They either want to impeach him, force him to resign or make him ineffective. Added to the financial situation it’s adding stress to the system.
The question is whether they’ll have him so weakened that he can’t get going.
(The video interview goes into depth on this also.)
He needs to put some points on the board to have confidence in his leadership.
THE U.S. DOLLAR
The science behind capital markets shows a collapse coming. That’s easy to see. But what happens next?
They can try some kind of a gold standard and SDRs.
SDRs go to countries and not individuals.
But if you have to print trillions of SDRs then you’ll still have inflation.
Dollars will be local in the U.S. just like Mexico uses pesos.
Best case scenario is the SDRs work, in which case the U.S. dollar is no longer the world reserve currency and is just the local U.S. currency.
Jim expects an ounce of gold to go for about $10,000 per ounce, but not to be used in day-to-day transactions at the store.
People used to use silver coins in daily purchases, or else paper dollars backed by gold and silver.
Silver will go up along with gold. And primarily if the SDR solution fails.
But the time to get physical gold and silver is now before that happens.
Once it starts skyrocketing you won’t be able to get it. It won’t be a question of price at that point. You won’t be able to get any.
Jim speaks with vault operators and refiners and they tell him they’re having a lot of difficulty sourcing physical gold to refine.
Jim just got back from China where he spoke to the heads of precious metal trading at two of the biggest banks and they said demand is strong and they’re selling everything they can get.
For now the price of gold is just going to chug along.
The Fed is expected to raise interest rates again in June but the economy in the U.S. is very weak. Growth is about 1% and nowhere near the 3.5%ish trend growth levels needed to dig out from the sky-high debt-to-GDP ratio and budget deficits.
But the Fed wants to get rates high enough that they can cut them in the next recession.
By summer the economy will stall out and Fed will have to flip, which will cause gold to rise to maybe $1,300 by the end of the year. Jim’s two-to-five year target is $5,000 per ounce, and ultimately to $10,000 per ounce for the reasons he discussed in the interview and covers in his books.
If you have to go to gold to restore confidence in a crisis then you have to raise the price in order to not have it be deflationary.
Silver will climb with gold, so if gold goes to $5,000 per ounce then silver would be at about $100. If gold goes to $10,000 then silver would go to $200.
Gold is still the lynch pin in the global monetary system but no one wants to talk about it.
The IMF disparages gold but they have 3,000 tonnes of it.
Why does the IMF cling to 3,000 tonnes of gold?
Why does the U.S. have 8,000 tonnes of gold?
Why does Europe have 10,000 tonnes of gold?
Why do they have it if it has no value? The answer is that it has value and it’s the backstop of the global monetary system. It’s just that no one wants to talk about it.
The Road to Ruin is available at Amazon.
Jim Rickards can be found on Twitter and at James Rickards Project.
Very brief today. Gold shot up because of the threat of war. I don’t think of gold as a way to make money; I think of it as a shield. There’s no way to know all the dynamics of things you can’t control. But I like to feel that I’ve done what I can to create a peaceful surrounding. To learn the why from different sources. To connect dots. Part of that is to create a shield from the seasons.
Seasons spin. War and peace. Tension and release. Winter comes, and we haven’t had a financial winter in a while — just more debt to hold off the inevitable monetary winter that always cleans out the parts that aren’t working well.
Elaine Diane Taylor~
April 7, 2017
Gold is $1,253.80 U.S. per ounce
Not Much of a Holiday
words and music Elaine Diane Taylor
© 2015 Intelligentsia Media, Inc. All rights reserved.
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.
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.
Coins and Crowns
words and music Elaine Diane Taylor
© Intelligentsia Media Inc. All rights reserved.
from the album Coins and Crowns available on iTunes
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.
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.
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.