3 Min. Gold News – This Week in Gold – Oct. 4, 2019 – Jim Rickards with Sprott Money News Pt. 1

October 4, 2019

Synopsis of Part 1 of a Q & A with James Rickards, author of the bestselling books Currency Wars, The Death of Money, Road to Ruin and A New Case for Gold, with Sprott Money News.

Jim’s new book is Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos.

TOPICS:

Canada & Gold
Global Reserve Currency
Mining Stocks
Silver
Negative Interest Rates
A 2% Target
Hyperinflation

Link to Q & A video.
CANADA & GOLD
Canada has no physical gold reserves.

Jim has spoken to some of the leading international policy experts and they say the international monetary system is “incoherent”.

Mark Carney, who was the head of the central bank of Canada and is now the head of the central bank of Bank of England, released a paper at the Jackson Hole financial conference last month, where he called for a new international monetary system.

Carney suggests a digital currency could be created that is like the international SDR (Special Drawing Rights) at the IMF.

We’re getting closer to some kind of international monetary conference. It will be something like Bretton Woods or the Plaza Accord of 1985.

What comes out of a new conference on monetary policy may be a gold standard, a commodity standard, or a fiat currency that’s an SDR instead of the U.S. dollar. No one knows right now.

Canada will be at the conference because it’s in the G7 and is a large trading partner with the United States.

But the conference will be like a big poker game.

The participants will want to play with a big pile of chips and at this game the chips will be gold.

The U.S. has 8,000 tonnes of gold.

Germany has over 3,000 tonnes.

Russia is now well over 2,000 tonnes and China is well over 2,000 tonnes.

Both China and Russia have increased their gold holdings by a factor of 3 or more in the last ten years.

If you hold gold you’ll get a seat at the table and if you don’t have gold then you’ll have a seat back against the wall watching.

So Canada will be at the conference but won’t be one of the decisive voices.

GLOBAL RESERVE CURRENCY

A reserve account for a nation is the same as for a household – it’s the amount left over from what you earn after you spend. T

It’s called the reserves and is either saved or invested.

Countries export goods and earn hard currency. Then they import other goods and use the hard currency to pay for what they import.

If you have more exports than imports then you have some savings.

So the reserve is just the cumulative trade surplus.

What does a country invest their reserve in?

They buy bonds and some nations buy stocks, but they have to choose which currency to denominate the stocks and bonds in.

About 60% of the global reserves and about 80% of global payments are denominated in U.S. dollars.

Almost 100% of global energy payments, like oil and natural gas, are paid using U.S. dollars.

So, the U.S. dollar is clearly dominant as the world’s reserve currency, but there are others used too.

China, Russia and Iran hate using the dollar because it means they’re subject to U.S. sanctions. They don’t like the hegemonic power that the U.S. has.

But changing the reserve currency of the world would mean a lot of compromise.

There’s no reason the U.S. would want to change it.

But if there’s a loss of confidence in the U.S. dollar or a confidence in fiat currencies as a whole, then tthere might not be much choice.

At that point there will need to be something used at a yardstick. It could be a digital currency or an SDR that everyone agrees on.

Everyone would need to have confidence in the value of the new yardstick.

If a new SDR is chosen then as long as the IMF can print them up then it doesn’t matter if nations hold dollars or not, because the trade and payments would be in the SDRs.

We might be at the point of beginning discussions about it, but we’re a long way off from a new currency.

MINING STOCKS

Mining stocks are a leveraged bet on gold.

Having 10% of your personal reserves held in physical gold as a hedge is a good idea.

Aside from that, if you have a little more appetite for risk then you have two choices:

1. Gold Futures, which are leveraged contracts.

2. Gold mining stocks, which are leveraged in a different way.

With stocks you’re not just betting on gold, but on the management’s ability. In mining stocks the thing that matters is the management. Look for someone with a track record.

A junior miner that’s well run and well capitalized is often bought out by the big miners like Barrack.

There’s risk there but also rewards.
SILVER
Silver is harder to analyze because it’s a commodity as well as a precious metal.

While gold isn’t used for many things as a commodity, silver is used as an industrial metal for things like autos and computers. So you’re subject to the business cycle risk.

With gold, it’s used in jewelry but that’s is just a way of holding physical gold.

Silver will follow gold as gold rises and falls.

Having some physical silver eagles is a good idea in a monetary collapse.

It can be used for gas and groceries, while a gold coin would be too valuable for small purchases.

NEGATIVE INTEREST RATES

The world is headed towards lower and lower interest rates.

Europe, Switzerland and Japan already have negative rates.

Will the U.S. join them?

At a private conference last month the Fed heads said that they’re cutting rates and if they get to zero interest they’ll look at going negative.

But Jay Powell just publicly said the opposite. He said they weren’t thinking about it and they’re not going there.

Powell wants to raise rates, but he knows he can’t because the economy is weak.

A 2% TARGET

What the Fed says is that they need 2% inflation so that they can have 3% or higher interest rates.

Everyone on a fixed income wants to earn at least the rate of inflation on their reserves. If you don’t then you’re losing real value over time instead of gaining.

But when you invest you don’t just want to earn the inflation, they want to earn more than inflation, which is called the premium.

If inflation is 2% and an investor wants a 2% premium, then for the 10-Year Treasury, for example, an investor would want to make 4%.

They’re only getting 1.7% or 1.8% right now.

The Fed wants 2% inflation and 2% term premium, so a 4% interest rates, because history shows they need to cut interest rates by 4 – 5% to get out of a recession.

So if the economy hits a recession and rates are only at 2% then what do they do?

That’s the Fed’s case.

Jim believes the inflation should be zero.

The real reason the Fed wants inflation is because there is a huge debt problem.

The debt-to-GDP hasn’t been this high since the end of World War II.

How do they get out of that?

They could cut spending but they’re not going to.

They could grow the GDP but the debt itself hinders growth.

So they are going to do it with inflation. (They pay back the number of dollars owed, but each dollar is worth less than one dollar so the value of the payment is less.)

HYPERINFLATION

If you have 3% inflation for 20 years then the effect is that the debt is cut in half.

But there’s a risk of it getting out of control.

The U.S. saw this in the late 1970s.

There’s not much “official” inflation today (though we see some prices going up and package sizes going down).

The Fed says they want inflation so they will be able to cut interest rates when a recession comes, but the real reason is that they want to cut the debt.

It’s another reason to own physical gold. (Gold tends to rise when the value of a currency falls).

Jim can be found at www.jamesrickardsproject.com and on Twitter.

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Here’s How Gold Moved This Week:

from The Gold Hub at www.gold.org

Gold is hanging around the $1,500 U.S. per ounce area still. Since the price is manipulated to wherever those-who-know want it to be (for now), it still looks like it’s the accumulation phase for them. Nations and parties are accumulating gold to prep for the monetary reset meeting, so it looks like those in power are not ready yet.

Lots of things could set their plans off course, so look out for yourselves out there.

No one wants to tip over the leaky boat before the new one is built.

But it’s a world without an anchor and the seas are looking stormy.

Elaine~

Gold now sits at $1,504.80 US/oz. from kitco.com

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Mando practice…

The world out there is bobbing up and down without an anchor, but we attach and detach as we choose.

That’s where the world is heading. Consciousness and non-locality is the new frontier.

So nice to see Frank Giustra mention it in his interview with Daniella Cambone of Kitco News covered in the last 3 Min. Gold News, and also on Frank’s latest blog post.

Grounded in gold. Elaine~

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Coins and Crowns

words and music Elaine Diane Taylor

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.

The costs go up and the jobs go down. Hunger goes up and hope goes down. Anger goes up and it all goes down, down, down.

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Single available on iTunes.

In a world without an anchor
Subject to the sea
Right before a tempest
Left screaming at the breeze
Walls of rage and water
Test what you have learned
In a world without an anchor coins are tossed and boats will burn.
There’s ships that lie deep (in) state beyond (the) reach
Who will wear a yellow vest?
Who will wash up on the beach?

In a world of flags and spices
We were playing pipes and drums
Sailing on the winds
Selling souls and sums
Gold floating one way
Silver in return
But in a world without an anchor
We all drown in debt in turn
There’s ships that lie
Deep in state beyond the reach
Who will wear a yellow vest?
Who will wash up on the beach?

In a world of borrowed soldiers
The captains’ damage owned
Treasure chests are missing
And the golden anchor sold
We are fed with cake and follies
We are tethered to the shell
Bailing out the breaches
They’re now bailing in the hell
There’s ships that lie
Deep in state beyond the reach
Who will wear a yellow vest?
Who will wash up on the beach?

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Not Much of a Holiday

words and music Elaine Diane Taylor

SOCAN/ASCAP

Single available on iTunes

Bank holidays and long lines at ATMs to get enough for the day. Debt deals behind closed doors. The media telling us what to believe. China building islands in the South China Sea and claiming all the international waves. Markets close and rockets crash. Silken road, treasure, files hacked. Oil, fusion cold. News and nations all sold. 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 available on iTunes — featuring Wag the Dog, Black Swan Dive, American Pie and Gods of the Copybook Headings.

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