3 Minute Gold News

A synopsis of Jim Rickards, New York Times bestselling author of The New Case for Gold, The Death of Money, Currency Wars, The Road to Ruin and Aftermath with Alex Stanczyk from The Gold Chronicles February 2020 vidcast.

Jim is the Editor of Strategic Intelligence, Chief Global Strategist for Meraglim Inc., 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

Topics:

Most Important Event of 2019
Repo
Cash Shortage
Next
Trump
Interest Rates
Fintech
Bitcoin
Blockchain
Libra

Jim Rickards

Link to YouTube Vidcast

GOLD CHRONICLES

February 2020

MOST IMPORTANT EVENT OF 2019

Significant events that impact the future don’t always seem important at the time they’re happening.

The financial crisis of 1998 began in June 1997.

The financial crisis of 2008 began in the spring of 2007.

Sometimes an event is off the radar and takes a year or more to gain its complete magnitude.

REPO

The spike in Repo interest rates last September, and the Fed’s response ever since, was the most significant event of 2019.

“Repo” is short for a financial tool called a Repurchase Agreement.

With a Repo I have some good collateral, like U.S. Treasury securities, and I need some cash, so I borrow the cash from you for a short time, like overnight, a week or a month, and I send you the security as collateral.

I pay interest and buy them back, or re-loan them (a rollover) at the agreed on short term period.

Dealers buy Treasuries, use them as collateral to borrow cash, and then use the cash to buy more securities.

So there’s a pyramid of purchasing agreements out there.

Last September there was a huge spike in the Repo interest rate.

Why?

There was a need for cash by hedge funds, institutions and smaller banks who were pledging their collateral, but the big banks weren’t lending to them.

So there was a mad scramble for cash, bidding up the Repo interest rates.

The Fed only deals with the big banks, so they printed money (out of thin air) and bought the big bank’s Treasury securities, which gave the banks cash.

They lent to the banks so the banks would turn around and lend the cash to the smaller customers.

So the Fed was giving the big banks cash and taking in short term 30-day and 60-day Treasury bills.

CASH SHORTAGE

The Fed has printed trillions of dollars over the last ten years so why is there a cash shortage?

Their lending and the leverage created since the 2008 crisis exceeds the trillions they printed. By many multiples.

So the Fed printed even more last fall to get cash out there to the banks so the banks would lend to the market.

But the banks didn’t lend.

They said, “Thanks for the cash!” and then deposited it with the Fed as excess reserves.

So not enough cash has been getting out into the market.

Early October 2019, the Fed said it would be $70 billion, rolled over every day into a new loan. But then they increased it to $100 billion, and then $200 billion.

Then overnight lending became a week. Then a one week loan became a two week loan.

Now the amounts are more than ever and the times have been extended and the Fed can’t reduce it.

They can’t stop.

After the financial crisis of 2008, the Fed created QE with long term assets, usually 10-Year Treasury Notes, but today they’re using short term 30-Day and 60-Day Treasury Bills.

The Fed could unwind it over the 30 or 60 days by just not rolling the loans over, but they’re not and they can’t.

Here’s why it’s significant:

1. It came as a surprise to the Fed
2. There was some kind of stress behind-the-scenes
3. They can’t stop.

The Fed was raising interest rates in order to normalize things and get ready for the next recession.

At the end of 2018 the stock market dropped 18%, so Jay Powell “got religion” and paused raising rates because it was crashing the stock market.

Then he cut interest rates and stopped the QT the Fed was doing.

They reversed course.

There’s been three rate cuts since, there’s no hikes on the horizon, and they’re increasing the lending.

A complete failure to normalize their balance sheet.

The Fed have painted themselves into a corner and can’t get out.

They can’t raise interest rates and get things back to where they have a cushion for the next recession, without creating the recession they want to prep for.

The Fed has two problems:

1. Bad forecasting
2. Staying too long when they’ve got it wrong

The debt is growing faster than the economy.

So at some point there’s going to be a debt crisis.

TRUMP

Jim predicts Trump has a greater than 70% chance of being re-elected based on Jim’s model. As the odds of a recession go down over the year, Trump’s odds of winning will go up. If the odds of a recession go up then Trump’s odds go down.

INTEREST RATES

Jim believes the Fed won’t cut interest rates in March, but will cut them in either April or June.

There are signs of a slowdown because of global factors and the impact of the corona virus, COVID-19, but they won’t cut from July through November because it’s too close to the U.S. election.

The rate cut will give the stock market a little boost and give gold a boost.

FINTECH

New technology always disrupts existing business models.

But with financial technology, fintech, those in power won’t let it disrupt the current models.

The banking system itself is always tightly controlled.

With war, you’re out to destroy the productive capacity of your enemy or else take it over for yourself, and turn it to your own use.

What if I could either destroy the productive capacity of my enemy, as in Iran, or else take it over and use it to my own use, as China is attempting to do with the Belt & Road Initiative?

If you could do it with money you wouldn’t really need an army, except for defence.

Just take over the financial system.

For example, Germany has taken over Europe financially without invading. That’s what the euro is and what the European Union is. Germany dominates the economic relations in the eurozone.

Germany bullied Greece and Italy.

Nothing happens without Angela Merkel, the Chancellor of Germany.

They aren’t going to let a new fintech blockchain come in and disrupt their system.

There will be digital currencies created by the central banks.

The U.S. dollar is mostly done through digital means now.

BITCOIN

People have both made a lot of money and lost a lot of money with Bitcoin.

But the financial powers, like the IMF and central banks, will come up with their own cryptocurrencies and destroy their rivals.

BLOCKCHAIN

The world will evolve into a cryptocurrency blockchain system but Jim does not believe it will disrupt the current banking system.

The central bankers would love to get rid of stacks of cash and go digital.

The only form of wealth they can’t get rid of or control is physical gold.

LIBRA

Mark Zuckerberg of Facebook tried to bring out his own digital currency, and a year later it’s now dead in the water.

Alex Stanczyk points out that he watched Zuckerberg talk to the US Congress about Libra, and it was a giant wake up call for those in power to the risk of cryptocurrencies that aren’t under their control.

They are now motivated to create their own.

Jim notes that if Libra was set up then if he sent Zuckerberg cash in exchange for Libras, Zuck could use that money to buy Treasuries and earn interest , while the Libra’s don’t make Jim anything.

Another name for that is a “bank”.

;)

Jim Rickards can be found on Twitter and at James Rickards Project.

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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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Gold is at $1,583.60 U.S. per ounce.

via Kitco.com

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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.

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Thank you to Jim Rickards for including me in his bestselling book The New Case for Gold.

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A Terrible Breeze (Nuclear War)

The news comes down
A little bluebird sings
Words of war
Fire and furious things
Of testing might
‘Til no patience knows
If keeping still
Still keeps you safe at home

It’s a terrible breeze
They speak of today
Of threats that used to live a world away
We all know wind
Can blow both ways
And a terrible breeze can blow it all away

A worldwide net
Sees our village grow
Until we all forget
What each one used to know
How a blind bird’s wings
Can reach the shore
And turn the wheel of peace and war

Village fools sinking down, down, down
Debt and gold wound in numbered shrouds
Deal of a life it’s bread and clowns
Can we afford another go around?
The news comes down.

It’s a terrible breeze. The news comes down.

Single available on iTunes

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Not Much of a Holiday (Bank Holidays and Media Persuasion)

words and music Elaine Diane Taylor

SOCAN/ASCAP

Single available on iTunes

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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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The Gods of the Copybook Headings

words by Rudyard Kipling and music by Elaine Diane Taylor

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

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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3 Minute Gold News – synopsis of Jim Rickards – The Gold Chronicles – February 2020