3 Min. Gold News
Thinking of the future. Of changes. Of safely getting from here to there.
An interview 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 The Wiggin Session.
Jim’s book “Sold Out: How Broken Supply Chains, Surging Inflation and Political Instability Will Sink the Global Economy”, is available now.
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:
Fed Target Interest Rate
Nominal vs. Real
Too Far?
Russia
China
CBDCs
FED TARGET
Federal Reserve 2% Inflation Target
The Fed’s target of 2% is the wrong number – the target should be zeo.
For stabiliity you wouldn’t want any inflation or deflation.
That would be price stability.
That would mean you’re not stealing anyone’s money through inflation, and you aren’t enriching creditors through deflation.
So why does the Fed want 2% inflation?
They target 2% because they say every now and then you need to cut interest rates to stimulate the economy and bail out the stockmarket.
By keeping interest rates so low they make simple savings unattractive and drive investors into other investments like Treasury Notes or stocks, housing, maybe commodities. That creates a ‘wealth effect’ where people feel wealthier so they spend more.
All garbage. It doesn’t work.
Investments increasing in value doesn’t make people spend more.
Central bankers want people to feel like it’s “use it or lose it”, but instead people feel like there’s trouble coming and so they save even more.
If there’s a recession and interest rates are zero then what can a central bank do?
Nothing.
They want 2% inflation so that they can cut interest rates a bit at a time, which has a bit of effect to manipulate people to borrow and spend.
But 2% per year is a theft of your money. It’s theft, but small enough that they believe you won’t notice. If it was 10% then the citizens might be up in arms, but no one will notice if they steal 2%.
The math is that it cuts the value of your dollar in half in 35 years.
It cuts that half in half again in another 35 years.
Why would they want to do that?
Because the government’s debt is nominal (it’s a number and not a value).
NOMINAL
If I owe you $1 then I owe you $1.
It doesn’t matter if that dollar is worth $1.05 or $0.95.
The worth doesn’t matter; only the number matters.
So one way to pay back less is to lower the value of that dollar.
REAL RATES
The value of the U.S. dollar is not positive in real rates (value instead of number). Interest rates are going up in nominal terms (the number) but the amount is still a negative in real terms (the value).
So, their target is 2% real inflation but they’re not there yet.
Jay Powell said they are going to raise interest rates until they meet their target.
They know unemployment will go up and they know it will cause a recession.
Too bad.
The Fed says if they don’t do it then the long term damage will be even more painful.
TOO FAR?
So they’ve raised rates and inflation has started to come down. Have they raised enough? Should they stop and let it come down to target on it’s own? Or keep raising and maybe overshoot the target?
Wall Street (commercial banks) want low rates, so they want the Fed to stop and then cut.
If you know what the central bank is going to do then you can prepare for it.
The Fed have said they’re going to keep raising interest rates to destroy people’s demand for goods and services, which will bring down inflation.
So even if they’ve hit the right amount they’re going to keep going and go too far, because they’re always the last to know.
The stock market has been going down because Wall Street realized the Fed is going to keep raising, and they’re not going to stop and cut rates until at least May.
Interest rates might stay high until 2024. That’ll cut demand and cut earnings, but then stocks are going to crash.
But the Fed might cut rates before they’re planning to because things could become much worse than they expect.
They’ve hit the terminal rate in Jim’s view. They should stop and let the normal time lag catch up, and inflation will fall to their target.
If they keep raising, like they plan to, then it’s going to pass the target.
Then the economy will crash.
Then they’ll have to stop and cut rates.
SOLD OUT
Jim’s newest book is “Sold Out”.
Inflation can come from the supply side, called cost-push. If the costs go up then the price increase is pushed onto the consumers and there’s inflation.
Inflation can also come from the demand side, called demand-pull. If there’s money available and rising prices cause consumers to want to buy something now before the price increases further, then there’s inflation.
Cost-push inflation extinguishes itself because less people buy.
Demand-pull inflation feeds on itself. Prices go up as people are buying things now because they’re afraid the price is going higher.
Up to now the inflation has been on the supply side.
It hasn’t morphed to demand side yet.
So we’re seeing inflation coming down. Gold is down, oil is sideways.
FED
If you’re the Fed then you don’t care where the inflation is coming from; you just want it down to 2%.
But the Fed has no tools to affect the supply side.
They don’t drive trucks, they don’t drill oil or plant crops or drive tractors. They have no way to alleviate supply side problems.
All they can do it destroy demand. They do it by raising interest rates.
Then credit card interest goes up and the cost of working capital goes up. That tends to slow the economy and make people tighten their belts.
The conundrum is that this inflation is coming from the supply side.
The central bank can’t do anything about the supply side, but they can crush demand.
How much do you have to crush demand when that’s not the problem?
The answer is a lot.
You have to crush demand by a lot just like Jay Powell has been saying.
So, today there are more things on the shelf because the demand is less and not because all the supply side logistics have been solved.
And that’s another thing leading us into a recession.
CHINA AND RUSSIA
Geopolitics and economics are more integrated than they’ve ever been, and sanctions are an economic weapon.
They can work against a small or medium sized power, but they don’t work against a country like Russia. That’s ridiculous.
Sanctions against Russia have failed uttterly. The ruble is stronger than it was before the war. They’re selling all the oil they want to India and China.
The sanctions haven’t hurt Russia. They’ve just hurt the United States.
The U.S. foreign policy is the stupidest Jim has ever seen.
As far as U.S., Russia and China relations go: if you’re playing poker and you don’t know who the sucker at the table is, then you’re the sucker.
The three most important countries in the world are the United States, China and Russia – nuclear powers, large land masses, large populations, large economies.
A three handed poker game.
Two players should work together against the third.
Henry Kissenger took Richard Nixon to China to create a defacto alliance against the Soviet Union (Russia). And it worked. The Soviet Union fell apart.
The problem today is that the main enemy is China.
What should the U.S. do? They should be aligning with Russia against China.
That was going on until 2016 when Hillary Clinton blamed Russia for her failed campaign. Then it was morphed into blaming Russia for Trump’s win. None of the accusations were true.
The people in the top positions in Biden’s cabinet today view Russia as a vassal state. In the 1990s Russia was looted and destroyed by America setting it up with a stock market and such when the Soviet Union fell.
Putin came along and stopped that. Biden’s team hate Putin because he stopped the U.S. from subordinating Russia.
Russia and the U.S. is a natural alliance – Russia has natural resources and the U.S. has technology. They cover two large land masses. They have two of the largest nuclear arsenals in the world. Russia and the U.S. together against China is perfect.
But Clinton and Biden’s team never let up so Putin finally went with China against the U.S.
Now the U.S. is the sucker and the citizens are being lied to about Ukraine.
Ukraine citizens are being killed by the 100,000s and the country is being destroyed. Jim believes Russia will take the entire eastern Ukraine.
What did the U.S. get for spending about $150 billion so far?
The Russia-China alliance is getting stronger by the day.
Major countries have stayed neutral. India hasn’t taken sides. Brazil hasn’t taken sides. Saudi Arabia hasn’t taken sides.
NEXT
What happens next is going to be horrific.
Russia has 700,000 people mobilized along supply chains and logistics behind the front lines all the way back to Moscow, and 300,000 on the front lines who are just going to go and kill Ukranians.
You don’t hear any of that on mainstream media.
THE U.S. DOLLAR
There’s a difference between a reserve currency and a payment currency.
The U.S. dollar is the world reserve (savings) currency.
It will eventually stop being the world reserve currency but not yet.
Reserves are held in securities that are denominated in a currency, but they are not held in the currency itself.
PAYMENT CURRENCIES
Payments can be made with anything. Anything can be money.
Payments is where the dollar is suffering.
Countries are getting out of a U.S. dollar payment ecosystem, but nothing is big enough to be a global reserve currency except U.S. dollar securities.
Nothing else is big enough or solid enough to absorb global savings.
There’s $31 trillion U.S. debt and nothing else has a big enough securities market.
ELECTION
American people have been lied to over and over again. They were lied to about Afghanistan, about Covid, about lockdowns, about masks, about vaccines. They’re at the breaking point. Ukraine is just one more lie.
Citizens are going to burn the New York Times and never read it again.
The reality is coming. Americans will feel betrayed and that will make it a political issue.
CBDCs
Central Bank Digital Currencies are the last step along a road to totalitarian control that central banks want.
CBDCs are not decentralized, not on a blockchain and not cryptocurrencies.
They are a currency but what is different is the payment channel.
It’s faster and cheaper than a credit card, but the ledger is maintained by the central bank instead of a private company.
That means the central bank knows everything you buy.
That information can be used against a citizen who supports something that the ruling party or central bank doesn’t like.
On top of that, if the central bank wants to stimulate the economy they can make the user spend it or be penalized. They can take a withholding tax if they want, or freeze your account if they don’t like something you’ve done. Total control. Total surveillance.
Jim Rickards can be found on Twitter and at James Rickards Project.
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My thoughts….
Today there was a line up around the building at a bank in California.
Silicon Valley Bank has failed and this weekend is filled with backroom banker passes. Monday will perhaps go down as Margin Call Monday.
And so the citizens will do their best to remove their funds before they’re frozen in the new bail-in world. The CEO made an egregious video asking the employees to “stick around” to support each other while he made off like a bandit. The citizens are waking up to the fact that they’ve been lied to. Those with power will do what they can to keep it. Those without a yardstick will make their own.
This song is applicable today:
Not Much of a Holiday (Bank Holidays and Media Persuasion)
words and music Elaine Diane Taylor
Single available on iTunes
Elaine~
Thank you to Jim Rickards for including me in the foreward of his bestselling book The New Case for Gold.
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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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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.
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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
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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.
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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 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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More thoughts…
Oral societies would sometimes build up enormous surpluses of commodities in season, which they had to destroy in works of art or ritual to avoid changes in the traditional class structure.
We have seen an enormous surplus of units created through debt, and those in power do not wish to see a change to the current class structure as a new monetary technology is created.
Money is a social construct.
Once that money became currency it extended the reach from those in front of you to those far beyond your shores. It is the act of grasping and letting go in a repeating pattern.
As the alphabet took the magic of words and divided them into repeatable units to be separated and strung along, carried at distance, and then reformed in the quiet of one’s own mind, so currency separates commodities and items of value into concise repeatable units. Packaged, shipped, identical. The oral societies are not led by the alphabet; they are led by the voice and ear. Each item is different, unique, and so bartered over. These countries will not easily move to digital wallets and identical purchases.
Those in power talk about taking care of the ‘unbanked’. But the care is misplaced. A new bank account will earn them fees – their goal. But the oral led person does not necessarily feel they are lacking.
To keep their central bank system going they must have ever expanding borrowing and debt. They have failed to keep inflation in their goal because of the greed of a few. Their system has failed, they know this, and they want to use the new technology of digital money to cement in control.
The concept of green technology is a way to expand the borrowing.
My biggest thoughts at the moment come from Understanding Media, written by Marshall McLuhan. He writes of Nobel prize winning author Alias Canneti’s book, Crowds and Power, talking about the psychic effects of the Germany inflation after the First World War.
The depreciation of the citizen went along with that of the German Mark.
There was a loss of face and of worth, in which the personal and the monetary units became confused.
Elaine~
Elaine Diane Taylor 