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:
Coronavirus
Gold
Mining
Financial System
The Next Great Depression
Supply Chains
Complex Systems
China
Europe
Full Spectrum Warfare
The Fed
Gold
Trump
Jim Rickards
Link to YouTube Vidcast
GOLD CHRONICLES
March 2020
CORONAVIRUS
The questions now are:
How bad is it?
How long will it last?
What will the impacts be?
PREPARING
Jim’s books have included predictions, warnings of what would happen and how it would unfold, and suggestions on how to prepare.
Readers would ask him to let them know the day before the financial crisis hit so they could sell their stocks at the last minute and buy some physical gold.
His reply was always that the exact day wouldn’t be known but when it happened there will be no gold available. He always said to get yourself 10% of your investible assets in physical gold before the crisis hit.
And that by the time everyone wakes up there will be a 30% loss in stocks, which has happened, and the price of gold will soar.
Right now the average person can’t find gold for sale. The U.S. Mint is backordered and not taking new orders, the Canadian Mint is closed, and Swiss refineries are having trouble with shipping restrictions. Brinks is working half shifts because of the virus, and their backup facility was hit with an earthquake and is closed to assess damage.
Alex points out that only a fraction of the population understands what’s happening and yet they have already cleaned out the metals availability. Jim believes it maybe only 1% of the population who have been buying gold and silver.
So what happens when problems really happen with the U.S. dollar?
When you most want your gold you’ll be least able to get it.
It won’t matter what the price is. It won’t be available.
A bullion dealer does “spot plus commission”. The spot price is set but a dealer who sells it may get 2% above that, or maybe 4% above.
Now the commission are 10% or 15% because the gold is harder to get.
The people who sell aren’t allowed by law to deliver more than 28 days after the order because then it’s classified as a futures contract.
GOLD FUTURES
Gold futures are not the same thing as physical gold. Futures are paper contracts linked to the price of gold.
Any contract you make – a futures contract, an ETF or an unallocated forward under the LBMA – any paper contract is not physical gold.
They’re a contract which can be broken.
They can claim force majeure (a clause that allows them to terminate because of unforeseen events), or they can just not show up with the gold you paid for.
In this environment you don’t have to just worry about the price and availability. You have counterparty risk as well.
Alex sees this is a really unique event in that the Swiss refineries are closing, and that’s never happened in his long career. It didn’t happen through wars or through the London Gold Pool problem. He believes that when the refineries reopen it will be all direct deals with parties they already trust.
Physical Gold Fund has longstanding positive relationships with refineries so might be one of calls for orders that they will take.
Jim and Alex met with one of the top precious metals refineries a few years ago, and even at that time they were running 24 hours a day and couldn’t meet their demand.
MINING OUTPUT
Mining output is flat and hasn’t increased in six years.
Fixed supply and skyrocketing demand will send the price up.
On top of that there are mines shutting down because of the coronavirus and issues with transportation and borders closing.
So the supply is going to have to come from either scrap or people who are willing to sell.
FINANCIAL SYSTEM
Capital is scarce and the Fed is printing trillions upon trillions just to keep the lights on.
They’re trying to keep the commercial paper market, the corporate and municipal bond market, currency swaps at foreign central banks, and the Repo market open.
They’re just trying to prevent the system from freezing up.
So for miners, where will they get money to expand?
THE NEXT GREAT DEPRESSION
We’re already in the Next Great Depression now.
The data to confirm it will trickle in.
Right now the unemployment claims are five times worse than the highest on record.
GDP in the U.S. is going to drop about 5% for the first quarter of 2020 and it’s going to fall about 20% in the second quarter.
The baseline is no longer the 2008 Crisis.
There haven’t been numbers like this since 1929 and The Great Depression.
From 1929 to July 1932, the Dow Jones Index dropped 89%.
Right now it’s down 30%.
Unemployment went to about 25%, world trade shrivelled up and banks were closed. The banks stayed closed for eight days.
What’s happening today may not play out exactly the same way, but we need to think of today in terms of that time, and not just the Crash of 2008.
The events of the Great Depression played out over four years, and we just saw it play out over about three weeks.
All sped up.
There’s never been anything like what’s happening right now.
SUPPLY CHAINS
Many of the small and medium sized businesses will not be around when the voluntary lockdowns end.
The supply chain is affected as well as the industries themselves, such as restaurants. All of their suppliers, like the farmers, the butchers, as well as the servers and bartenders are affected.
But also the manufacturers, accountants, the law offices, the dentists and the doctors offices are closed. On and on. The list is basically everyone you can think of in the economy.
The drop in production will be unprecedented in history.
How long will it last?
Will it recover quickly or over time? Or not at all?
Are they permanent or temporary losses?
70% of the U.S. economy is consumption and 70% of that is services. So 49% of the U.S. economy may be a permanent loss.
COMPLEX SYSTEMS
Sometimes complex systems crash into each other.
For example, in Fukishima in March 2011 there was an underwater earthquake. Tectonic plate movement is a complex system. The earthquake caused a tsunami which is the complex dynamic system of hydrology. The tsunami then crashed into a nuclear power plant which is the complex system of radiology. Then next, the Tokyo Stock Exchange crashed because of the effects on the Japanese economy.
That’s four unique complex dynamic systems.
Each is a challenge to analyze on it’s own and there were four crashing in rapid succession.
That’s happening today.
We have the coronavirus pandemic with the complex system of epidemiology and applied math, which is crashing into the economy, another complex system.
This will have an effect on politics and the Presidential election, which is another complex system.
Beyond that you have social disorder and collapse.
Watch South Africa and watch Mexico.
They are both important economies that are uncomfortably close to being failed states.
With Mexico, they already have trouble with the cartels and the collapsing price of oil. Now there’s the coronavirus and overwhelming migration from Central America.
CHINA
There are geopolitical aspects to consider right now, including the U.S. and China relationship.
At this moment their relationship is beyond fractured and there’s a new cold war. You have to look at the economy, but also look beyond that.
Nationalism is an issue that’s playing out, even within individual states in the United States.
EUROPE
All of a sudden nationalism is back.
Nations are closing their borders within the European Union, as well as Turkey threatening to allow Syrian refugees to pass into Greece and then into the other EU nations.
It’s another example of how these response functions and complex dynamics are crashing into each other.
FULL SPECTRUM WARFARE
Full spectrum warfare is kinetic warfare along with cyber, financial, biological and social engineering warfare.
We see the Russia and Saudi Arabia oil price war dropping the price of oil to where the American shale sector is underwater. America will no longer be energy independent if the shale companies go bankrupt. The population is crippled with coronavirus and the hospitals overwhemed, and the logistics systems are busted.
China, Russia and maybe even Iran might see this as a perfect time to go kinetic.
It’s already started. An American aircraft carrier group is down with coronavirus and being disinfected. There are only 11 aircraft carriers for the U.S. worldwide, and that makes it a perfect time for China to mess with Taiwan.
China is lying about the number of coronavirus infections and deaths. Chinese telecommunications reported that 21 million cellphones in China went out of service last month. It’s not because they didn’t pay their bills.
China is in worse shape than anyone realizes and in worse shape than they will admit.
That’s when dictators usually start a war in order to get everyone’s mind off it.
THE FED
The Federal Reserve just got $425 billion from the Treasury.
Because the Fed is a bank they can leverage that amount 10-to-1, So they can lend an additional $4.2 trillion. Added up with everything else they’re doing it’s about $7 trillion in new helicopter money.
But it’s not stimulus. It’s just trying to keep the lights on in the financial market.
People are uneasy about the future so they might not spend the money they get. They might save it. That would mean zero velocity.
$7 trillion time zero equals zero.
Without spending you don’t have an economy.
DEFLATION AND GOLD
The greatest threat to national security may be deflation because it increases the real value of debt.
There was a debt of $22 trillion in the U.S. and they just added another $7 trillion in the last few months.
America’s last longest sustained deflation was from 1927 to 1933 and gold went up 75%, from $20 per ounce to $35 per ounce.
If you’re on a gold standard and there’s deflation then you can just devalue the dollar against gold.
That’s what Franklin Delano Roosevelt did in 1933.
He was the President and he changed the price of gold from $20 to $35 per ounce to revalue the dollar.
Nothing happens in isolation, so when the price of gold went up so did the price of corn, oil, wheat and everything else.
It worked.
Nixon broke the convertibility of the dollar for gold in 1971, and the gold price went from $35 per ounce up to $800 per ounce by 1980.
The price of oil, housing and everything else went up too.
Both FDR and Nixon grossly devalued the dollar against gold and we got massive inflation as a result.
It was intended to cause inflation and it worked.
TODAY
We’re in deflation today and we’re not on a gold standard.
So today the price of gold is going up because people are looking to get out of the dollar.
With another $7 trillion of U.S. money printing people want to get out of the dollar and into something tangible like a house, land, commercial real estate and gold.
TRUMP
Trump will be judged by his leadership and his response to the coronavirus.
Jim puts his re-election odds at 50% right now.
On the Democrat side, he believes Joe Biden isn’t fit enough to be President and that Andrew Cuomo will end up as the Democratic nominee.
Jim Rickards can be found on Twitter and at James Rickards Project.
……………………………………….
Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.
……………………………………….
Gold is at $1,591.95 U.S. per ounce.
via Gold Price
……………………………………….
Coins and Crowns
words and music Elaine Diane Taylor
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes
Coins and Crowns is featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.
……………………………………….
Thank you to Jim Rickards for including me in his bestselling book The New Case for Gold.
……………………………………….
Not Much of a Holiday (Bank Holidays and Media Persuasion)
words and music Elaine Diane Taylor
Single available on iTunes
……………………………………….
A Terrible Breeze (War and Social Media)
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.
words and music Elaine Diane Taylor
Single available on iTunes
……………………………………….
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.
……………………………………….
The Gods of the Copybook Headings
words by Rudyard Kipling and music by Elaine Diane Taylor
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
from the album Coins and Crowns available on iTunes
“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“. The world is changing as we know it.
……………………………………….
Elaine Diane Taylor 