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 New Case for Gold, The Death of Money, Currency Wars and The Road to Ruin, by Alex Stanczyk from the Gold Chronicles podcast.
Jim is the editor of Strategic Intelligence, 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
This synopsis is followed by my thoughts. Thanks for reading. Thanks to Jim for his knowledge and thoughts on the U.S. and global monetary/geopolitical system. Looking forward to hiking and chatting gold with Jim again in July in Vancouver, Canada. We’re planning on hiking The Chief if you have any advice or thoughts.
FED & DEBT
THE FED & INTEREST RATES
An FOMC Meeting is coming June 13th and 14th.
They’ll raise rates 25 basis points. Four of the eight yearly meetings have a press conference and this is one of them. Janet Yellen will be able to talk about what the Federal Reserve plans to do.
The Fed tends to do big things like announce policies at these press conferences.
They’re expected to raise interest rates. What would it take for them not to raise them?
Even if inflation and the jobs report are lower than they expect they’ll still stay on plan and raise rates.
Even if the stock market goes down over time they don’t care, but what they do care about is if it drops sharply over a few days and it looks scary. That might make them pause on the rate hiking.
Jim’s forecasting model is:
The Fed is going to raise interest rates 25 basis points four times a year until 2019, so they can get the interest rates up to 4 1/2%, unless there’s: 1.) a disruptive stock market 2.) severe disinflation that looks like it’s going to be persistent or 3.) job growth well below 75,000 or even negative job growth.
If you don’t see those three things then they’re going to raise rates.
Jim’s model is different from mainstream because the mainstream market thinks that if they raise rates then the economy is stronger.
But this time is the first since World War II that the Fed is raising rates into an economy that isn’t getting stronger. Why?
They’re doing it because they have to cut them 3% to get out of a recession. They have to get rates up to 3% so they can cut them 3% again when the next recession hits.
BITCOIN & CRYPTOCURRENCIES
Jim believes Bitcoin and cryptocurrencies/alt-coins are in a bubble, but that bubbles can go on a lot longer than you think. (I have a different opinion. I believe they are part of a new technology and just at their beginnings, unless governments shut them down.)
There’s no way to short Bitcoin yet.
When a bubble crashes it crashes hard and it’s hard to get out.
Bitcoin is speculation and it’s definitely not wise to go all in.
The FED and DEBT
The Fed has $4.5 trillion debt on their balance sheet.
When the Treasury sends the Fed money to pay off their bonds the money disappears and it reduces the money supply.
Right now there are bonds maturing all the time. What the Fed has been doing is just buy a new bond to replace it. Now what they’re doing is not buying new ones, they’re just maintaining the money supply.
What the Fed is going to do is let the bonds mature, pay them off to the Treasury and the money will disappear out of the supply.
They’ll do it gradually, and bit by bit they’ll normalize their balance sheet down to about $2 trillion.
That’s their plan.
Jim figures there’s going to be a recession and it’ll mess up the Fed’s plans.
The Fed told us that all the QE would help stock prices and mortgage prices, and it would help people borrow more money and spend it.
None of that happened. All it did is create asset bubbles.
Physical gold for this year is still moving from the west to the east.
US based gold funds have been pretty flat. In the first three months of 2017 as much as six times as much capital was invested in gold funds by Germany and the UK as from the US.
India is back on top of the list of nations receiving gold from Switzerland. India is taking more from Switzerland than China and Hong Kong combined.
Overall, Asia is about 74% of Switzerland’s total gold exports, which means gold is still flowing from the west to the east.
China’s physical gold imports were up 64% in Q1 and their domestic production is dropping.
Mining production is going to start dropping off after 2019.
Jim experienced the derivatives blow up of hedge fund Long Term Capital Management in 1998 when the banks bailed it out, and Jim negotiated the bailout as LTCM’s lawyer.
He studied complexity theory and physics to try to understand what happened. Then saw the same things happening again, only this time with the banks on Wall Street, instead of just a hedge fund.
Jim warned of the crash of 2008 coming as he saw the same things happening as he had experienced, and the risk that held.
He sees the same things happening now only on a larger scale.
Every financial panic is the same: everyone wants their money back.
People think they have money when they really don’t.
When they have money in stocks, bonds and real estate they don’t really have money. They have stocks, bonds and real estate. If they want their money back they need to sell the stuff and get back money.
In a financial panic everyone is trying to sell and get their money out at the same time so the price plunges and people panic.
But each one is also different because there’s a different catalyst each time.
The next one won’t come from sub-prime mortgages, but it could come from Chinese credit, emerging market currency crisis, or any other number of catalysts.
There’s $100 billion more debt in the system.
The scale of the system is bigger, the concentration of assets is with a smaller number of players, and there’s non-transparency in derivatives that’s worse than it was in 2008.
Those things alone points towards the next crisis being exponentially worse than the last one and that the banks won’t be able to fix it.
But worse than all of that, and aside from high frequency trading (which has its own dangers) is the rise of robo-investing and of passive investing. Less individuals are buying, holding and selling by actively looking at the market, which keeps the prices healthy.
Robo-investing and passive investing with an index follows and goes along for the ride like a parasite. That’s fine when a parasite is small – it can feed off the host’s decisions for a long time.
But what happens when the parasite gets bigger than the host?
The passive investing is now larger than the active price discovering part of the market, and it’s getting larger.
That means that a smaller and smaller number of players are making the decisions which the passive and robe-investors will follow.
In other words, when everyone wants to sell there will be no buyers, and things will go no-bid so fast it will make your head spin.
When a crash happens you’ll want to have some physical gold.
It’s just a hedge in case this happens. Like insurance. So 10% of investable assets is a good place to be.
A crash will start with a flight to quality.
At the beginning of a panic some people actually sell their physical gold. Not because they don’t want it but because it’s liquid – there’s a buyer when other things won’t sell.
Gold goes up and down in price but it’s always liquid. There’s always a buyer.
The stage where people sell for quick money passes quickly, and then everyone scrambles to buy gold.
Jim Rickards can be found on Twitter and at James Rickards Project.
The physics of our world moves as a child on a swing.
Before swinging up to the heavens one way the parent pulls the child back a small way in the opposite direction.
We as a civilization have swung one way since the Renaissance – in the direction of the straight lined sequence, of cause and effect and a fragmented production line for efficiency.
The alphabet divorced symbol from meaning and we began to move our eyes from left to right to form sounds that together made words, and communicated our thoughts. The printing press fragmented this process into tiny repeatable chunks that changed the way we thought and lived and explored scientific theory.
This did away with the alchemical thought of magic and God: the idea that results happened all at once without sequential steps we could control and move through in a 1, 2, 3 way.
We’ve now reached the end of the swing of centralization and straight lines, and we’ve begun to head back the other way. It started with electricity. Electromagnetic technology has made our world a field, everywhere at once, like the lightbulb that fills the room with an instant on and off.
As I wrote about in a previous blog, it’s no long The Tortoise and the Hare because there is no longer a race to a finish line. Turn the light on and you’re there. Instant communication with the internet. Instant transactions. Insight and the eureka moment move us forward instead of mechanical movement in a fragmented set of steps.
In terms of geology and the history of humankind, our time of enlightenment has been so small. Like a tiny pull back of the swing that brought us from oral, tribal, decentralized life toward scientific linear thought and conclusions.
Each piece of technology over time has given its creator, and then controllers, an advantage over all others. It’s a way to claim more than an equal share of resources, which is nature’s way, through ingenuity, strength, and inevitably through weaponizing the new tech.
The wheel, the horse, oil, electricity, space. All good and bad. All amoral.
Horses can plough a field for planting or carry soldiers further and faster than an enemy on foot.
In economics, chart watchers point out graphs that show how over time commodities all have a pull back before they shoot up in price.
And with money we’re now seeing the beginnings of the swing from centralized to decentralized. It happened with music, with books and with movies.
Money is just another medium where we move an idea of value from one place to another. It both stores wealth and is a means of transaction. Both. Or either one. This is showing up in physical gold and in Bitcoin and other alt-coins.
Both gold and Bitcoin can store wealth and be a medium of transaction or movement of money, but gold is best as a store and Bitcoin is best as a medium to move it. For now.
Our current financial system is based on debt. Digits created on computers out of thin air based on a governments’ belief that the citizens can be managed best with more and less currency at a given time.
It’s like there are two ways to view physics: multiplying and making more or else dividing what is a finite amount.
This mechanical world of ‘money’ as debt paid over time is in its death throes, which means those in control now will fight as hard as possible to keep the status quo.
The brand new system of Bitcoin along with the ancient system of gold will be suppressed and once we’ve reached critical mass, and gold and Bitcoin can no longer be artificially kept down, then the elite will strive to have a controlled transition to the new technology.
We’re seeing this in digital currency. Digital currency is different from Bitcoin or alt-coins. Digital currency is more like online transactions of fiat currency being tracked with debit cards. The money is our current fiat system, but the transactions and storage is all digital. This means that the elite will have to remove cash which can’t be controlled and taxed as easily.
If the elite cannot control the transition to decentralized new tech money they will seek to control all transactions using the current system.
The prior technology of fiat currency gave an enormous edge to those controlling its creation. It has been no surprise that fiat currency, ‘money’ created by nothing more than a decision to make it, would be weaponized. There is good and evil in every person, every closed system, and every society. How it is managed brings the results of expansion or contraction of the system.
The central banks, corporations and government entities who had the technology edge after World War II have taken it to its extreme swing of the pendulum now.
In order to continue the dominance of fiat currency and control it was necessary to add the dimension of time (debt paid back in the future), and to use force to tie something crucial to survival – oil – to the use of the current system and to gold.
In other words, the agreement via perceived force to purchase oil worldwide and between all nations using only American dollars.
Now we’re seeing the barbarians at the gate – Bitcoin miners and infrastructure creators who are not happy with the current system. Those who are tired of Ponzi schemes, and of seeing a very tiny group of winners among swaths of losers.
And the peasants have pitchforks in their sheds.
The elite know this and want a quiet and smooth transition to financial money technology while keeping control.
The majority of peasants haven’t turned to Bitcoin or gold yet, but the trend is growing and the ball is already in the air.
The gate for the Bitcoin barbarians is opened wide as the governments loot the peasants to despair.
If we step back we can visualize the ball’s trajectory.
It’s a new world.
New physics coming. New tech coming.
It’s pulling back the swing on which a small child is sitting. We’re all that small child, and the Bitcoin barbarians, new tech scientists, AI creators and thinkers are pulling the swing back.
Feel the building tension?
Hold on tight.
When it collectively lets go then that swing is going to feel like it’s flying out into the open sky, the universe and beyond.
All is well.
Elaine Diane Taylor~
June 7, 2017
Gold is $1,286.70 U.S. per ounce today.
Bitcoin is $2,650.27 U.S. today.
I just returned from a trip through the interior of British Columbia, Canada to meet with my independent gold supplier, and to purchase another round of 100% raw gold nuggets and flakes for the line of fine bullion and glass jewelry I’m creating. It’s important to me that the gold is ethically sourced and fair paid.
I love the wild. I love how nature moves and grows and dies all in a cycle of sacred geometry and math.
I’ve played music these past months with musicians in B.C., Alberta and Manitoba, and have been writing and creating, but nothing recorded yet. When the time is right that is going to be amazing fun.
Thank you for reading.
Not Much of a Holiday (Greek Debt and Media Persuasion)
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
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.