3 Min. Gold News – Synopsis of Jim Rickards – The Gold Chronicles – May 2020

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 May 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:

Pandemic & Economic Depression
Science
Stock Market
Inflation vs Deflation
Gold
Now
World Crisis
National Security
China
War?

 

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Link to YouTube Vidcast

GOLD CHRONICLES

May 2020

 

PANDEMIC & ECONOMIC DEPRESSION

Epidemiology is about half science and half math.

Epidemiologist and virologists are qualified on viruses but they aren’t qualified to make policy decisions on economic outcomes.

Team science is best here, where both epidemiologists and economists work together.

The decisions about whether to shut down an economy to the extent that has been done should have been made with economists’ input.

Mitigation with things like masks at times and social distancing is appropriate but while shutting down a whole economy may have saved lives it has also cost lives. It has increased alcoholism, drug addiction, suicide and domestic violence, which they call deaths of despair. That should not be discounted.

There are probably better solutions to the pandemic than to shut down a whole economy.
SCIENCE

It’s good to hear the scientific information and filter out fringe theories, but the scientific peer reviewed papers don’t agree with each other on this topic.

It’s not that the scientists are all saying one thing and the economists another. One PhD says you must wear a face mask and another PhD says they’ll do no good and even make you sicker from recirculated carbon dioxide.
STOCK MARKET

The stock market does not reflect what is going on in the economy.

The economy in six months to a year from now is going to look awful yet the market is up.

The S&P 500 is considered the benchmark but it’s cap weighted, meaning they don’t add up the prices of 500 stocks and then divide by 500. Instead, they take the top six companies – Facebook, Amazon, Netflix, Apple, Microsoft and Google – and just add up their market capitalization.

The top six look fine, but most of the other 494 companies are either treading water or going down.

Don’t confuse the health of the top six companies with the health of the market as a whole.

Those top companies are mostly digital, so they aren’t negatively affected by the pandemic or stay-at-home orders. They have all benefited.

Also, over 90% of the trading on the stock market is done by robots, where the computer itself makes the decisions. Those algorithms were created before the pandemic, and they’re programmed to scan headlines and buy the dips.

All of those 401Ks out there are index funds so they’re along for the ride.

There’s 38 million unemployed in the U.S. now and the GDP for Q2 of 2020 looks from the research companies to be down about 40% on an annualized basis. That means it’s down $1 – 2 trillion, and that’s going to have an effect into the rest of 2020.
INFLATION VS. DEFLATION

Psychology of expectation creates inflation or deflation.

That means inflation will happen when enough people think it’s going to happen.

Today the expectation is deflation and not inflation.

In deflation you don’t get more interest on your savings, but the value of your money goes up – each dollar buys more than it did yesterday.

People save their money in a deflation because its value rises.

Printing money doesn’t create inflation unless the velocity, the amount of spending of the money, stays the same.

And it’s doesn’t stay the same.

Velocity started dropping in 1998. The last time the velocity of money dropped was in 1930, before the Great Depression.

How do you change the deflation and get people to spend?

Their psychology has to change.

Central banks don’t know how to do that. Printing $5 trillion hasn’t done it and printing another $5 trillion (which they’re doing right now) won’t change it either.

Printing is all that the Fed can do. Interest rates are at zero and they’re printing $10 trillion, which won’t lift the deflation. It won’t work and so they are not able to do what they said they will do. They’re useless.

The Fed has been trying to get 2% inflation for 12 years. So how are they going to get the 4 – 5% inflation that they need to get out of the debt problem?
GOLD

Jim sees only one way out.

They have to raise the price of physical gold.

The Fed can declare the price at, for example, $5,000 per ounce, and keep the price there by selling their gold and buying more to keep it at $5,000.

That would change expectations.

If gold is $5,000/oz then everything else would go up in price to match it, and you’d get your inflation. Oil would move to $400/barrel and copper to $20/oz.

That tactic has been done twice by the U.S. government to get inflation.

Roosevelt did it on purpose. He confiscated all the public’s gold and then raised the price, and that changed the psychology and brought the inflation he needed.

From 1933 to 1936, in the middle of the Great Depression, the stock market was down 90%, and it started going up about 30% per year after he changed the price of gold. The market took 25 years to recover its losses and we could be looking at that.

(Nixon closed the gold window when too many nations were exchanging their dollars for physical gold. The price of gold rose as a result, and that brought inflation.)
NOW

Jim sees deflation for now and into next year.

But there needs to be inflation to correct the deflation and the rising debt-to-GDP level.

But the U.S. can’t borrow their way out of debt and they can’t be productive enough to pay off the debt, or even make the interest payments.

So the only way out is to inflate it out.

That means the dollar number gets paid but the actual value of each dollar is so low it doesn’t pay the lender the value of what was borrowed.

The only way to do it is to use physical gold to change the psychology, which is what was done in the past.

But no one in the Fed or the establishment wants to discuss the topic of gold and Jim doesn’t see that changing until things get much worse.

You could move from deflation to inflation pretty quickly by using gold, as Jim just explained, but what happens if you shoot past the mark and get hyperinflation?

A 6% inflation would be good to bring it out of deflation, but it would not be good for investors, so they need to prepare their portfolio and look out for it.

A 6% inflation would cut the debt in half in about 12 years.

The problem is if the inflation shoots past 6% and goes to 12 – 14%, like was seen in the 1970s.

In 1977, the U.S. had to issue bonds in Swiss francs because no one wanted the U.S. dollar.

The inflation then peaked at 15% in 1980, and that’s about the time when gold shot up to $800 per ounce.

The highest price for gold was $1,900 per ounce in August 2011.

Jim thinks it’s likely to go to $2,000 per ounce and higher, but because of the huge amount of current debt it means that price is actually less than the value back in 1980.
WORLD CRISIS

Last fall, before the Chinese virus, there were riots in Paris, Barcelona, Beirut, Hong Kong, Chile, and in other parts of the world.

The people had reached a tipping point in accepting government taxes and burdens.

There’s something in some peoples’ DNA that makes them want to tell other people what to do. When there’s a crisis it makes some people in power become fascist – they can’t help bossing people around.

The problem with all of these shut down orders is that when the virus diminishes they aren’t going to reverse them. That’s what happens with fascism. They were just looking for an excuse.
FUTURE

This trend is going to continue and things are going to get worse. But it’s not too late to protect yourself.
NATIONAL SECURITY

The laws that allow government officials to act in a dictatorial way in a crisis are already on the books.

They were passed for a nuclear threat and the executive government has been trying to use the same laws for a pandemic. In the cases when citizens have sued the citizens have won.

CHINA

The U.S. owes China money on trade, and one way that it can gain reparations against China for causing this global pandemic is to sue them for, say, $1.4 trillion for damages. The lost wealth for the U.S. is multiple trillions.

If the government wins the case they can collect by seizing the payment account to China that’s held at the Fed.

Another way to be paid reparations is for President Trump to freeze China’s account.

WAR?

In the 1920s, there was a knock-down-drag-out currency war. By the 1930s it turned into a trade war and the Great Depression.

By 1939, Hitler invaded Poland.

The sequence of a currency war, a trade war, and then a shooting war has proved true in the past.

The current currency war started in 2010 and the trade war started about 2018. Is a shooting war on the table?

You can’t rule out China doing something crazy in the South China Sea, Taiwan or India.

 

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 $1,708.72 U.S. per ounce.

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via Gold Price

 

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Coins and Crowns

words and music Elaine Diane Taylor
SOCAN/ASCAP
from the album Coins and Crowns available soon in the site Store.

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

words and music Elaine Diane Taylor

Single available on iTunes

Available soon on the site Store.

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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

Available soon on the site Store.

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AlbumCover.PreparingfortheFall

Preparing for the Fall live boutique album available for digital download now — 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

from the album Preparing for the Fall.

 

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.

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.

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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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