Podcast

Jim Rickards: We're Witnessing One of the Greatest Failed Experiments in Economic History

It all ends in the collapse of the dollar
Saturday, September 21, 2013, 2:50 PM

Jim Rickards, author of the best-seller Currency Wars, sees the world's central banks embroiled in a "race to debase" their currencies in order to restore – at any cost – growth to their weakened economies.

In the midst of the fight, the U.S. Federal Reserve wields oversized power due to the dollar's unique position as the global reserve currency. As a result, actions by the Fed create huge percussive ripples across the battlefield, often influencing events in ways little understood by the players – and especially by the Fed itself.

In Rickards' words, the policymakers at the Fed "think they are dialing a thermostat up and down, but they're actually playing with a nuclear reactor – and they could melt the whole thing down":

It will play out in all markets. When I say collapse, it is a loss of confidence in paper money.

Take the Fed, for example. The Fed has printed almost $3 trillion since 2007. Now, that is without a liquidity crisis. I mean, we did have a liquidity crisis in 2008. And the first round – I would say QE1 was a legitimate central-bank response to liquidity crisis. But QE2 and QE3: we will look back over them and we will see them as enormous blunders in one of the greatest failed experiments in economic history.

But the problem is, the Fed printed trillions of dollars without a liquidity crisis. What is going to happen when we do have a liquidity crisis, which I expect in the next couple years, where there is a 2008 panic starting again? What are they going to do? Print $6 trillion? $9 trillion? There is a limit on what they can do. And so at some point, it is going to get handed over to the IMF, and they are going to have to print SDRs (special drawing rights). That is the IMF world money. Because none of the central banks have clean balance sheets at this point; they look like hedge funds.

And so it really is a loss of confidence. Confidence is the key word – a loss of confidence in paper money. And that confidence is going to have to be restored somehow. And there are really only two ways.

One is the SDR, which no one understands. So maybe they can re-liquify the world by printing SDRs and that will create massive inflation, but no one will really understand where it is coming from.

And the other way is gold, which would restore confidence. But to have a non-deflationary price of gold, you are looking at $7,000 an ounce – very possibly higher, maybe as high as $9-10,000 an ounce. I know that sounds extreme. But it is really just eighth-grade math, if you look at the money supplies and look at the physical amount of gold. People say you cannot have a gold standard because there is not enough gold. Well, that is not true. There is always enough gold; it is just a question of price. So the theoretical question is, what is a non-deflationary price for gold if you have to go back to a gold standard? And the answer is, it's north of $7,000 and up.

So that is the kind of thing that you might see. It is not what any central bank wants. It is not what the elites want. But it is the kind of thing you could get if you had to restore confidence. So that is what the future of the international monetary system will look like. But right now, the Fed is still behind the wheel, and they are still driving the bus over the cliff.

Click the play button below to listen to Chris' interview with Jim Rickards (32m:46s):

Transcript: 

Chris Martenson: Welcome to this Peak Prosperity Podcast. I am your host, Chris Martenson. Now, let us be clear about something. We are living in the most unusual economic and financial circumstances of all time, in my opinion. Perhaps we have even become accustomed to them. Our baselines have shifted, and we have begun maybe to believe that it is normal for central banks to intervene in all markets at all times. Maybe we even believe they have everything under control.

To help us keep our bearings and provide essential perspective necessary to keep a level head during tilted times, today we are speaking with Jim Rickards, seasoned financer, risk manager, and author of the recent bestseller, “Currency Wars,” as well as the upcoming book, “The Death of Money, The Coming Collapse of the International Monetary System,” scheduled to be published early 2014.

Jim is best known for his expertise in describing how currency wars are one of the most destructive and feared outcomes in international economics, and that history shows that they always end badly. He warns that today we are engaged in a new currency war posing risks that every prudent individual and maybe nation should be aware of.

Recent central bank actions from the U.S. to Japan have shown that the “race to the base” has entered high gear. Now I have invited Jim here to help us understand what is most likely to come next and provide that essential context. Jim – hey, welcome! It is a real pleasure to have you back.

Jim Rickards: Thank you, Chris.

Chris Martenson: Now, earlier this month, you went on record predicting the Fed would not taper. Well, congratulations! You just earned some major prognosticating credit. What was your rationale behind that call?

Jim Rickards: You know, Chris, it was actually very straightforward. I mean, going back to May, when Ben Bernanke first raised the issue of tapering, of course, there were speculations about it all summer. But if you listened to what Bernanke said – and they said this many times, other governors, the Federal Reserve Bank president said – if the economy performs in accordance with our forecast, we are going to taper, we know it is reduced asset purchases.

They actually raised it the other way around. They said we are going to reduce asset purchases if the economy performs in accordance with our forecast. Well, the market is focused on the first part, that they were going to reduce asset purchases, but ignored the conditionality, ignored the second part, which is if the economy performs. They always said it was data dependent. And they put out a forecast.

Now, a couple of things. The Fed has the worst forecasting record in economics. If you go back, every year they produce an economic forecast that is one year forward. So in 2009, they projected 2010; in 2010, they projected 2011, and so on. If you go back and look at those forecasts for the last four years, they were all wrong. They were not only wrong, but they were wrong by orders of magnitude, meaning the Fed was predicting 3% growth when it came in at 1.5%. And they were predicting 3.5% percent growth and it came in at 2%. They were always wrong.

So the first thing about Fed forecast is, you should assume it is wrong, and it always is. And then if you looked at the actual data, it was coming in lousy. The August employment report was way below expectations, consumer confidence collapse, mortgage applications collapse, etc. And so all I did was take the Fed at their word. They said if the data is bad, we are not going to taper. And the data was bad. So I said they are not going to taper, and I said it repeatedly. I said it in interviews on Twitter, and speeches, etc. I did not think it was that difficult. I did not think I was going out on a limb.

Now, everyone else, or almost everyone else, was surprised. And they all woke up Thursday morning and they were doing these posts and wanted to know gee, how could we be wrong? The Fed fooled us. And my answer is, you were not fooled by the Fed. You fooled yourself because it was a lot of wishful thinking. And it was a lot of sense that oh, I go back to the green shoots. The economy is getting better, etc.

So I just took the Fed at their word. They said if the data was bad they were not going to taper. The data was bad. So to me, it was an easy call.

Chris Martenson: It is interesting. I am reading a lot of other headlines that suggest the economy is getting stronger. We just heard about record auto sales – back to pre-slump levels, at any rate. The housing marketing and existing home sales are way up. Of course, that might be institutional buyers, at least emboldened if not enriched in part by all of that Fed money sloshing out there. Do you think if the data did come in worse that we might see the opposite? The Fed would un-taper, in fact, increase their asset purchases – is that in the cards?

Jim Rickards: Well, one of the things I said about the tapering decision, I said that they were not going to taper, but it was a close call. You have to admit that the Board of Governors was divided, and President Bullard of the St. Louis Fed said today it was a very close call. So I think that is fair.

But I also said if they did taper – I did not think they would; but if they did taper – I projected they would reserve course and increase asset purchases by the middle of next year. And that is still on the table. And by the way, the Fed has said that. This is not guesswork.

See, Chris, this is the difference between QE3 and QE2. The mistake that the Fed made in QE2, they put a specific dollar amount, a specific time limit on it. They announced it in September of 2010. They launched it in November 2010. And they said by June 2011, we are going to purchase $600 billion worth of intermediate-term Treasury securities.

The problem was, the minute you announce an amount and a date, which they did, the market immediately discounts it. In a stock market rally in September and October of 2010, based on the announcement effect alone, the problem was the market says well, fine. It is over in June. What else have you got? In other words, by putting a time limit and a dollar amount limit on it, they got the top up front. But then the market immediately said what comes next? And they did not have a next. So they did Operation Twist.

Now, when they got to QE3, they learned from their mistake. QE3 has no end date and no amount. They are buying an amount per month. They spend $85 billion per month. We know that. But they did not say whether they could increase it, decrease it, extend it – and the answer is, they can. They have kept all those options on the table. So we actually do not know what they are going to do, except to say they have said it is data dependent. So my advice is, just watch the data.

But sure, we could head into a recession early 2014. And if we do, they might actually increase asset purchases. So you cannot rule that out. But I just take it one month at time. I’ve got to take the Fed at their word. They said it depends on the data. So just look at the data and draw some logical conclusions.

Chris Martenson: Well, Jim, how extraordinary is this circumstance? I mean, let’s take one-step back. I look at this and I see that the Fed is now not even really providing guidance anymore because their guidance is it depends if the data goes up or down. They are going to be in a reactive mode, which is hardly good verbal guidance. And they are not providing any concrete guidance in any way, shape, or form.

They did set a couple of targets. Maybe it was 6.5% unemployment. Maybe it was 2% inflation. But Bernanke has been providing some nebulous wiggle room around those as well. How extraordinary is this to be printing $85 billion a month with basically no guidance on how long it might continue?

Jim Rickards: It is more than extraordinary, Chris. It is a very good question. It is actually impressive. There has never been anything like this. You go back to the Great Depression, and scholars including Ben Bernanke have studied that very closely, and they said that the problem was we went into – we had a business cycle. We had a bubble. It burst in 1929. There was deflation. There was depression. And the Fed blundered. The Fed kept money too tight in 1927-1928, and that caused the Great Depression. And they did not loosen up fast enough.

So they are like generals fighting the last war. They said A-ha! We figured out the Great Depression. The Feds should have printed money! So now come all the way forward to 2008-2009. They said, We are not going to make that mistake twice. We are going to print lots and lots of money. But it never occurred to them that they were making a new mistake. In other words, who says that printing money was the answer in 1933? Maybe it was; maybe it was not. Actually, there were other things going on. There was what is called ‘regime uncertainty,’ which is, business people did not know what the investment climate was going to be like and they kind of went to the sidelines. And that is what I see happening now.

The reason the economy is not moving is because on the consumer side you have still got the leveraging going on. And then you can drive an economy with investment. But if you were going to commit, say – let us say you were going to commit $5 billion of capital to a ten-year infrastructure structure project, and that was your job inside of some major corporation. And you had to figure that out. Well, what are you healthcare costs going to be? What are your taxes going to be? What is the environmental regulation going to be? You have no idea. And so businesses are just saying Look, I will move to the sidelines; hang on to my cash. Maybe I will invest in India or Malaysia or someplace. I am not going to invest in the United States because I do not know what the deal is.

Well, that is continuing, because of gridlock, because the Republicans and Democrats do not want to work together, because the White House is sort of taking this “my way or the highway” approach. You just do not know. Today we have an announcement from the EPA that they are using unprecedented regulatory powers to impose greenhouse gas emissions limitations on new power plants. Now, you do not have to get into that debate, or at least I do not. I mean, I do not want to argue whether that is a good idea or a bad idea. I am just making a point that when you wake up in the morning, there is a massive new regulation, and you do not know what is coming next. As a businessperson, you do not want to invest in that environment.

So consumption is de-leveraging. Investment is flat to down because no one knows what the deal is. Government spending is being cut because of the sequester. So none of the components of GDP is really contributing, with the possible exception of exports, which is where the currency war has come in. So we are like a four-cylinder car that is not firing on three cylinders, maybe all four. So it is not surprising we are in this kind of malaise.

I would expect it to continue. We have structural problems. The Fed is trying to address it with cyclical solutions, meaning liquidity solutions. But you cannot solve a structural problem with a liquidity solution. You need a structural solution. I do not see any on the table. So I would expect we are just going to chug along with this kind of 1%-1.5% growth as far as the eye can see.

Chris Martenson: Now, hang on, here. We are talking about high government deficits, stubborn unemployments, low interest rates, ultra-low interest rates, and low growth. This sounds a lot like Japan. I thought that Bernanke had a solution for us not to turn into Japan.

Jim Rickards: It is actually exactly like Japan. It is ironic, because you go back to 2000 – even 2007 – 2008. Public officials – Bernanke in particular, the Board of Governors in particular – said over and over, We are not going to repeat the mistakes of Japan. Well, guess what, we have repeated every single mistake of Japan. We are Japan. And that is why people saying that forecasting is hard. I like to say forecasting is easy; what is hard is getting the model right. If you get the model right, the forecasting is easy. But most people do not get the model right.

The model now is, we look like Japan. For example, in 2008, what should have happened is the major bank should have been shut down. It should have been nationalized by the government, stockholders wiped out, management fired, and some of them put in jail. Bondholders should have taken a haircut. The government should have stripped out the bad assets, put them in some kind of trust for the American people, sell them gradually over 20 years, and then take what is left, which would be a clean bank with new management and a new balance sheet, IPO because you do not want the government going into the banks forever. You just want do this temporary solution. IPO it and put some clean banks out there that can make some loans.

Instead, what did we do? We preserved them. We preserved the bad assets. We preserved the bad management. We propped them up. We gave them subsidies in the form of zero interest rate policy, etc. We did exactly what Japan did, which was, we did not confront the problem. There was cronyism, alienism, the government taking care of their buddies in the private sector, etc.

So we did not clean up the messes. So we should not expect a different result. We should expect the same result, which is a decade or more of low growth. I mean, look at every year since 2008. In 2009, people talked about green shoots. In 2010, Secretary Geithner talked about the ‘recovery summer.’ In 2011, the economists were projecting stronger growth in the second half; same thing in 2012. They were wrong every single time.

Well, the reason they are wrong is because they are using the wrong model. They are assuming this is a normal cyclical recovery where you go down, and then you cut rates, and then you go back up again. That is not what we have. We are in a depression. And we are going to stay in a depression until there are structural changes. But I do not see any on the horizon. So I would just say we are in a depression as far as the eye can see.

By the way, people keep saying, when is this recovery going to take off and get a little more robust? And when is growth going to go up to 3.5%? We could actually have a recession in 2014. I mean I have got news for people: This recovery is four years old. The average recovery is about 55-56 months. And this one is – we are 48 months into it. So we might very well have a recession next year.

Chris Martenson: As we wait for our mythical third-half recovery to come along, I am noting that we have equities at all-time highs, not just in the U.S. but across the globe. The German DAX is at all-time highs. We have got bonds priced to perfection. Both of those seem inconsistent with the idea that we might be long in the tooth in this particular recovery or that there might be a recession on the horizon. To me, it feels bubblicious. I am looking at price/earnings ratios on some of the headline equities out there that are back to 1999 levels. It feels priced to perfection. But as you mentioned that the data is anything but perfect at this moment in time, where do you see this going?

Jim Rickards: I think stocks will continue to grow. I agree, it is a bubble. But the thing you have to remember about bubbles is they can go on for a long time. Just because you can step back and see it is a bubble does not mean it will not get more bubbly, so to speak. So I think stocks will continue to rally on Fed money printing. It will crash at some point, but it does not mean tomorrow. It does not mean next month. So I think stocks will do well through the end of the year, particularly because of the no-tapering decision. I would not invest in them, but a lot of people are. And I think they will grow higher before they crash.

The bond market is a different story, because everyone says the bond market is priced to perfection. It has got nowhere to go but down. But people do not really pay attention to the difference between nominal rates and real rates. I agree that nominal rates are close to all-time lows. But real rates are actually still high. You go back to 1980, for example. We had 13% bond rates, but inflation was 15%, meaning the real rate was negative 200 basis points. That is cheap. In other words, that is really monetarily easy to say, Gee, how can you have that with 13% interest rates? So the answer is, inflation was 15%.

Now today, the ten-year note is kind of around 2.7% or thereabouts, and inflation is only 1%. So we have positive real rates of 175 basis points, which is very steep. So I think rates are very high. Nominal rates are low, but real rates are high. And that is where the action is. I could see the ten-year note going all the way down to 80 basis points, which is where it is in Japan. That would be one of the greatest bond market rallies in history. So this is what Bill Gross and others are saying, which is, they are seeing deflation. They are seeing the Fed’s efforts to create negative real rates. And bond rates could actually come down in nominal space because they are really quite high in real space.

Chris Martenson: Well, that leaves the equity market sort of hanging out over a cliff at this point in time. And so I want to turn our attention now to what all of this impact might be on the emerging markets. We have certainly seen the Fed, the ECB, Bank of Japan. This liquidity has come out. It is sloshing around. We have the usual dynamic hot money that needs somewhere to go. The carry trade is just alive and well. And this can be extraordinarily disruptive for the thinner, more peripheral markets. I understand you have had a recent experience of going to the periphery and having some interesting talks there. I wonder if you could give us your take on the dynamic of all this money printing on the rest of the world.

Jim Rickards: Sure. I spent a couple of weeks in South Africa two weeks ago. And I am actually heading out to Eastern Europe. I will be in Warsaw, Vienna, and Bratislava next week. So I am spending quite a bit of time in emerging markets. And they just feel thoroughly abused at this point. The Fed is trying to wash its hands of emerging markets. The Fed has said, and I say the same; I mean, Bernanke himself and other Federal Reserve Bank presidents and members of the Board of Governors have said, Look, our job is to run the U.S. economy. And you emerging markets, you are kind of on your own. You have got your own central banks. You figure out monetary policy.

Well, it is not that easy. The dollar is the leading reserve currency. Most of these countries maintain a large portion of their reserves in dollars. Dollar capital markets are the largest in the world. These dollar hot-money inflows race in and race out. South Africa, the currency went from eight to the dollar almost to eleven to the dollar in a matter of months, and now it is heading back down again. The rand is getting stronger because of the tapering decision.

So it is highly disruptive and almost begging these countries to put on capital controls. I mean, what are they supposed to do – raise interest rates to defend their currencies when unemployment is high? That does not really make sense. But they sort of have no choice because of what the Fed is doing.

So I think the Fed is risking creating a crisis in emerging markets, sort of a replay of what happened in 1997 with Thailand. I do not think they understand it. I do not think they understand the interconnectedness, and the vulnerability, and the critical state and nature of the global monetary system. And they think they are dialing a thermostat up and down, but they are actually playing with a nuclear reactor. And they could melt the whole thing down. So it is an extremely dangerous state of affairs.

But I do have a lot of sympathy with the emerging markets. They are trying to do the right thing. But we do not have a gold standard. We do not have a dollar standard. We do not have fixed exchange rates. We have got floating exchange rates that are being manipulated by the Fed. So I do not think you can blame the emerging markets for feeling they are victims at this point, because it is risk on/risk off, money in/money out, every other day it seems.

And you are right. When it looked like the Fed was going to taper, interest rates were going higher. People were unwinding the carry trade. They borrowed dollars. So you are effectively short the dollar. They convert to these emerging market currencies. They plunge into these stock and bond markets in places like India, South Africa, Indonesia, Thailand, and elsewhere. They make a nice spread. They leverage the trade and make a lot of money.

The minute you think interest rates are going to go up, you want to unwind the trade. So they dump the emerging markets assets, dump the emerging markets currencies, pay back their dollar loans, and unwind the carry trade. And then these places are in shock. And then all of the sudden the Fed does not taper. It is like oh, put the trade back on again. Here we come.

I just think it is hard to blame the emerging markets when they are really just on the receiving end of Fed dollar and currency and interest-rate manipulation. And I do think the Fed is risking some kind of a global meltdown because they do not understand that dynamic.

Chris Martenson: Well the Fed is – I believe I am not even paraphrasing much – but they basically said, emerging markets are on their own. Just washing their hands, saying oh, you guys have your policies; we have ours. But it is not that simple, is it?

Jim Rickards: Not at all. I mean, that ignores the extent to which the dollar is not just our currency. It is a global reserve currency to the extent to which – and by the way, these capital markets are not that big. You look at the size of them relative to capital flows and dollars, and they are tiny.

Even a big country like Australia – an important country, but those capital markets are small relative to what we are accustomed to in the U.S. and even in Europe. And so when investors decide they want in, this is a flood of money. And I do think some of these countries may have to get a little more creative. I have been in Korea and Australia. I recently met with government officials in both countries. And I said well, what you want to do? If you want to cheapen your currency, the best way to do that is print money and buy gold. That way you can target an exchange rate and keep the gold instead of buying more dollars and dominated bonds.

So no one is doing that, of course. But there are more creative ways. Or just issue bonds in your local currency. If the capital markets want your paper, well, give it to them. But then put the money to good use. Do not waste it, of course, but build infrastructure projects or do things that are going to add economic productivity and prosperity in your country.

So there are some creative solutions. But they are not being used. What the central banks are doing is, they are just kind of sucking it up and learning to live with a strong currency, which is good. I mean, that is what Germany and Singapore have done successfully. And I think we are seeing that in Korea. Or in the case of Australia and Brazil, they are joining the currency wars, cutting rates, trying to cheapen their currency even as we are trying to cheapen the dollar. All that does is get you inflation.

Actually, Brazil is a very interesting case because in 2011-2012, Brazil fought the currency wars by cutting rates, trying to cheapen their currency at the time when the U.S. was trying to cheapen the dollar. And I said at the time, that is not going to work. All you are going to do is get inflation. And that is exactly what happened. Brazil got the inflation. Now Brazil is having to raise rates to try to cap down the inflation. And the same thing is going to happen in Australia. So some countries are doing it right. I would say Singapore, Korea, and Canada are good examples. Some countries are doing it wrong. I would say Australia; Brazil has kind of changed course recently, but they have got it wrong for a couple years. And other countries are just baffled. Thailand, South Africa, some of these other emerging markets. They are looking for stability and they are not finding it.

Chris Martenson: Well, is that not sort of par for the course? In a game of international currency wars, everybody cannot win. And so it sounds like you are describing countries that are trying to find relative advantage in a game that is ultimately zero sum. So the big kid on the block probably has some additional advantages. We have got Japan in the process of doubling its monetary base in two years. We have got the U.S. Fed recommitted to providing liquidity far out into the horizon. Unless the laws of economics have been rewritten, these actions, they have to come to an end sooner or later. So my question is, how does this all end? Will it be self-selected or do you think it might be forced upon everybody by some market event?

Jim Rickards: It will end in a collapse of the International Monetary System. And when I say that, that is not really meant to be a provocative statement. The International Monetary System has collapsed three times in the past hundred years. It collapsed in 1914. It collapsed again in 1939. And it collapsed in 1971. So these things do happen. They have not happened recently, but they do have a tendency to happen. And when it happens, it is not the end of the world. It does not mean we all go live in caves and eat canned goods. What it means is that you have to reboot the system. That means the major economic powers have to get together and sit down at a table and rewrite the rules of the game. So I spend a lot of time thinking about what the future of International Monetary System will look like after this collapse. I think that is the most likely outcome.

One of the things I have said about currency wars is that we are not always in a currency war, but when we are, they can last for a very long time. They can last for 10 or 15 years. That is what happened in the 1930s, and that is what happened in the 1970s, as I describe in my book.

And so, this currency war just started in 2010. And here we are in 2013. A lot of people said about my book, Jim, how did you know that this currency war would be going on in 2013? And I said, Well, first of all, it started in 2010; I think we are going to be talking about it in 2014 and 2015. Currencies wars do not have a logical ending because it is just back and forth and back and forth. And it is actually worse than a zero sum game. It is a negative sum game because you actually destroy wealth and create suboptimal outcomes and inefficiencies by the currency war itself.

So it is a disaster state of affairs. I do not expect it to be over anytime soon, because, as I say, countries just keep fighting back and forth. What I do expect to come out of it is inflation first and then finally a collapse.

Chris Martenson: And this collapse, what will this look like in your mind – are we going to see this playing out in the bond market, in the actual currency markets?

Jim Rickards: It will play out in all markets. When I say collapse, it is a loss of confidence in paper money. Take the Fed, for example. The Fed has printed almost $3 trillion since 2007. Now, that is without a liquidity crisis. I mean, we did have a liquidity crisis in 2008. And the first round – I would say QE1 was a legitimate central-bank response to liquidity crisis. But QE2 and QE3, we will look back over them and we will see them as enormous blunders in one of the greatest failed experiments in economic history.

But the problem, is the Fed printed trillions of dollars without a liquidity crisis. What is going to happen when we do have a liquidity crisis, which I expect in the next couple years where there is a 2008 panic starting again? What are they going to do, print $6 trillion, $9 trillion? There is a limit on what they can do. And so at some point, it is going to get handed over to the IMS, and they are going to have to print SDRs (the special drawing rights). That is the IMS world money. Because none of the central banks have clean balance sheets at this point. They look like hedge funds.

And so it really is a loss of confidence. Confidence is the key word. A loss of confidence in paper money, and that confidence is going to have to be restored somehow. And there are really only two ways. One is the SDR, which no one understands. So maybe they can re-liquify the world by printing SDRs and that will create massive inflation, but no one will really understand where it is coming from. And the other way is gold, which would restore confidence. But to have a non-deflationary price of gold, you are looking at $7,000 an ounce, very possibly higher, maybe as high as $9-10,000 an ounce. I know that sounds extreme. But it is really just eighth-grade math, if you look at the money supplies and look at the physical amount of gold.

People say you cannot have a gold standard because there is not enough gold. Well, that is not true. There is always enough gold; it is just a question of price. So the theoretical question is, what is a non-deflationary price for gold if you have to go back to a gold standard? And the answer is, it's north of $7,000 and up.

So that is the kind of thing that you might see. It is not what any central bank wants. It is not what the elites want. But it is the kind of thing you could get if you had to restore confidence. So that is what the future of the International Monetary System will look like. But right now, the Fed is still behind the wheel, and they are still driving the bus over the cliff.

Chris Martenson: As we look across the currency landscape, we note that Kissinger did something quite smart in arranging the petrodollar, meaning that all oil was traded in dollars, effectively. And that held for a long time. And we are seeing early signs that that is unwinding, with China and Russia both starting to navigate towards trading in different currencies, pieces like that.

So, as I have been noticing, to connect these dots, a lot of gold has been flowing from West to East. China has been buying a lot. Russia has recently announced, at least officially, that they have got a pretty decent hoard now at the central level. Do you think that this flow of gold from West to East, is that intentional at this point in time on the part of the players in the East? Are people connecting dots in the way you are and looking forward and saying we do not know but eventually this all might be reset around gold? So he who has the gold will be a relative winner in this game? Do you think that is being played out some official level?

Jim Rickards: Of course. And this is what we said. If you go back to the first two chapters in Currency Wars, that book came out in 2011. But we described a war game that was conducted by the Pentagon at a top-secret weapon laboratory outside of Washington. And I was one of the designers of that game and one of the participants, and helped to recruit other people who played in that game. And this was in 2009. So it was four years ago. And what we said at the time was that Russia and China would acquire gold and move towards a gold-backed currency, not the ruble or the yuan. There is no way the Russian ruble or the Chinese yuan are anywhere close to being reserve currencies. That is not on the table. But you could have a new currency backed by gold. Or you could have an SDR backed by gold in which the people with the most gold would have the largest clout, if you will, in the new International Monetary System.

We were pretty much laughed at and ridiculed at the time. But since then, Russia has increased its gold reserves by two-thirds. They have gone from about 600 tons to over 1,000 tons. China has increased its gold reserves by a multiple from 1,000 tons to some number; no one knows the exact number, but that is the estimate. The best research I have been able to apply to it says somewhere between three and four thousand tons. So no, there were things that played out exactly as we predicted in 2009. It is all in the book. It was put in front of the Pentagon from a national security perspective.

Now, I like to remind people that you cannot have a strong national security without a strong currency. And if the Treasury, the Fed, and the White House are undermining the dollar, they are also undermining U.S. National Security. So that is exactly what it going on. But it is a long game.

The problem with markets today is that I find everyone has a two-second attention span. Gold goes down 4% one day and everyone is like oh, it is the end of gold or whatever. No, gold is volatile; it will remain volatile. But the long-term trend is much higher because of these forces that we just described.

Chris Martenson: So what options then do nations or individuals have really for surviving these currency wars? What advice would you give to somebody who lives in Japan, which is actively debasing its currency, or to the U.S? What do individuals do here?

Jim Rickards: Well, the individual should own gold. I recommend 10% gold for the conservative investor and 20% gold for the aggressive investor; not more than that. I mean, you have some people that are 50% in gold or 100% in gold; I do not think that is really smart or necessary. If you have 10% to 20% and gold goes down a little bit, you are not going to get hurt too badly. And if it goes up, as I expect, that is really going to ensure and insulate the rest of your portfolio. So I think you do not have to be helpless. You do not have to be a victim. I think if you have a million dollars, you should have $100,000 in gold. If you have a $100,000, you should have $10,000 in gold. If you have $10,000 dollars, go buy one American Gold Eagle, which is a little more than 10%. But the point is, have some gold, and whatever happens in all these other markets, you will have the insurance you made to protect yourself.

Chris Martenson: Thank you so much for your time today, Jim. I am interested in helping people find more of your work so they can follow you. And also, if you could, tell us when they can look forward to your book coming out.

Jim Rickards: Sure. Thank you ,Chris. Of course, Currency Wars is still selling very well. So that is available from Amazon. My new book, The Death of Money, the publication date is April 8, 2014. So it is finished, but we are going through the editing process right now. So that will be out on the bookshelves on April 8. And in the meantime, if people are interested, they can follow me on Twitter. My handle is @jamesgrickards, middle initial G, last name, R-I-C-K-A-R-D-S. So just go to @jamesgrickards. And my Twitter feed is open, meaning you do not actually have to join Twitter. You can, of course, and you can join the conversation. But you can just find online @jamesgrickards. And I put out a study, a stream of commentary on Capital Markets and International Monetary System.

Chris Martenson: Well, as always, Jim, just brilliant stuff. Thank you so much for your time today.

Jim Rickards: Thank you, Chris.

About the guest

Jim Rickards

James G. Rickards is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is a writer and is a regular commentator on finance. Rickards advised clients of an impending financial collapse, of a decline in the dollar and a sharp rise in the price of gold, all years in advance. Rickards is the author of The New York Times bestseller Currency Wars, published in 2011.

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106 Comments

Arthur Robey's picture
Arthur Robey
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Why is gold valuable?

Let us play a game. It is so much fun. It is called make-believe.

Let us pretend the a country that has a long history of loving gold, say India, has a surge of paper (Or computer digits) into it. The Indians spend all their digits buying Gold. And then the digits rush back out with equal alacrity. And then where would India be? It would have all its wealth trapped in gold. It would be trapped because any Indian worth his salt taxes would cling on to his gold as a talisman against famine. Gold to him would be his virtual pantry.

But if some external force, say the Climate Catastrophe, had to decrease rainfall on the wheat belt of the USA by 2" there would be a world-wide shortage of food energy. Food energy would become more expensive compared to gold, and the clever Indian's pantry would shrink. Once he had eaten all his gold India would be left penniless.

Meanwhile some other clever country, having sold all its gold to the East and invests heavily in 3d printing the internet, robotics and fundamental energy research still has an ongoing product that they can exchange for food after the masses have made the ultimate unacknowledged sacrifice to the evolutionary progress of mankind.

Unfortunately no such clever country exists.

KugsCheese's picture
KugsCheese
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Real Inflation

If we take a conservative 4% for real inflation, then real interest rates are negative.  So bonds are in trouble.  Remember in 2008/2009 stocks and bonds went down but bonds went down much less which is to be expected since bonds have calls on assets of the borrower whereas stocks can go to zero.

FreeNL's picture
FreeNL
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I dont trust lawyers,

I dont trust lawyers, economists, nor bankers...and certainly not anyone who has been all three.

seems like an ultra elitist mouthpeice to me. Ever so gently guiding us toward the one world currency like the Rothchilds want.

does anyone really believe that they dont know exactly what their doing? give me a break. Its all planned out. Been that way for a very long time. No expirimentation, all lies and manipulation.

LogansRun's picture
LogansRun
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Don't trust Rickards

Copied and pasted from another thread:

Rickards has been trying to soften the blow of this scenario for years.  He's also a known councelor to the Financial Elite/Banking Cartel so, what he says, is what he's being told to say.  Pretty simple.

CNBC doesn't allow (especially any longer) people to come onto their show unless that person is there to help the cause (Ron Paul Excluded).  

In other words:  Don't trust Rickards.  He's working against the citizen, not for the citizen.

Arthur Robey's picture
Arthur Robey
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Do you want the Top Job? Its yours.

Common Fellas. Since when is a plan a conspiracy?

Some people might fantasize that they have got everything under control. Humour them, they too are people.

The size of an empire is dependent on its speed of communication. World government is an Emergent Property of the internet.

Not that that is going to save us from the findings of the  Limits to Growth report.

My nightmares are far more frightening than worrying about who (Or What?) has the top job.

When this baby hits, they can have it.

SPAM_ferralhen's picture
SPAM_ferralhen
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Posts: 151
feeling safe?

skip the swirl of ideas and complexity.

if dollars are paper or digits or a concept. why does it matter if gold is valued in dollars? 0 digits/dollars ,1000 digits/dollars or 7000 digits/dollars?...what's the difference if all digits are digits and worthless because they are not really backed by anything? and in reality just digits.? zero x zero is zero.it takes a human to say oh no, it(zero) has worth.it's a digit..not zero.. but where? how? if electricity stops, how does one get digits?well they are there somewhere aren't they? right.here i have a 3 cent piece of typing paper that says i have here 1 million digits or dollarsso i think i have 1 mil digits, but all i actually have is a 3 cent piece of paper that claims i do. is this stupid or what?

.that makes gold worthless too in my understanding.because it is valued in worthless digits or dollars. where a potato has value because it is food.who cares if an once of gold goes from 200 digits to 1000 digits? digits are worthless and so are dollars...they are akin to feathers and shells, and tulips. smart people know this, and smart people play dumb ones.

but if the potatoe is full of chemicals, then it's no longer food but poison.it too has no value.so we all end up holding useless currency , dollars, gold, or potatoe.surely not stable. we hold useless ideas and nothing solid.

for the saver:

it's like storing sunlight and energy or storing my labor today to use in the future. i don't see any good means of storage.natue does. it take 60 years for an oak tree to store enough of the sun's energy to heat my house for a winter. wood is a natural battery-- a store of energy. my work is energy...where is 60 years of my energy stored? in gold which is valued in paper and digits? in a sheet of typing paper that comes in my mailbox saying i own 1000000 digits? where?

in digits? no in paper ? no   where? where is my life stored?

i think we are living in the biggest scam in history. i think once discovery of these thoughts hits mainstream the party is over. it's very fragile. and when this flushes, trust of all sorts goes out the atmosphere so to speak.

open to comments.

TexasCanuck's picture
TexasCanuck
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gold is money, paper dollars will go the way of all counterfeit

gold cannot be created. every particle of gold dug up from the earth since time immemorial still exists. Gold has survived as a monetary standard since will before Christ, before paper ever existed. gold has value because it took mens labor blood sweat and tears to find and produce. You cannot create gold as you can paper. gold lasts for-ever. gold is the ideal commodity to serve as money, and silver comes in second.  ETC ETC paper dollars can be printed by any country with good counterfeiting equipment. counterfeiting is cheating and lying. ETCETC

TexasCanuck's picture
TexasCanuck
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gold is money, paper dollars will go the way of all counterfeit

gold cannot be created. every particle of gold dug up from the earth since time immemorial still exists. Gold has survived as a monetary standard since will before Christ, before paper ever existed. gold has value because it took mens labor blood sweat and tears to find and produce. You cannot create gold as you can paper. gold lasts for-ever. gold is the ideal commodity to serve as money, and silver comes in second.  ETC ETC paper dollars can be printed by any country with good counterfeiting equipment. counterfeiting is cheating and lying. ETCETC

FreeNL's picture
FreeNL
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At the end of the day neither

At the end of the day neither imfbucks nor gold have any real value. Symbolic only, subject to manipulation.

only energy has real value, and unlike jim who has given us the strategic 2 options, i have a thrid option.

Energy is currency, and the ability to generate energy is the reserve for that currency.

SPAM_ferralhen's picture
SPAM_ferralhen
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the whole point is people see

the whole point is people see value in worhtless shit.

i sell art...it's perceived value....so is gold, dollars, cds ,clams, feathers. shells.tullips...whatever ?.!

deflation:  losing your stored labor value., nest egg

Yoxa's picture
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TEST POST

Quote:
 gold has value because it took mens labor blood sweat and tears to find and produce.  

No, it's the other way around. People invest labor to find and produce gold because other people value it. If no one valued gold, there'd be no point in mining it.

Investing labor in a thing doesn't automatically make it valuable. It's all too easy to invest great labor into something that no one ends up wanting. On the other hand, lots of people want gold, so (for folks so inclined) it becomes worth investing effort to find and produce it.

The whole idea of "money" is a man-made construct, but there are practical reasons why gold has become so widely accepted as a medium of exchange and store of value. It's durable (chemically stable, corrosion resistant), malleable and ductile (can be formed and reformed), and rare (but not too rare). Its aesthetic appeal is a bonus!

None of the above can be said about paper money ...

Quote:
 a potato has value because it is food

True ... until someone eats the potato.
Potatoes have a different kind of value than gold does.

 
blackeagle's picture
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We need some sort of money

Barting is useful but limited in its scope. This is why men created money as a generic intermediate medium to "bart" what they needed. The money must have some practical characteristics:

- Its ratio of value/volume must be high: No one wants (or can) store truckloads of it to buy few potatoes.

- Durable. Wear is an issue.

- Workable (Malleable, ductile, etc...).

- Rare. this allow control supply and thus maintain its value.

Gold has these characteristic. Other metals too up to a certain point.

If gold takes the high shelf, we need at least another metal for lower shelf. Silver is such an option for everyday grocery.

I don't think gold or silver will be the universal money. They are real money, they will stay real money. Paper money will still exist through new sets of rules. This is the only way to maintain (or try to) a 7 billion crowd.

Having some gold and silver on hand is not a bad idea.

To follow...

JM

LogansRun's picture
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Arthur, You're a smart dude,

Arthur,

You're a smart dude, but you're wrong if you believe they don't have control of this situation.  

Look at the graph at around 2035 and imagine, who will benefit the most when all of those lines turn for the worst for most of the population.  Who will be in control of the resources, energy, food, police forces, military, etc....?  It won't be the masses, but the elite (Rothschilds, Rockefellers, Warburgs, etc...). 

These "Conspiracy Theories" as many like to call them, are extremely well documented, and for the most part, have been CONFIRMED by most of those families!  Again, it's all documented.

Cheers.

Arthur Robey wrote:

Common Fellas. Since when is a plan a conspiracy?

Some people might fantasize that they have got everything under control. Humour them, they too are people.

The size of an empire is dependent on its speed of communication. World government is an Emergent Property of the internet.

Not that that is going to save us from the findings of the  Limits to Growth report.

My nightmares are far more frightening than worrying about who (Or What?) has the top job.

When this baby hits, they can have it.

blackeagle's picture
blackeagle
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Arthur

Arthur,

What is the source of the graph?

Thanks

JM

SPAM_ferralhen's picture
SPAM_ferralhen
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i'm not trying to discus

i'm not trying to discus gold's attributes or it's shortcomings. i'm not in that discussion. i'm saying to say gold is "worth" $7000/ounce just tells me at the moment the faith in a us dollar is low.compared to an ounce of gold. an ounce of gold is still an ounce of gold. it hasn't changed. the dollar has. so we all know for many reasons, the dollar is worthless. so why would we valuate gold in a worthless currency? that does not make sense to me.

the ability of gold's buying power in the future is unknown just as much as the value of a dollar and it's buying power is unknown.... people are fickle and many other things. i just don't see the financial system as it is as sustainable and more like an avalanche of mistrust waiting to happen. i don't see gold as necessarily standing out as a secure store of my labor. the house i built is.(until something destroys it) i don't see anything as risk free, but to place a lot of trust on a future value of anything seems foolishness.these are times that prove that point.

one nervous large investor, country, event could start a run on the claims the owner has. the claims can't be paid off in full, a few cents on the dollar perhaps if that. now it's not a matter of closing the banks the doors, it's a matter of turning off some computers.

i don't see the emporer's new clothes, i see the people;s new clothes. we are running around thinking we have something of value when we don't. my own greed sets me up for my own folly.

davefairtex's picture
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"they have control" - do they? do I care?

...does anyone really believe that they dont know exactly what their doing? give me a break. Its all planned out. Been that way for a very long time. No expirimentation, all lies and manipulation.

At one point during my work history, I was a mid-level manager in a company that was acquired by a larger company.  After a particularly unpleasant meeting with the big guys from the acquiring company, we got together and asked my boss, "are they deliberately setting us up to fail here?"

He sat back a moment and thought.  And then said this:

"You see a duck gliding across the lake.  How is he moving?  Is he paddling furiously underneath the water, is the wind blowing him across, or is it some current that is the motive force?  How can we tell from here?"  To this day, I have no idea if it was all some grand plot, or if they were just idiots, but seeing the other mistakes that the acquiring company made, my money is on "idiots."

Martin Armstrong does not believe that "they" are in charge.  He claims to have seen behind the curtain, sat in meetings with central bankers and finance ministers and politicians and big money, and he has found only general cluelessness and short-range and self-interested thinking.  He would seem to prefer that someone really did have a plan, but he hasn't encountered it yet. 

http://armstrongeconomics.com

As for me - that's above my pay grade.  I'm not invited to the meetings!  Regardless of what moves the duck across the water, all I am concerned with is - is that duck moving or not, and what direction is it going.  Whether it is obliviously gliding with the current or paddling furiously beneath the water to move towards its objective - for the life of me, I can't tell from where I am.  And the outcome for me is identical so...I just watch and see where the duck is headed and save my energy for stuff I can control.

I am also reminded of the axiom: no battle plan survives contact with the enemy.  If they exist, and they do have a plan, most likely it won't survive contact with reality either.  So why worry?

FreeNL's picture
FreeNL
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Posts: 112
Thats the problem. Even a

Thats the problem. Even a little defiance in a place like this is enough to make a difference.

They are scared to death of us. Scared that we will take away all that they have stolen.

and we will.

Wendy S. Delmater's picture
Wendy S. Delmater
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Posts: 1627
how food relates to Jim's interview

My focus, as almost always, is agricultural. One of the factors no one is talking about--not even Jim R & Dr. Chis in the above podcast--is that the USA is the Saudi Arabia of wheat. In my opinoion, part of reason why the dollar continues to be the reserve currency (for now) will be stripped away once climate change (floods, storms, drought) plus overtaxed aquifers combine to bring on a new dust bowl.

A grannery is a form of stored wealth. So is a pantry. And if I were a farmer who only had enough to feed his family and someone offered me gold for their food, guess what my answer would be?

Local resources are wealth. If we allow those resources to be stripped by distant lands, we are being depleted. A sad example of this is was highlighted by Ferfal when he mentioned that, during Argentina's 2001 collapse, that people worrked producing food for export, while starving. They were, basically, farming for the bankers to pay off bad loans. That is not food-as-wealth, it's economic colonialism.

On the other hand even small amounts of personal growing space are wealth. In the former Soviet Union, for example, one fourth of the value of agricultural production in 1973 was produced on the private plots peasants were allowed  which was 2% of their arable land. During WWII in England and the USA we had Victory Gardens. And on the collective side, even impoverished Cuba managed its economic abandonment by the defunct USSR by planting every available growing space.

So, 10 to 20 perecent of your wealth should be in precious metals, Jim? Sounds reasonable, but... Jim, Chris, we love you, but your solutions don't really help the common man all that much. Statistically, the common man is poor and getting poorer. And if individuals are personally out of debt-slavery enough to have a net worth, I wonder what portion of their wealth should also go into building up soil, saving seeds, learning how to grow things...including those trees ferralhen sugggests are a great store of wealth.  I agree with FreeNL that the ability to prodice energy is wealth, too,so I suppose a portion of your wealth should go into things that either lower your energy use or produce enegy outright.

I am not lambasting Jim R for his views, or criticizing Dr. Martenson. This was a good podcast because it advised gold as a minor part of one's portfolio. The information will be useful to those who have the resources to apply it, and can be ignored by those who do not. I was concerned that some of our community might rely on precious metals as a be-all and end-all solution, and this podcast suggests that it is merely part of the puzzle. The other parts of the puzzle of where to put one's resources are addressed elsewhere on PeakProsperity.com

Arthur Robey's picture
Arthur Robey
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I'm Not smart. I'm a Groupie.

"The Fire in the Madhouse at the End of Time."

Terence McKenna.

I was familiar with the concept of Strange Attractors pulling the present into the future. Terence McKenna added to my understanding of our present predicament by cogently arguing that events are happening faster and faster as we reach an asymptote. His lectures were about 1 hour long, but if you have the patience they are worth it.

On the other hand he did not have access to newer information which is an illustration of the acceleration of events that he was rabbiting on about.

He was no intellectual slouch.

westcoastjan's picture
westcoastjan
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Wendy, I totally concur and will add

that the biggest challenge as I see it for many is to be able to "see" the wealth as you define it - gardens and energy plus skill set to be self-sufficient and resilient.

We have been brainwashed ad nauseum with the idea of what wealth is. Judging from my personal observations of the consumer landscape, it would seem that the general perception is that wealth = "money". Is it any wonder then that people are reluctant to invest in soils & seeds, tools & implements, skills & knowledge? They do not perceive this as "wealth". I have been struggling greatly with this myself - getting over the idea that money in the bank makes me feel safe. As time goes on, and my uneasiness with the financial system grows, that feeling of safety is greatly diminished. The positive side of that is that it changes my thinking on what wealth is.

I had a wonderful "aha" moment last weekend that has helped to solidify my thinking and erase some of the doubts. On that Saturday this beginner fly-fisherwoman had the good fortune to land my second rainbow trout of the season. That evening, my dinner consisted of the trout I caught, salad and vegetables I grew, and dessert I baked from scratch. The feeling of satisfaction and contentment was worth its weight in gold. Later, over drinks with a neighbor, who monetarily speaking is far ahead of me, she commented "I like how you are living your life". And in that moment I knew I was more wealthy than she was.

Richness is a state of mind.

Jan

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eastcats
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the future of food

Bravo, Wendy!  I absolutely agree.  Not all of us have enough cash to buy gold or even silver.  But those of us who are lucky enough to own even a small plot of land, in my case 99' x 199' have the ability to raise some of our own food.  In addition to a vegetable and herb garden, we have planted raspberries, a peach tree (which produced 50 peaches this summer) and two pear trees.  Yes, it would be nice to own some gold/silver, but I would rather put my limited resources into improving the soil around my home.

HughK's picture
HughK
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Posts: 446
Limits to Growth is the image source

blackeagle wrote:

Arthur,

What is the source of the graph?

Thanks

JM

Hi JM,

The image that Arthur posted above is from the Club of Rome's original 1972 report, Limits to Growth.

I first becames acquainted with that image in the paper Revisiting the Limits to Growth after Peak Oil by Charles Hall and John Day.

Cheers,

Hugh

IvaRay's picture
IvaRay
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Heaps of Gold Game

An excellent analysis when comes to the global markets and their interdependent dynamics. I agree with the assesment that the domination of the USA currency, Petro $ might be challenged in next decade, which will crush terribly on people's back--it's already crushing with the "usery type" of  taxation for a medium income, health care expences, and food prices. Ricards is great talking about the global markets, helpful to people who focused their lives on business profession, but not sure that any of his advices could help common people, limited in their retirement investments thrugh the work place to only invest on the stock market, or, at best, in paper gold. Ricards says: "If you have a million dollar,... you should have a hundred thousand in gold (I guess not paper gold?), if you have ten thousand dollars you should buy one American Eagle." I can just right poetry about the dragons holding in their caves the heaps of gold or about the Chinese housewife buying 300 tons of gold  http://blogs.marketwatch.com/thetell/2013/05/02/chinese-housewives-buy-300-tons-of-gold/, but I cannot seriously play this gold game. The gold game is not for a common people in the USA.     

ao's picture
ao
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not my go-to-guy

davefairtex wrote:

...does anyone really believe that they dont know exactly what their doing? give me a break. Its all planned out. Been that way for a very long time. No expirimentation, all lies and manipulation.

At one point during my work history, I was a mid-level manager in a company that was acquired by a larger company.  After a particularly unpleasant meeting with the big guys from the acquiring company, we got together and asked my boss, "are they deliberately setting us up to fail here?"

He sat back a moment and thought.  And then said this:

"You see a duck gliding across the lake.  How is he moving?  Is he paddling furiously underneath the water, is the wind blowing him across, or is it some current that is the motive force?  How can we tell from here?"  To this day, I have no idea if it was all some grand plot, or if they were just idiots, but seeing the other mistakes that the acquiring company made, my money is on "idiots."

Martin Armstrong does not believe that "they" are in charge.  He claims to have seen behind the curtain, sat in meetings with central bankers and finance ministers and politicians and big money, and he has found only general cluelessness and short-range and self-interested thinking.  He would seem to prefer that someone really did have a plan, but he hasn't encountered it yet. 

http://armstrongeconomics.com

As for me - that's above my pay grade.  I'm not invited to the meetings!  Regardless of what moves the duck across the water, all I am concerned with is - is that duck moving or not, and what direction is it going.  Whether it is obliviously gliding with the current or paddling furiously beneath the water to move towards its objective - for the life of me, I can't tell from where I am.  And the outcome for me is identical so...I just watch and see where the duck is headed and save my energy for stuff I can control.

I am also reminded of the axiom: no battle plan survives contact with the enemy.  If they exist, and they do have a plan, most likely it won't survive contact with reality either.  So why worry?

Well Dave, with all due respect, I question the wisdom and/or observation powers of your boss.  An observant, aware individual can tell what is moving the duck.  If there's no wind or the wind is blowing in a different direction from how the duck is moving, it ain't the wind.  Most lakes don't have any noticeable current unless one is near a water inflow or outflow and if the duck's movement doesn't match those, it ain't the current.  Muscular action requires congruent whole body organization and the duck's moving feet will leave clues in the duck's neuromuscular organization that tell whether it is paddling furiously or not.  The point is, you can tell, if you want to.  Something about the "do I care" statement seems strangely akin to Hillary's "what does it matter" statement.  Given that you're a highly intelligent fellow, this post evokes my "spidey sense".

Also, the high click number on this post make me realize one of two things: (1) either a certain number of folks on this forum aren't as savvy as I thought or (2) someone's pumping the clicks (which has happened before and I'm sure, will happen again).

Most definitely, it has all been planned out.  That doesn't mean that there aren't competing and infighting factions.  That doesn't mean that their every strategy will always be successful.  But there is an inexorable and undeniable long term trend and there is an enormous and continually growing volume of evidence which suggests that it is indeed all planned and connected.  And it is indeed surviving "contact with the enemy" because (1) it is flexible and (2) even more importantly, it is patient ...very patient (although it is accelerating).  Personally, understanding that trend has been a godsend to me.  YMMV.

P.S. You may recall that Martin Armstrong spent 5 years in the pen so his ability to discern the veracity of certain non-economic strategic situations may be in question.

P.P.S. To those it may concern, check the PMs I sent on Mar. 27 of this year to understand this post better.

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Wendy S. Delmater wrote: My

Wendy S. Delmater wrote:

My focus, as almost always, is agricultural. One of the factors no one is talking about--not even Jim R & Dr. Chis in the above podcast--is that the USA is the Saudi Arabia of wheat. In my opinoion, part of reason why the dollar continues to be the reserve currency (for now) will be stripped away once climate change (floods, storms, drought) plus overtaxed aquifers combine to bring on a new dust bowl.

Wendy,

I couldn't agree with you more.  Apropos to this statement, there have been repeated highly destructive hail storms in the Dakotas this year of unprecedented frequency and severity, with hail the size of baseballs at times.  Interestingly, these storms have, in the national news, essentially been a non-event ... kind of like Ron Paul's campaign was. 

 
For those who care to do the research, there is indeed a "unified field theory" behind all this.
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absolutely shameful.although

absolutely shameful.

although i cant say much, up here in Canada we have our own version of evil running the show. Im actually ashamed to be a Canadian, At least im still a Newfoundlander.

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Arthur Robey wrote: "The Fire

Arthur Robey wrote:

"The Fire in the Madhouse at the End of Time."

Terence McKenna.

I was familiar with the concept of Strange Attractors pulling the present into the future. Terence McKenna added to my understanding of our present predicament by cogently arguing that events are happening faster and faster as we reach an asymptote. His lectures were about 1 hour long, but if you have the patience they are worth it.

On the other hand he did not have access to newer information which is an illustration of the acceleration of events that he was rabbiting on about.

He was no intellectual slouch.

Except for the communication problem to other galaxies.  So though it looks like we build complexity in the face of entropy in the end the earth is destroyed by an exploding Sun and all is lost to entropy.

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that's rich coming from a Newfoundlander

FreeNL said:

although i cant say much, up here in Canada we have our own version of evil running the show. Im actually ashamed to be a Canadian, At least im still a Newfoundlander.

I agree with you regarding who is running the show up here, however, irrespective of that, we live in one of the greatest countries in the world, blessed with an abundance of natural resources that are the envy of many countries. Given our large size and small population relative to that size, there are (understandably) pronounced regional disparities. That being said, I am a proud Canadian, and always will be, regardless of who is running the show - they do not form or reflect my identity.

I find your statement that you are ashamed to be a Canadian and that "at least I am still a Newfoundlander" a bit rich, given that historically speaking Newfoundland has been a basket-case provincial economy, a "have-not" province, as the saying goes. The province only rose out of its perenniel need for hand-outs from the rest of the country via transfer payments in the last couple of decades as the Hibernia oilfield came into play. It is of course a total irony that it is now a "have" province contributing to the up-keep of former have provinces such as Ontario, which is floundering on the rocks.

Given the predicitions and certainty of peak oil, you might want to engage in a little strategic thinking vis a vis being a part of this great country. When the oil runs out, where will Newfoundland be? Back to jigging for cod? Good luck with that...

Jan

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ao - your spidey sense

ao-

not my go-to-guy

Something about the "do I care" statement seems strangely akin to Hillary's "what does it matter" statement.  Given that you're a highly intelligent fellow, this post evokes my "spidey sense".

Ok, I'm not your go-to guy.  And I am beginning to recognize that spidey sense.  It appears to be common to a group of people.  From what I gather, I am disturbing to this group because I write well and appear to be intelligent, rational, mostly calm, and I put up with a lot of silly stuff.  This makes me even more likely to be part of the conspiracy.  Why would someone put up with such a large ration of crap for so long without going completely nuts?!

From my point of view, you guys are taking exactly the wrong approach.  I'm an expert about me.  When you accuse me of being a bad guy, you (may) forget that I know the truth.  Consider for a moment the possibility that I'm just someone who disagrees with you and in a really modest way.  What must I think?  Well I'll tell you: from my perspective, each time you jump to conclusions about who I am and my motivations, your credibility about everything else just drains away.  If you are this willing to jump to conclusions about a subject (namely me) that you know little about, and you are this wrong about me, how likely is it that you have used that same research methodology on your conspiracy subject matter?

The really funny thing is, I'm pre-disposed to believe in these conspiracies.  Perhaps its reading too much fantasy as a teenager, but I tend to see them everywhere too.  I could go through the list, but I'm probably on board (at a "true more likely than not" level) with about 50-60% of the standard conspiracy storyline.

The difference is, I don't put my energy behind into the effort, nor do I feel that my opinions have the force of Truth behind them.  I have other fish I want to fry.  If the gold market is completely controlled, and the price drops - or there simply aren't any buyers, and the price drops, what then is the difference?  The price has dropped.  Let's focus on that, avoid being angry and/or scapegoating and pointing fingers and other energy-sapping and self-distracting emotional outbursts, and learn to take advantage of it.  It turns out, price movements often happen in recognizeable patterns.  What does it matter to us, the small fish, if its a Deus Ex Machina or it has some other explanation?  It Simply Is.

I'm not trying to distract the masses and keep them asleep.  I just recognize the limits to my own power.

If I were in the DOJ, or SEC, or the CFTC, or some other organization where my efforts and energy would lead to possibly useful outcomes, I'd act differently.  But that's not where I am.

It sounds a bit like heresy I suspect.  I leave it to someone else to sort out those issues.  You, for instance. But I have chosen the battleground for my own revolution, and it is intensely personal - internal, rather than external.  Even the current US government cannot find anything seditious in getting out of debt, becoming more resilient, physical fitness, taking personal responsibility for one's situation, and attempts at spiritual advancement.  Time and energy spent being angry at "the manipulators" (who most definitely exist in their various forms) is energy taken from more important parts of my life.

There will come a time when they will fall.  To all things there comes a time.  Until that time arrives, I will stick to my knitting.  That's not everyone's path, or even the right path.  But it is the one I've chosen.

Lastly, I want to agree with you regarding the flaws you noticed in my boss's duck story.  And yet even with those flaws, I still find valuable insight.  The next time you and I are together, and we watch a duck crossing a lake, you can explain how you know that it is paddling, or going with the current, or whatever.  I still haven't been able to figure it out - although I must confess, I haven't really put the effort into solving the mystery.  I am more focused on the duck's speed and direction than on the mechanism of travel.

Which I think was the point of the story.

PS.  I don't judge Martin Armstrong (or Nelson Mandela) for his prison experience.  I judge him by the consistency of the story he tells, and how well it seems to explain the world.  Some stuff Armstrong says is ... a bit out there.  But other stuff makes a great deal of sense.  So I take the stuff that makes sense, and I put question marks around the rest and leave it at that.

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westcoastjan wrote: FreeNL

westcoastjan wrote:

FreeNL said:

although i cant say much, up here in Canada we have our own version of evil running the show. Im actually ashamed to be a Canadian, At least im still a Newfoundlander.

I agree with you regarding who is running the show up here, however, irrespective of that, we live in one of the greatest countries in the world, blessed with an abundance of natural resources that are the envy of many countries. Given our large size and small population relative to that size, there are (understandably) pronounced regional disparities. That being said, I am a proud Canadian, and always will be, regardless of who is running the show - they do not form or reflect my identity.

I find your statement that you are ashamed to be a Canadian and that "at least I am still a Newfoundlander" a bit rich, given that historically speaking Newfoundland has been a basket-case provincial economy, a "have-not" province, as the saying goes. The province only rose out of its perenniel need for hand-outs from the rest of the country via transfer payments in the last couple of decades as the Hibernia oilfield came into play. It is of course a total irony that it is now a "have" province contributing to the up-keep of former have provinces such as Ontario, which is floundering on the rocks.

Given the predicitions and certainty of peak oil, you might want to engage in a little strategic thinking vis a vis being a part of this great country. When the oil runs out, where will Newfoundland be? Back to jigging for cod? Good luck with that...

Jan

when oil runs out our whole civilization grinds to a halt. It doesnt matter where you live. You know that. I probabally will go cod fishing though.

Newfoundlanders have a long history of being robbed. Only recently have we had leadership that was able to stand up to Canada, stand up to the oil companies and make sure that Newfoundlanders were actually benifiting from the resources here. Voilla! have province! We werent poor because of lack of resources, we were poor because we were being robbed. I am proud of Newfoundland for doing that. Hell im proud of iceland for putting the shiv to the banksters and other places that have resisted being bullied and abused.

Nothing Canada has done makes me proud.  Jean Chretien when he stood up to the yanks over Iraq. Downhill since then. We support Al-queda terrorists in Syria, genocide of the palestinians. That says it all for me.

Of course its different when we do it. Right?

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the big A

davefairtex wrote:

ao-

not my go-to-guy

Something about the "do I care" statement seems strangely akin to Hillary's "what does it matter" statement.  Given that you're a highly intelligent fellow, this post evokes my "spidey sense".

Ok, I'm not your go-to guy.  And I am beginning to recognize that spidey sense.  It appears to be common to a group of people.  From what I gather, I am disturbing to this group because I write well and appear to be intelligent, rational, mostly calm, and I put up with a lot of silly stuff.  This makes me even more likely to be part of the conspiracy.  Why would someone put up with such a large ration of crap for so long without going completely nuts?!

From my point of view, you guys are taking exactly the wrong approach.  I'm an expert about me.  When you accuse me of being a bad guy, you (may) forget that I know the truth.  Consider for a moment the possibility that I'm just someone who disagrees with you and in a really modest way.  What must I think?  Well I'll tell you: from my perspective, each time you jump to conclusions about who I am and my motivations, your credibility about everything else just drains away.  If you are this willing to jump to conclusions about a subject (namely me) that you know little about, and you are this wrong about me, how likely is it that you have used that same research methodology on your conspiracy subject matter?

The really funny thing is, I'm pre-disposed to believe in these conspiracies.  Perhaps its reading too much fantasy as a teenager, but I tend to see them everywhere too.  I could go through the list, but I'm probably on board (at a "true more likely than not" level) with about 50-60% of the standard conspiracy storyline.

The difference is, I don't put my energy behind into the effort, nor do I feel that my opinions have the force of Truth behind them.  I have other fish I want to fry.  If the gold market is completely controlled, and the price drops - or there simply aren't any buyers, and the price drops, what then is the difference?  The price has dropped.  Let's focus on that, avoid being angry and/or scapegoating and pointing fingers and other energy-sapping and self-distracting emotional outbursts, and learn to take advantage of it.  It turns out, price movements often happen in recognizeable patterns.  What does it matter to us, the small fish, if its a Deus Ex Machina or it has some other explanation?  It Simply Is.

I'm not trying to distract the masses and keep them asleep.  I just recognize the limits to my own power.

If I were in the DOJ, or SEC, or the CFTC, or some other organization where my efforts and energy would lead to possibly useful outcomes, I'd act differently.  But that's not where I am.

It sounds a bit like heresy I suspect.  I leave it to someone else to sort out those issues.  You, for instance. But I have chosen the battleground for my own revolution, and it is intensely personal - internal, rather than external.  Even the current US government cannot find anything seditious in getting out of debt, becoming more resilient, physical fitness, taking personal responsibility for one's situation, and attempts at spiritual advancement.  Time and energy spent being angry at "the manipulators" (who most definitely exist in their various forms) is energy taken from more important parts of my life.

There will come a time when they will fall.  To all things there comes a time.  Until that time arrives, I will stick to my knitting.  That's not everyone's path, or even the right path.  But it is the one I've chosen.

Lastly, I want to agree with you regarding the flaws you noticed in my boss's duck story.  And yet even with those flaws, I still find valuable insight.  The next time you and I are together, and we watch a duck crossing a lake, you can explain how you know that it is paddling, or going with the current, or whatever.  I still haven't been able to figure it out - although I must confess, I haven't really put the effort into solving the mystery.  I am more focused on the duck's speed and direction than on the mechanism of travel.

Which I think was the point of the story.

PS.  I don't judge Martin Armstrong (or Nelson Mandela) for his prison experience.  I judge him by the consistency of the story he tells, and how well it seems to explain the world.  Some stuff Armstrong says is ... a bit out there.  But other stuff makes a great deal of sense.  So I take the stuff that makes sense, and I put question marks around the rest and leave it at that.

Dave,

Perhaps thou dost protest too much.  The "not my go-to-guy" comment referenced Armstrong, not you.  But your lengthy answer was revealing.  In terms of your projections regarding "emotional outburts", it seems like there was a lot more emotion in your post than in mine but maybe that's just my perspective.  Could you point out an example of an emotional outburst in my post above for me?  Believe it or not, I'm actually a pretty Zen guy in person.  Mind/body studies (and that included meditation and combat arts as well as other disciplines) were my thing for many years so there's much less wasted emotion there than you might expect.  But also remember that human beings were given emotions for a reason.  The tendency of some here towards a blanket denigration of emotions belies their value in certain contexts.

Also, I think you're mistaken about something else as well in that the US government does indeed find something seditious in your actions.  Seeking resiliency (for example, if you are growing your own food or storing food) puts you in the profile category of a potential domestic terrorist.  That's not me saying that.  That's our government.  The same one that says ex-military, freedom speaking, firearm owning, gold owning, food storing, food growing, and prepping individuals meet multiple profile criteria for domestic terrorists.

Because of the excellent quality of your posts, I just found it unusual that you seemed to dismiss any plan behind much of what we see in the world.  I think you're too intelligent and knowledgeable not to see what becomes patently obvious the more one studies and learns.  As I frequently tell folks, it's all about the big A ... Awareness ... awareness on a physical, psychological and spiritual level and any other level you may choose to focus upon, either to help yourself or to help others. 

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agree and disagree

FreeNL,

I am glad that Danny Williams came along and got things going for Nfld as things were so dire for a while there. Chretien is a different ball of wax, but I am not going to go there as Canadian politics is not what this thread is about, so let's not hijack it ok.

Going back to the subject of the podcast, if the dollar does collapse, your beloved province will take a big hit on oil revenue, since oil is priced in US dollars. My own province (BC) has take a huge revenue hit from far too optimistic projections on natural gas prices/sales, which is the reason they are trying to pursue LNG so aggressively. Alberta has been taking a big revenue hit from the discount they have to take on their gooey, land-locked oil. The lesson for all of us is that too much emphasis on fossil fuel related revenue is a risky bet, all the more so if that revenue is connected to the value of the US dollar.

If the US dollar tanks, a whole bunch of people may very well be joining you for some cod fishing.

Jan

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You hit the nail on the Head

Wendy and Jan.  I was going to post thoughts along a similar line, but did get the chance earlier today.  Thanks for your posts.

The more you have the less your are. The less you have, the more you are.

Possession is not a one way street, however you choose to store your "wealth", it has a drag on your existance, it is a trade off we must make thoughtfully, carefully and consciously.  Investment in skills, whether they be intellectual, spiritual or physical are the things that bring true security and peace of mind.  It seems that we have taken the materialist paradigm for granted, which is surely the disease of the rich. It's why there is never enough, why once you travel down that road, it leads to the misery that it does and the madness that we live with.

Relationships with each other and the world around us leave us grounded and secure.  

Speaking the truth and acting with free will are not things that are granted by others, nor are they choices we can make in a moment. They are powers that we can achieve with focus and hard work.  What ever power we assign to the political and corporate elite and their impact on the global economy and national economy, the power we have both personally and collectively to transform our selves and our world is ours for the asking.

Certainly we need to be concious of what is going on in the world, but we must not give up our power to it. We will become what we hate.  And there in lies the trick, to be aware without being pulled off our own centers.  ao and Dave have broached a difficult subject, one that will take great focus, much discussion for us all to navigate successfully.  

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my overprotest is ended!

ao-

Perhaps thou dost protest too much.  The "not my go-to-guy" comment referenced Armstrong, not you

Excellent!  Consider my overprotest ended!  I am overjoyed to find out that it was Martin Armstrong rather than me whom you were responding to.  My work here is done.  :-)

I agree with you about emotions, we were born with them for a reason.  I find them extremely useful in understanding what is going on inside myself.  Then I try to release them.  However, its the acting on emotion prior to its release that I almost always end up regretting.

If I am mistaken about the government finding me seditious, I suppose I'll have to live with the burden of being on a list for not being a good little consumer.  But once again I feel that if the whole country decided to reject debt-funded consumerism, became more fit, and started to become conscious of their own food supply, that alone would peacefully bring about massive change without a shot being fired.  Many if not most of the plans you find so patently obvious would most likely be for naught.

My latest act of rebellion: installing more memory and a flash drive ($400) into my mostly-serviceable 2010 macbook pro rather than buying a new one for $1600 whose memory is soldered onto the motherboard and can't be upgraded.  I probably get another 2 years of life out of a tool I use every day.  Plus now I have the skill to do this for others in my friends & family if they need it.  ifixit.com, an awesome site.

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New Macbook Pros not upgradeable

davefairtex wrote:

My latest act of rebellion: installing more memory and a flash drive ($400) into my mostly-serviceable 2010 macbook pro rather than buying a new one for $1600 whose memory is soldered onto the motherboard and can't be upgraded.  I probably get another 2 years of life out of a tool I use every day.  Plus now I have the skill to do this for others in my friends & family if they need it.  ifixit.com, an awesome site.

Wow, Dave, I didn't realize that the newer MacBook Pros are not upgradeable.  Apparently, they're also not easily repairable or recycleable either.  A computer with a three (or at best five) year life span seems crazy, especially when so much aluminum, copper, and even some silver are used to make each one.

Cheers,

Hugh

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Dave, It Does Matter

DaveF,

Eloquent post.  And I respect your point of view and your defense of it.  Allow me to give you another point of view.

I think what riles up folks like me is that the Hilary "what difference does it make?" approach is that A) it is reductionist, and not intellectually curious, and B) it hides and intentionally obfuscates a deeper, sometimes darker agenda. 

I think it is helpful to know the true agenda of folks, and not just because I like conspiracy theories.   I think it goes to our (the newly awakened) journey, especially since 2008, that started with "something is not right" and "what the media and the TV folks are saying is not the true story".  I say these things also acknowledging that there are often nuances such as manipulation and market forces can co-exist and swirl around together, and interactions between manipulators and the real world are complex and multifactorial.

Without getting into a dissertation, I seek to learn as much as possible (and I suspect others like Chris do- but I leave it to him to defend himself) about the truth behind the data, and the agenda behind the data, because A) I have intellectual curosity and a deep-seeded though hard to express belief (hat tip to Chris' point about belief v data) that it is better to know why and how things work than to not know why.  Specifically because one may need to react to them based on a mechanistic understanding in the future, in a currently unknowable way, and B) I believe that understanding the real world (not the fake media one), i.e. how the duck is paddling, helps me to better predict the future, and plan for it, and anticipate the next move of the advisary, and decide what data points to watch as opposed to which ones are likely to be noise. 

I am hungry for any time advantage to react earlier and more decisively than the majority, as I have seen in 2008 how fast the world went from perfectly fine to 'the credit markets will collapse if congress doesn't act in one week'.  I also believe due to the growing awareness of the dishonesty of the President, congress and big business, the speed of devolution will be even faster than 2008.  Perhaps this is unfounded, but for now it's my story and I'm sticking to it.

I guess this betrays my scientific background and innate curiousity.  But I also appreciate your point that keeping a big picture view on where the duck is paddling is important as well.

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SDRs

Chris,

I know Jim Rickards has mentioned SDRs as the (a) way out of the credit crisis several times, not just on your excellent interview.

I for one would appreciate a basic explanation of SDRs, from you or a guest.  What are they?  Who controls their existence and creation?  Do they work like fiat money, i.e. printed into thin air?

If yes, how does replacing one debt-based, fiat money with another debt-based fiat money improve our situation?

Could you step through a sequence of events in which SDRs would come to the rescue of the USD?

Thank you in advance,

H

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in the end its going to

in the end its going to require about a billion of us all waving the same sign "End central banking now" before things will get better.

the duck is an illusion. Its actually a great white shark. You just cant see it because its beneath the surface. Doesnt mean its not there though, and certainly everyone can feel its presence in their daily life. Whether they know it or not.

Imagine if it wasnt there?

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I can't eat gold, and I

I can't eat gold, and I couldn't afford any right now anyway. I'm converting my fiat currency into reducing my debt, purchasing goods which might help my family survive a collapse, learning new skills, and planting food we can hopefully eat. That's about as far as I can go with any "gold advice" on this website. I can respect the reasons why Chris and Adam talk about gold so much, but that will only be currency much further down the line if things truly go horribly wrong (or horribly right, depending on your viewpoint). I can't defend my family with bullets of gold, dig in the earth with shovels of gold, nor eat gold.

Now, Vodka? That's a post-collapse currency if I've ever heard of one, which is why I'm hell-bent to learn how to make moonshine/vodka/anything alcoholic.

That last part is my half-hearted attempt to inject humor. Let's all not forget to live and laugh in these trying times!

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I have always found that

I have always found that making your own beer and sharing it with your good friends is an extremely rewarding activity :). Start with beer. Its the easiest and requires minimal investment. Then do wine. Once youve mastered wine you can learn to distill and make your own hard liquour.

I totally agree with you on gold though. Thats for rich people only. In a collapse type scenario history has shown in the US that they will confiscate it and make it illegal to use, so i dont see how that would be valuable. 

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What the heck is an SDR anyway?

HRunner asked a great question about SDRs.  I too am in the dark.  So I asked the ever-infallible Wiki to explain.  Here's what wiki coughed up, or at least my executive summary:

* SDRs are a currency - the IMF's unit of account - and are only held by IMF member countries and "select organizations licensed by the IMF", not people.

* SDRs can only be exchanged for euros, yen, pounds, and dollars

* SDRs may represent an actual claim to currency held by IMF member countries forex reserves.  Sounds like...a warehouse receipt for currency?  Not sure why wiki said "may" rather than "is".

* whenever confidence in the buck as a reserve asset drops, nations start talking about SDRs, which gets the US upset and the issue usually vanishes again.

* right now 1 XDR = 1.53 USD.

* there are 476 billion XDR in the world today, or 728 billion dollars.  About what the Fed prints in 9 months.

* they were issued to IMF member nations; it sounds like they were handed out like raffle tickets in exchange for membership.

http://en.wikipedia.org/wiki/Special_drawing_rights

So I'm not sure how printing SDRs ends up saving the day, but who knows.  I'm with HRunner.  I'd like to hear from Jim Rickards on how the mechanics of this plays out; who would be in favor, who against, who wins, who loses, and who had the power to pull the trigger to make it happen.

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Should have talked about the Euro.

Good talk, but like most goldbug interviews, its basically two guys agreeing with each other and repeating facts and phrases we've heard before. 

I am sure that CM knows that JGR has a very different view on the future of the Euro, so its dissapointing that he only asked JGR about subjects on which they fully agree. 

It would have been more valuable to hear them tease out their differing stances on the future of the Euro. Rickards sees it surviving, while CM (like Mish, McLeod and every other UK or US pundit) seem unable to see that the ECB is on a radically different path to the Central Bank's of the US,UK and Japan and will win the currency wars.

The Euro was been envisaged with full expectation of dollar failure in the 1960-70's (see Triffin, Rueff, Zijlstra et al). The Euro has a balanced trade/current account with the outside world. The outsized debts between the member states will not be dealt with by exits/devaluing curriences, rather,with a revaluation gold upwards.

But we'll have to wait for dollar failure / Saudi ditching the dollar first.

,

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the SDR is another leg of the

the SDR is another leg of the scam. Ask any 3rd world country what happens when you owe the IMF money.

Once they have bankrupted all countries and all countries are dependant on the SDR for operation, the IMF/World bank/BIS and its owners will effectively own the world.

Then we get our one world government, then chains on our legs and then death camps lovingly run by the blue helmets of orwellian doom.

Time to wake up, slaves.

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LogansRun
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And why would Rickards be

And why would Rickards be promoting SDR's as a fix to the current crisis?

SDR's are a form of a One World Currency.  Another avenue to start over with a new FIAT/Interest bearing currency, to replace the old "buck".  

Lather - Rinse - Repeat = Banker Controled Currencies over the centuries.

FreeNL wrote:

the SDR is another leg of the scam. Ask any 3rd world country what happens when you owe the IMF money.

Once they have bankrupted all countries and all countries are dependant on the SDR for operation, the IMF/World bank/BIS and its owners will effectively own the world.

Then we get our one world government, then chains on our legs and then death camps lovingly run by the blue helmets of orwellian doom.

Time to wake up, slaves.

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davefairtex wrote:HRunner

davefairtex wrote:

HRunner asked a great question about SDRs.  I too am in the dark.  So I asked the ever-infallible Wiki to explain.  Here's what wiki coughed up, or at least my executive summary:

* SDRs are a currency - the IMF's unit of account - and are only held by IMF member countries and "select organizations licensed by the IMF", not people.

* SDRs can only be exchanged for euros, yen, pounds, and dollars

* SDRs may represent an actual claim to currency held by IMF member countries forex reserves.  Sounds like...a warehouse receipt for currency?  Not sure why wiki said "may" rather than "is".

* whenever confidence in the buck as a reserve asset drops, nations start talking about SDRs, which gets the US upset and the issue usually vanishes again.

* right now 1 XDR = 1.53 USD.

* there are 476 billion XDR in the world today, or 728 billion dollars.  About what the Fed prints in 9 months.

* they were issued to IMF member nations; it sounds like they were handed out like raffle tickets in exchange for membership.

http://en.wikipedia.org/wiki/Special_drawing_rights

So I'm not sure how printing SDRs ends up saving the day, but who knows.  I'm with HRunner.  I'd like to hear from Jim Rickards on how the mechanics of this plays out; who would be in favor, who against, who wins, who loses, and who had the power to pull the trigger to make it happen.

SDR is a buffer and poor one at that.  I suspect it is used more as tool to teach lessons such as the Rubble Run.

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Hrunner
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Wealth Protection

@Snydeman

Just to give you a bit of support, I think you are right on track.  In fact, everyone should be doing the same things, skill development, debt reduction, useful good storage et al..

To clarify, I think a number of people who buy and store gold are in the category of those who have some amount of wealth accumulated due to a lifetime of work and investing.  After we "woke up" and realized the damage being done to the USD, plus all world currencies, and at the same time realized that our lifetime wealth was denominated in USD, and worse, was mostly in the form of electronic 0's and 1's, we began to see increasing risk and began to look for an alternative store of wealth. 

At least a partial alternative to having all your life savings in digital USD.  I mean the highly proclaimed "diversified" investments of "stocks"  "bonds" "treasuries" "reits" "annuities" "pensions"  "social security" "medicare".  Those all can be lumped into one big category of digital dollars.

Physical gold and silver are real diversification.  They are a recognized form of wealth for centuries, because of their monetary features (rare, assayable, fungible) and they are not digital.

I have been blessed to be able to earn and accumulate some amount of wealth.  I imagine Chris and other "stackers" are in the same boat.  I also just see gold as a backup or insurance policy.  It is a bit risky to have a strategy for the future of "stack up gold and sit around and stare at your big stack".  In fact, everything you describe is actually more important than stacking PMs in the priority list, IMHO.

All the criticisms of gold (just like there are criticisms of insurance policies) are valid- could be confiscated, doesn't return a yield, etc.  It is just the best and most compact alternative to digital money or stacking drums of oil or timber or cotton that I know of.

Stacking vodka or beer is an alternative 'hard currency'.  If you need someone to come over and give you feedback on your brewing efforts, I mean financial strategy, let me know.

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westcoastjan
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There is also different thinking for home owners and renters

when it comes to whether or not to invest in any PM. Since a home owner, especially if they own free and clear, has a tangible hard asset that can be further developed to provide resilence and self sufficieny, there is perhaps less need to invest in PM as a store of wealth. Investing in things such a solar sytem would seem to me like the better investment than owning some gold.

It is a different ball game for people like me who are renters. I simply refuse to keep all of my assets in paper or digital fiat. So in the absence of a hard asset like a house, I thought it prudent to have a small amount of PM as an insurance policy. As a renter I can only invest so much in my living situation. I have managed to do a lot in spite of that, and continue to find ways creative ways to expand my prepping - with many things that will be able to go with me should I move at some point.

Every person and their circumstances are unique. What is good for one is not necessarily good for another. As CM has said in the past, you have to trust yourself. That means truly knowing and understanding your own personal situation, and making your decisions based on what the best choices are for you. So many investing mistakes are made by doing what others are doing. Been there, done that. Now the only investing criteria I have is "is it good for me and does it fit in with my overall life plan? Will it contribute to my ongoing prosperity?" I find using this type of thinking helps me to make better decisions.

Jan

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earthwise
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That's not my take.

And why would Rickards be promoting SDR's as a fix to the current crisis?

I don't see Rickards as promoting SDR's as a fix. He's just observing that this is a possible (likely?) outcome. Big difference. And neither do I see him as a shill for the banking elite or the powers that be, as has been suggested. I don't doubt that they exist; I just doubt that Rickards is one of them. He calls this "One of the greatest failed experiments of all time". Hardly the words of a cheerleader for the team. He is harshly critical of all the steps that led us here and of all the 'solutions' to the predicament. I will admit that his criticism seems muted but I think that is more a function of his dispassionate coldly-analytical style, a style that I like frankly. I call it the Sgt. Joe Friday approach,  "Just the facts Ma'am". He also suggests buying a little gold---not exactly Big Bank 'barbarous relic' type thinking.

Just my opinion.

HughK's picture
HughK
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Posts: 446
Rickards on SDRs (from Currency Wars)

earthwise wrote:

I don't see Rickards as promoting SDR's as a fix. He's just observing that this is a possible (likely?) outcome. Big difference. ... He calls this "One of the greatest failed experiments of all time". Hardly the words of a cheerleader for the team. He is harshly critical of all the steps that led us here and of all the 'solutions' to the predicament.... He also suggests buying a little gold---not exactly Big Bank 'barbarous relic' type thinking.

I agree with Earthwise.  Here are a few quotes from Rickard's Currency Wars (2011) regarding SDRs.  This comes from Chapter 11:  "Endgame: Paper, Gold, or Chaos?"  In this chapter, Rickards says that the four succeedingly disruptive possibilities of what might fill the reserve currency vacuum if/when the dominance of the USD falters are "multiple reserve currencies, special drawing rights, gold, or chaos." Any bold emphasis is mine.

Here's a quote from p. 203, under the header "Special Drawing Rights"

"Perhaps no feature of the international monetary system is more shrouded in mystery and confusion for the nonexpert than the special drawing right, or SDR.  This should not be the case because the SDR is a straightforward device.  The SDR is world money, controlled by the IMF, backed by nothing, and printed at will.   Once the IMF issues an SDR, it sits comfortably in the reserve accounts of the recipient like any other reserve currency.  In international finance, the SDR captures the mood of the 1985 Dire Straits hit 'Money for Nothing.'

moving on to page 206, still in the section on SDRs

"Here in all its technical IMF-speak glory is the global power elite's answer to the currency wars and the potential collapse of the dollar.  Triffin's dilemma would be solved once and for all, because no longer would a single country bear the burden of providing global liquidity. Now money could be printed globally, unconstrained by the balance of trade of the leading reserve currency issuer.

Best of all, from the IMF's perspective, there would be no democratic oversight or accountability on its money printing operations.... (p.207):  The IMF is explicit in its antidemocratic leanings, what it calls 'political considerations.'  The SDR blueprint calls for the appointment of"an advisory board of eminent experts' to provide direction on the amount of money printed in the new DR system.  Perhaps these 'eminent experts' would be selecte from among the same economists and central bnkers who led the international monetary system to the brink of destruction in 2008.  In any case, they would be selected without the public hearings and press scrutiny that come in democratic societies and would be able to operate in secret once appointed."

Rickards caps off this critique of the IMF's SDR plan with the following Keynes quote, probably well-known to many PP members:  

"There is no subtler, surer means of overturning the existing basis of society than to debauch the currency.  The process engages all the hidden forces of economic law ont he side of destruction, and does it in a manner which not one man in a million is able to diagnose."  

Rickards concludes his section on SDRs by saying that in spite of two potential flaws (slow implementation process and the ability of the US to veto an SDR proposal) the SDR has decent prospects as a partial or total replacement to the USD reserve currency regime, short of the IMF's SDR proposal becoming a campaign issue in the 2012 U.S. presidential election, and Obama being replaced by a president who is less interested in multilateral solutions.  (Note:  If monetary policy and currency ever became a serious election issue, it would be a mark of distinction for the U.S. electorate, whether or not a Demublican or a Republicrat won.)

Unless the global elite conspirators - assuming such a group exists and is truly coordinated - are weaving a very tangled web indeed, it seems that Rickards is not at all supporting them or being allowed to speak by them.  He certainly does not seem to be a supporter of SDRs, unless he's changed his tune since writing Currency Wars.

Cheers,

Hugh

Hrunner's picture
Hrunner
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Posts: 250
Great Stuff, Hugh, Earthwise, Dave, Jan

All great stuff, thank you very much for the deeper dive.  Hugh, thank you especially for the detailed CURRENCY WARS paragraph.

However, I must say that SDRs and an SDR world is still opaque.  I am guilty perhaps of "concrete-ism" (made up word) in that I need concrete explanations and personal scenarios to feel like I really understand something.  Telling me Triffin's dilemma is solved is interesting, but does not lift the shroud.

Assuming a shift to an SDR world happened over the weekend, what would a post SDR world look like?

Would I still go to the gas station and swipe my VISA card to pay for gas? 

What would my gold be worth?

How much would bread cost?  Would my bank account say SDR 10,000 instead of $10,000?  What if I traveled to Verona, Italy this fall and wanted to buy a pair of dress shoes?  Would I pay in Euros, SDRs?

What would be the major impacts on U.S. economy and economic sectors (energy, healthcare, finance, manufacturing, agriculture)?

Would my USD (assuming I still use USD versus some "World Kumbayah Currency") be worth more, less, or the same as on the Friday before the Great SDR Reset.

Clearly what we are talking about here is a war-gaming type discussion, something Rickards said he actually participated in with DOD.  I'm asking Rickards or some smart soul to play the role of the IMF in this scenario (seems kind of important since it is one of two that Rickards mentioned in his PP Voices with Chris).

Again, not being horsey here, just trying to take the next logical step toward keener understanding.  And to inform preps.

H

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