3 Min. 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, Aftermath and The New Great Depression with Daniela Cambone of Stansberry Research.
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 Defence.
Topics:
RUSSIA & UKRAINE
SANCTIONS
GOLD
US DOLLAR
RESERVE CURRENCY STATUS
CHINESE YUAN
GLOBAL LIQUIDITY CRISIS
WHAT TO DO
Interview link:
RUSSIA AND UKRAINE
What’s happening now is the first full scale economic sanctions war.
SANCTIONS
The US is slapping sanctions on Russia and Russia is hitting back.
The immediate impact will go well beyond Russia, and the repercussions could be felt for ten years or longer.
The second order and third order effects will pop up all over the world and can very quickly get out of control.
It’s the economic equivelent of a nuclear war. No one wants a nuclear war.
The interaction of economic sanctions and kinetic warfare is there in history.
In the 1960s, Jim studied Herman Kahn and Henry Kissinger and the leading scholars of the time.
They had different views, but the one thing they agreed on was: “Don’t go there.”
What they meant was no one wakes up and says, “Gee, I think I’ll start a nuclear war today. That’s a good idea.”
What happens is that a situation escalates and you end up in a nuclear war.
Their analysis was that there are no intention to start a nuclear war but things escalate.
We’ve had sanctions before with Iran, and with FDR putting sanctions on Japan.
The US put sanctions on Japan in August 1941, and five months later Japan bombed Pearl Harbour.
So we’ve had sanctions before but nothing on this scale.
This is unprecedented.
The repercussions are going to pop up in unexpected places.
Economic sanctions and economic warfare are among Jim’s areas of expertise. He runs a seminar for mid-career big thinkers run by the government military.
His area is financial warfare but he does not want to overlook the human tragedy and civilian casualties from what’s going on in Ukraine.
He wants to definitely point out that we are all sympathetic and pray for the victims of this.
That side of this is covered by the mainstream media. But the economic side of it, which is our subject, is not that well understood.
WAR
There’s never been a war that’s been easier to prevent.
There’s never been a war that’s been easier to end.
You could end this war in 48 hours or less.
Jim predicted this conflict in 2015, and even before that, in 2011, Jim’s first book Currency Wars talks about doing war games with the US government on this subject.
Currency Wars also includes a full chapter on Ukraine, Russia and natural gas.
This has been brewing for a long time.
It took a turn for the worst when Obama/Biden did a coup d’etat in Ukraine to remove the democratically elected pro-Russian leader, and put in his place a US puppet leader.
Two months after that Color Revolution, and a month before Obama put in Poroshenko, Russia took Crimea, saying that if Ukraine was moving away from neutrality and towards NATO then he’d take Crimea.
Putin didn’t take one square inch during the Trump administration because Trump is highly unpredictable.
But with Biden back in, as part of the original Obama/Biden team, then here we are again.
You could easily see this coming.
PROPAGANDA
All independent and bi-partisan investigations have said any idea of a coalition between Trump and Russia was a hoax. It was propaganda.
Trump wasn’t just not in Putin’s pocket, he was the only one standing up to Putin in such a way that Putin didn’t take any territory.
Now Putin is taking half of Ukraine under Biden.
Who is in the pocket of Ukraine? Joe Biden is because of his son Hunter, who made millions from Burisma, Ukraine’s large natural gas company.
Ukraine is ranked among the most corrupt nations in the world and the most corrupt country in Europe.
Zelensky just banned and banished 11 political parties, took over the parliament and took over the Ukraine state media.
He’s not another Winston Churchill.
You can take sides, but to analyze you have to step outside of the situation.
Zelensky is a dictator and Putin is a dictator.
Pick your dictator.
ENDING THE WAR – NATO
This could end in 48 hours with a phone call from someone on the Biden team calling Zelensky and telling him to say he’s not going to join NATO or the EU, by having the leader of NATO say that Ukraine is not going to join NATO, and the US say Ukraine is not joining NATO or the EU.
Ukraine would declare themselves autonomous and neutral.
Just like Finland and Austria during the Cold War.
When you have two great powers like the US with Europe and Russia confronting each other, the idea of having a buffer state between them is part of history from the beginning of nations.
Ukraine should be a buffer state and it should be neutral.
That way Putin has no reason to invade and the US and Europe have no reason to push the borders to a point just slightly east of Moscow.
Moscow hasn’t been attacked from the east since Genghis Khan.
SANCTIONS
These sanctions will not stop the war, slow down the war, or change the outcome.
They absolutely punish the Russian economy.
They punish Russian citizens.
But they will also punish US citizens far worse than they punish the Russians.
We already see the impact around the world with the near doubling of gas prices.
It’s going to get a lot worse.
Not just grocery store prices.
INFLATION
Inflation is already here but watch what’s going to happen.
Ukraine is the bread basket of Europe.
Russia and Ukraine together provide about 25% of the grain exports in the world.
There are countries in Africa where they get almost 100% of their grain from Ukraine.
Lebanon gets 100% of its grain from Ukraine.
Those people are going to starve.
Russians have taken over the Sea of Azov and they have the Black Sea ports in their sites.
Kiev is last in their plan.
KIEV
The idea that Putin tried to take Kiev in 3 days and failed is propaganda. That was never his plan.
Jim hasn’t seen their battle plans, but by looking at their operations he sees that Kiev is last on their list.
Once Russia has taken Odessa, (which may already be true because the Russian navy is already in the Black Sea), there are going to be no more exports from Ukraine.
And the US has banned most exports from Russia.
Russia has said that even if there wasn’t a ban to export they wouldn’t export to the US anyways. The US is on the Russian ban list.
WHEAT
Take 25% of supply off the market and tell me what that does to the price of wheat.
Wheat’s not just a loaf of bread – most grain is used to feed livestock.
So the price increase goes straight through the price of pork, chicken and beef.
You’re looking at prices doubling or more.
That’s if you can even get it.
SUPPLY CHAIN
There’s been a break down in the supply chain over the last several years.
It’s getting worse.
Put the Ukraine war on top of that and the Russian sanctions on top of that and it’s going to get a lot worse.
SWIFT
SWIFT is the worldwide money payment used by most nations to settle with each other for cross-border trade.
Russia has been kicked out of SWIFT and its US dollar payment system.
That means you can’t trade Russian bonds. Can’t receive funds. Can’t send funds.
The other day the Russian Central Bank paid US dollar interest on their external US dollar denominated bonds. How did they do that?
The fine print of the sanctions have delayed effective dates.
Someone at the US Treasury woke up and said, “Hey, if we don’t let Russia pay their debt then who loses?”
The creditor loses out when the debtor can’t pay.
So, the US bondholder (which is the US creditor who lent the money), is the one who loses.
Who owns those bonds?
BLACKROCK
A lot of those US bonds are in the company Blackrock.
That means those bonds could be in an average citizen’s 401K as an Emerging Market ETF from Morgan Stanley.
What happens in Russia doesn’t stay in Russia.
When you don’t let them pay their debt you don’t know where this is going to pop up.
You are playing with a global liquidity crisis.
This can escalate very quickly as we saw in 2008 and 1998.
GOLD
The US Senate has proposed sanctions to freeze Russia’s gold reserves.
Jim says, “Good luck with that.”
Physical bullion is not digital and it’s not in some account.
The only way to seize physical gold bullion without sending in troops, which of course they won’t do, is to freeze the proceeds if the gold is sold.
This immobilizes the Russian gold.
Just like in the 1964 James Bond movie Goldfinger.
(SPOILER: In the movie, everyone thought Goldfinger was going to take the physical gold out of Fort Knox. But his plan was to make it radioactive so the metal couldn’t be used and the villain could then corner the market.)
Freezing Russia’s gold by freezing any proceeds has only some impact.
CHINA
The Russians could just fly their gold to China, unload it, and use it from there to pay for goods outside the SWIFT system.
Some say that is barter and Jim says that’s using gold as money to pay for the goods.
CRYPTOCURRENCY
The US dollar has been cryptocurrency since at least 1979.
That was the last year that the US Treasury issued a paper Treasury note.
So, the dollar has been digital and message traffic has been encrypted since about 1980.
What’s happening now is a matter of being careful what you wish for.
Jim warned the Pentagon and the Treasury about this, and has been very vocal about this because he’s very involved with the intelligence community, and with advising the government about how economic sanctions work.
Sanctions can be powerful.
But if you use them too much and too broadly they lose all their impact, and the people you are targeting will leave the US dollar system.
The US has never frozen a central bank before.
And now they have.
An entire nation has never been kicked out of SWIFT, aside from an isolated case with Iran.
Now they have.
So Russia is saying they’ll go to a new payment system with a new currency.
SAUDI ARABIA
The Saudis are saying the same thing.
The Saudi princes are seeing the Russian oligarchs have their assets seized around the world, so they’re thinking they don’t want that to happen to them.
CANADA
Seizures in the current banking system aren’t limited to oligarchs.
We just saw this Neo-Fascism happen in Canada. They froze the bank accounts and tried to freeze the crypto wallets of the truckers, who were blue collar, non-violent protesters who were blocking traffic.
And they froze the accounts of anyone who supported them, They created a new interpretation of the law making it a criminal act to even support the trucker protest.
Canada’s Deputy Prime Minister is seizing the accounts of blue collar truck drivers and Biden is seizing the accounts of oligarchs.
It’s the same thing – suddenly the US and Canada, two of the top economies in the world, have frozen the US and Canadian dollar accounts of people they don’t like.
Whether you agree or don’t agree with whether it was right or not, or if Putin should have gone into Ukraine, it’s made the Saudi oligarchs and the Chinese oligarchs very uncomfortable with the US dollar.
(Daniela suggests this may be a reason why more investors are looking for more ways to invest outside the US or Canadian banking system.)
US RESERVE STATUS
Daniela asks why the US officials would do something that would risk the US dollar losing its curent world reserve status?
Jim answers that the US officials did not understand the repercussions.
The #2 guy at the Treasury, who is on point with the sanctions, is very bright but has never had a job outside of academia or government besides carrying Larry Fink’s briefcase for a year.
So he doesn’t really understand the real world and doesn’t understand what we’re discussing right now.
They don’t understand these knock-on effects.
They don’t understand how the international monetary system actually works.
They don’t understand the blow back.
Another example:
The US throws up sanctions so Russia stops export of strategic metals and chemicals that everyone else needs for inputs in their manufacturing processes
So Russia puts a ban on the export of nickel.
You need nickel to make battteries so good luck with your electric vehicles.
The price of nickel went to the moon. Up by a factor of 4 or 5.
The London metals exchange had to close.
Who lost?
There was a Chinese tycoon with one of the largest nickel mining operations who lost $5 or 6 billion dollars.
That wasn’t on the US or Russia’s radar screen.
It wasn’t on the Chinese billionaire’s radar screen.
DIGITAL CURRENCY
Jim predicted in Currency Wars that China and Russia would pool their gold reserves and use it to launch a new digital currency backed by gold, in place of the US dollar.
When Jim did the war game with the US government and predicted that, Russia had about 600 tonnes of gold. Today they have 2,300 tonnes.
China had about 600 (official) tonnes of gold and today they have just under 2,000 tonnes (official). They have gold off the record that is opaque so we don’t know the amount.
CHINESE YUAN
The Chinese yuan is not going to be the global reserve currency.
A reserve currency means the currency of the bonds they invest in with their reserves.
That’s what China has on their books.
Not “dollars” stacked in the basement.
There’s no infrastructure for a mature Chinese bond market and there’s no rule of law in China.
That’s why the yuan and the ruble will not replace the US dollar as a reserve currency.
NEW RESERVE
What they could do is use their gold to create a new currency that has both infrastructure and a rule of law.
For example, use UK law and store the gold in a third-party depository. That way you could use some of your own gold to get some of their currency, or run a surplus.
The physical gold would be needed to instill confidence.
GLOBAL FINANCIAL CRISIS
We’re uncomfortably close to this crisis but it’s impossible to know exactly when.
You can make very good predictions on complex dynamic systems as to the magnitude of a crisis, but it’s very hard to get the exact timing.
You never know what the trigger will be to set it off.
LONG TERM CAPITAL MANAGEMENT CRISIS
We’ve been close twice.
In 1998, we came within hours of shutting every market in the world. It began with a Russian default on their external debt. The ruble was grossly devalued. It started a global liquidity crises.
Jim negotiated for Long Term Capital Management.
They lost big in Russia but lost much more in everything else because in a liquidity crisis people sell everything.
It doesn’t mean people just sell their Russian bonds – they sell everything.
Spreads widen. There’s not enough collateral. Margin calls. People blown out of their positions. That’s what it looks like.
The Long Term Capital crisis was only halted by a $4 billion all cash injection sponsored by the Federal Reserve, along with two interest rate cuts.
They came within hours of shutting every market in the world.
2008 GLOBAL FINANCIAL CRISIS
Lehman Brothers bank failed.
Morgan Stanley was days away from failing.
Goldman Sachs was days away from failing.
The Fed came in and bailed them out.
The dominoes were falling and the Fed was the wall they dropped in to stop the dominoes.
TODAY
Each crisis is bigger.
Today’s crisis, we may be there now, will be bigger than the Fed’s ability to stop it.
HOW TO PROTECT YOURSELF
You want assets that will be immune from the global liquidity crisis.
Land, real estate, gold, silver, fine art, natural resources like water, energy and oil.
If you want to be in stocks then get stocks for companies that are based on natural resources – like Exxon Mobile and Chevron.
This isn’t financial advice, and Jim is just giving these as an example of things that are immune from a global liquidity crisis.
A regular bank portfolio isn’t a good idea because banks are going to be in distress and money markets are going to be in distress.
That’s where the liquidity crisis is.
Jim Rickards can be found on Twitter and at James Rickards Project.
……………………………………….
My thoughts….
This was an intense interview and took a while to pull apart and research. Today I’ll repost my thoughts on the big picture of the change from a mechanical world to an electric world.
I’ve been writing about this topic for over ten years now. My degree is in communications so I’ve studied the history, philosophy, sociology and news/mass media/government information angle from inside academia, as well as personal study on how gold and economics, as well as music and art, fits into this changing landscape.
We’re switching from the mechanical age to the electric age and it takes everything with it.
Thoughts. Language. Societal structure. Communication. Family. The idea of nations and tribes. Everything.
And money.
Language and the way we use it defines not just how we communicate but how we think.
And how we think gives us the parameters for what we entertain as the realm of possibility.
An idea is a kind of value that is formed into a message by one party, being a person or group, and is encoded and sent through a medium, such as the air, or through an electromagnetic wave, or visually through a painting, or by a touch, or even symbolically through a coin. And that idea of value is then received by another party, being a person or group, and decoded by the receiver on the other side.
When a relationship is stable, whether that’s a family or between nations, we aim for the coding and decoding to be properly understood on the other side. In an unstable one there is an intentional misuse and changing of definitions in order to gain advantage at the other’s expense.
As a new technology comes there are new ways of coding and new ways, media, of sending messages.
Medium means single and media is many medium.
Funny then, money being a medium of exchange will perhaps become a media of exchange. How about that Jim? A new definition for a new time.
,
Mass media was created to send a message from one party to many parties. One-to-many. The medium was direct and one way. The masses did not have an effective way of sending a message back in order to gain an equal relationship of understanding and negotiation.
Before the printing press was invented a society lived with an interplay of communication. A society was oral and tactile before the alphabet and printing. It was dynamic with everyone contributing all at once. There was no private viewpoint as there was no sitting alone at home decoding a message. The messages were sent and received and sent and received all at once.
It was the printing press and the book the begat producers and consumers. The repeated mechanical letters that were read by the single person alone, brought a power to the message maker as they became immortal and frozen in time. Society stopped being a living, dynamic thing. It split into individuals who received a message and formed an individual opinion as they decoded the letters in sequence. Letter by letter. Word upon word. Meaning was built in sequence
Now we are in the electric age. The light bulb goes on and the whole area, a whole frame, is filled with light. Day and night are forever altered. Time and space are altered. We see everything in the blink of an idea. The medium is instant and not linear.
Eureka! Insight in a flash. Value understood in a flash.
Symbolism carries insight in a flash.
And now money, the most deeply held value of the elite, is making the switch from mechanical to electric.
Eureka! Money changing hands in a flash.
Received across borders in a flash.
Those with power want to keep it.
Those without it want more.
This new technology of money is the game of coins and crowns.
So, we come to the beginning again. Language. Definitions.
What is money?
How will the balance of power be affected?
How does that play into the current wars and alliances?
How do decentralized crypto and CBDCs fit in?
Will write more soon.
Elaine~
Thank you to Jim Rickards for including me in his bestselling book The New Case for Gold.
……………………………………….
Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.
……………………………………….
Coins and Crowns
words and music Elaine Diane Taylor
SOCAN/ASCAP
from the album Coins and Crowns
Coins and Crowns is featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.
……………………………………….
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 is a live boutique album available for digital download — featuring Wag the Dog, Black Swan Dive, American Pie and Gods of the Copybook Headings. Also available on iTunes, Google Music, Amazon Music and major digital distributors.
……………………………………….
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 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.
……………………………………….
Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.
……………………………………….
Elaine Diane Taylor 