This week, seasoned financier, risk manager and author Jim Rickards returns to the program to share the predictions from his new book The Road To Ruin: The Global Elite's Secret Plan For The Next Financial Crisis.
Rickards warns of a coming confidence boundary in central bank omnipotence. Once breached, trust and belief in the central banking cartel quickly vaporizes. Rickards predicts that boundary will be crossed by 2018 or sooner; and when it is, the entire financial system will go into lockdown, freezing access to our money:
Here’s the point. In 1998, Wall Street bailed out a hedge fund (LTCM). In 2008, the central banks bailed out Wall Street. In 2018, if not sooner, who’s going to bail out the central banks? The central banks are at the point where they don’t have any dry powder left.
By way of example, the Fed took their balance from $800 billion to $4.2 trillion and cut interest rates to 0%. Now, if they had normalized things in the meantime, so let’s say they got their balance sheet back down to $800 billion or maybe one trillion dollars and raised interest rates up to 2 or 3%, I’d be the first one to congratulate them. I’d say, “Hey, nice going. You saved the world and you normalized your balance sheet and normalized interest rates.” But, that didn’t happen. The balance sheet is still at $4 trillion, interest rates are still close to 0%. What are they going to do in the next crisis? Take the balance to $8 trillion, $12 trillion? They can’t do it. There’s an invisible confidence boundary. No one knows exactly where it is — you find out the hard way. And when you cross it, you destroy confidence in the dollar.
The only clean balance sheet left in the world is at the IMF, the International Monetary Fund. And, that’s where the liquidity will come from in the next crisis. They have a printing press. They can print this world money called a geeky name: the special drawing right, or the SDR. But just think of it as 'world money', because that’s what it is. So, the Fed has a printing press; they can print dollars. The European Central Bank has a printing press; they can print euros. The IMF has a printing press; they can print SDRs. An SDR is not backed by anything, it’s just this kind of world money. That’s where the liquidity will come from, with an important difference. The IMF is not that nimble. It will take six to eight months. Last time it took 11 months, maybe they can do it faster. But, it’ll take a few months to print this new world money.
In the meantime, if the central banks are tapped out and the IMF is taking six months or so to issue the SDRs to reliquify the system, what are the elites going to do in the meantime when they can’t print the money? They’re going to lock down the system. Money market funds are going to spend redemptions. Banks are going to be closed. ATMs will be reprogrammed so you can get max $300 a day for gas and groceries. Stock exchanges will close. By the way, all this has happened before. None of what I’m talking about is new. It has all happened before.
So, in 1998, the Fed printed the money and gave it to you. In 2008, they printed the money and gave it to you. In 2018, if not sooner, they’re not going to able to print the money, they’re not going to let you have your money. Instead, they’re going to lock down the system.
Click the play button below to listen to Chris' interview with Jim Rickards (35m:25s).
Chris: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson, and it is October 31st, 2016. What a great day to be talking about this next topic. Look, with every passing day there’s another example of central banks doing something, anything to rescue or stabilize financial markets, especially equity, currency markets, bond markets now.
And, to help us talk about this, understand all of this, we have back with us one of my favorite guests of all time, a man who really needs no introduction, Jim Rickards, seasoned financier, risk manager and author. Now, he’s the author of The New Case for Gold, which we last talked with him about in April, 2016. Of course, two New York Times bestsellers, one being The Death of Money in 2014, and Currency Wars in 2011. He’s a portfolio manager, lawyer, economist. He’s held senior positions at Citi Bank, Long-Term Capital Management, Kachs [PH] & Associates. He is all over the world speaking and advising his clients.
Now, today, we’re going to discuss his latest book, The Road to Ruin, with the subtitle of The Global Elites’ Secret Plan for the Next Financial Crisis. Obviously, a great time to be talking about global elites and their plans, which have, thanks to Wikileaks, been made a lot less secret of late. And, to the elites, they have a private position and a public position it seems. And, of course, they do, of course, they do. And, by now you, you have as much confirmation as you need to know that such things as a public and private position exists. And, of course, they do. We’ve always known that on some level, that that exists, because, honestly, we’d probably the same thing ourselves in their position. But, there’s nothing like a solid reminder in black and white that your interests and the elites’ self-interest are only ever accidentally aligned.
So, what’s called for here, today, in 2016, open mind, a strong sense of curiosity and a willingness to let the data tell the story. Not your hopes, not your dreams, what’s really being said and what can you make of it. So, Jim, what a timely topic, what a timely book title and book that you’ve written. It’s also have a pleasure to have you on as a guest. Welcome back.
Jim: Thank you, Chris. It’s great to be with you.
Chris: Well, let’s start right at the beginning. Let’s dive right into your new book, The Road to Ruin. The basis for this book really rests on the idea that there, there’s another financial crisis coming. Let’s go into some of your context for that view.
Jim: Sure. And, that’s right. You know, this is—I’m not sure if the listeners know—but, this is Volume Three of a projected quartet, so Volume One was Currency Wars, Volume Two is The Death of Money. The Road to Ruin is Volume Three. There’ll be a fourth book, Volume Four, maybe sometime in 2018. But, the first two books, The Currency Wars and The Death of Money talked about instability in the system, talked about a coming crisis, explained why. And, you know, Chris, I never make claims without backing it up with analysis. It could be history, it could be math, it could be anecdotal, but there’s some document. But, there’s always some source behind it. I don’t really like it when people make claims and then, you know, they just say, “Well, the sky’s falling,” or “The world’s coming to an end,” or whatever, but they don’t have anything to back it up. I don’t say either of those two things, by the way. I talk about financial crisis and reaction functions, but there is a lot of backup for it.
But, the way I do this, what’s different about the new book is it takes you into the crisis. It puts you into the next financial crisis, which will be a lot worse than 2008. It tells you why it will be different, what the reaction function will be, and what the global elites intends to do about, and how it will affect you as an investor. And, then kind of come back to what you can do today to prepare for this. But, here’s what’s different. I look at three crises. I look at 1998, 2008, and then I hypothesize a crisis in 2018. And, just to be clear, that’s an estimate. I don’t want to put a stake in the ground about 2018. It could be 2018, it could be a little later, it could be tomorrow, by the way. We don’t necessarily have to wait that long. But, it could be soon.
But, the point is in 1998, that was the Russia/Long-Term Capital Management crisis. And, of course, I was involved in that. I negotiated that bail-out, I was in the room with the Treasury and the Fed when the $4 billion dollars changed hands and they propped up the Long-Term Capital balance sheet. But, we were just hours away from closing every market in the world; every stock and bond market would’ve closed on that day, September 29th, 1998. Non-exaggeration. Greenspan and Bob Ruen [PH] testified before Congress to that effect. Like I said, I was there watching it happen. But, you know, we, when the money changed hands and the Fed cut interest rates not one, not once, but twice. Once at an emergency meeting, unscheduled FOMC meeting. Last time that happened, by the way, since 1998.
So, come forward to 2008. Same thing. We were just hours, if not days away from a sequential collapse of every major bank in the world. Bear Stearns had failed on March, 2008. Freddie and Fannie failed in June and July, 2008. Then came Lehmans, September, 2008, etc. They were falling like dominoes. We, a couple of days later would’ve been Morgan Stanley, then Goldman Sachs, then B of A, then Citibank, maybe J.P. Morgan would’ve been the last guy standing, but who knows, probably not.
Now, what happened was the Fed came in and truncated that process. And, I make the point that this is, this is complexity theory in action. This is how complex systems collapse. They happen in the natural world and the man-made world, specifically, you know, capital markets. But, in a natural system, you can’t stop it, you can’t truncate it. So, when an earthquake starts, you can’t stop the earthquake in the middle. But, imagine if you could. What would happen, an earthquake is a release of energy. You can’t stop it. But, if you could, that energy wouldn’t go away. It would just get bottled up for the next time. But, in man-made systems such as capital markets, you can truncate with policy intervention, but the same thing happens. The energy, the destructive force just gets bottled up for the next time.
So, what did the Fed do in 2008? Well, we know over the following six years they printed four trillion dollars. They took the balance sheet from 800 billion to, you know, $4.2 trillion. But, that’s not all they did. They, they did $10 trillion dollars of swaps with the European Central Bank. And, the reason for that was the European commercial banks had loaned money in dollars. They had to borrow dollars to fund the loans. They were borrowing most of it from money market funds in the form of bank CDs and commercial paper. There was a run on the money market funds. Americans said, “We want our money.” The money market funds couldn’t roll over the paper. The European banks saw their dollar liquidity dry up. They turned to the European Central Bank, which is their lender of last resort. But, the problem was European Central Bank can’t print dollars, they only print euros. So, what they did was, the European Central Bank printed up a bunch of euros. The Fed printed up a bunch of dollars. They swapped them, so the Fed gave $10 trillion to the European Central Bank and then that gave them the dollars to bail out their banks.
So, that, by the way, we didn’t find out about that until two years later. It was not known at the time. It came out as, partly as a result of—that was one of the good things about Dodd-Frank is there some disclosure about things like that. They also guaranteed every money market fund in America. They guaranteed every bank deposit in America, regardless of insurance size. Insurance was 250,000. If you were a small, medium-sized business, happened to have, you know, let’s say a million dollars of working capital in your account, that was guaranteed. So, that’s the extent to which they did that.
Now, here’s, here’s the point. In 1998, Wall Street bailed out a hedge fund. In 2008, the central banks bailed out Wall Street. In 2018, if not sooner, who’s going to bail out the central banks? The central banks are at the point where they don’t have any, there’s no dry powder. So, just, again, by way of example, the Fed took their balance from 800 billion to 4.2 trillion, cut interest rates to zero. Now, if they had normalized things in the meantime, so let’s say they got their balance sheet back down to 800 billion or maybe one trillion dollars, raised interest rates up to 2 or 3%, I’d be the first one to congratulate them. I’d say, “Hey, nice going. You saved the world and you normalized your balance sheet and normalized interest rates.” But, that didn’t happen. The balance sheet is still at four trillion, interest rates are still close to zero. What are they going to do in the next crisis? Take the balance to eight trillion, 12 trillion? They can’t do it. There’s an invisible confidence boundary. No one knows exactly where it is. You find out the hard way, you cross it, you destroy confidence in the dollar. And, you look back and say, “Gee, we went too far.” Well, yeah. But, they sort of see that coming.
The only clean balance sheet left in the world is the IMF, the International Monetary Fund. And, that’s where the liquidity will come from in the next crisis. They have a printing press. They can print this world money called a geeky name, you know, the special drawing right or the SDR. But, just think of it as world money, because that’s what it is. So, the Fed has a printing press; they can print dollars. The European Central Bank has a printing press; they can print euros. The IMF has a printing press; they can print SDRs. Not backed by anything, it’s just this kind of world money. That’s where the liquidity will come from, with an important difference. The IMF is not that nimble. It will take six or eight months, last time it took 11 months, maybe they can do it faster. But, it’ll take a few months to print this money.
So, in the meantime, if the central banks are tapped out and the IMF is taking six months or so to issue the SDRs to reliquify the system, what are the elites going to do in the meantime when they can’t print the money? They’re going to lock down the system. They’re going to, money market funds are going to spend redemptions, banks are going to be closed, ATMs will be reprogrammed so you can get, you know, $300 a day for gas and groceries. But, why do you need more than that, after all? Stock exchanges will close. By the way, all this has happened before. None of what I’m talking about is new. It has all happened before.
So, in ’98, they printed the money and gave it to you. In 2008, they printed the money and gave it to you. In 2018, if not sooner, they’re not going to print the money; they’re not going to let you have your money, they’re going to lock down the system.
Chris: Now, I’ve been seeing a lot about the locking down on the systems. I’ve got a couple of questions from, from what you just talked through there. I’ll get back to them. But, this idea of locking down the system, now, now we had that one prime money market fund, Reserve America, broke the buck. I think it was a year and a half before people actually got access to their money by the time they’d sorted that out.
Chris: But, I think, you know, what you’re detailing in this book is that they’ve taken steps since then to make sure that that doesn’t happen again. But, not the kind of steps that maybe people would hope they would be taking.
Chris: Right? So, talk to us, like, like in money market funds, what has happened since the crisis that, that’s worrying to somebody who maybe has money in a money market fund.
Jim: Sure, Chris. And, again, thank you for pointing that out, and this is another example where I don’t just make claims. This is all documented in the book. So, here’s what happened. In 2008, there was a run on money market funds. Now, some of the biggest financial entities in the world, specifically General Electric Credit Corporation, financed themselves in the commercial paper market. Americans were panicked; they were pulling their money out of the money market funds. That, by the way, is what caused Ben Bernanke and Hank Paulson to march over to the White House with kind of faces white and tell the president, President Bush at the time, that he had to do something. They had to get the tarp done to save the system.
So, but since then, they’ve changed the rules in two respects. Number one, it used to be the case that money market funds could not break the buck. What that means is that if you put a dollar in, you get a dollar out. Now, you may or may not get a big yield, you know, maybe 25 basis points, maybe back in the old days you got 2 or 3%, sometimes more. But, whatever yield you got, you always got your dollar back. That’s no longer true. You put a dollar in, you might get 98 cents or 95 cents or 90 cents, depending on the price at which they can liquidate those assets. So, no more assurance, these are not the same as bank accounts, although they have their own problems. You might not get your money back at all.
But, worse than that, for the first time, this is brand new law, the SEC proposed it a couple of years ago, but it took that long to become into effect. It just went into effect, recently. They can suspend redemptions. That means they can close their doors and not give you your money. And, this is typical in a hedge fund world. I’ve read hundreds of hedge fund offering documents. I’ve never seen one that didn’t allow the hedge fund to, as they say, you know, raise the drawbridge or close the gates or suspend redemptions or basically tell you that you cannot get your money back. But, that is now the law with regard to money market funds.
So, I run into people, they go, “Yeah, I got my money in the money market fund.” By the way, great misnomer, it’s not, it’s not money, they call it money market fund, but it’s not money. Anyway, “I’ve got my money in a money market fund, no problem. I can call my broker, sell my units, the money’ll be in my bank account tomorrow. I can write a tuition for my kids’ college education or down payment on a house or whatever I need.” Uh-huh, not anymore. That money market fund can suspect redemptions and tell you that you cannot have your money. And, that is what they will do. That’s the law, again, that’s all, it’s all detailed in the book.
Chris: Yes. So, there’s this, this I think gets us to the subtitle, where you’re talking about how this idea that the global elites, they have a secret plan to protect themselves. It’s not really terribly secret, though. A lot of what I see you have in the book there, you know, you’re finding it’s on the BIS website. It might be 30 pages in, but it’s there, and they’ve been making moves, I think not just to gate things like money market funds, but to gate entire capital markets if need be. Like, pull up the drawbridges on Japan if things go wonky there. And, of course, that’s what you or I would be doing, because we’re both intelligent people. We’d say, “Listen, hyper-connected, hyper-complex international world without any financial bulkheads, if it starts to sink in one part of the world, best to sort of gate that and prevent it from sinking everything else.”
Now, I think, Jim, even six months ago if you had, you put that subtitle out, people would shriek the usual conspiracy theorist at you. Maybe today, not so much.
Jim: Well, that’s right. A couple of points there, Chris, and you’re right, when I say secret I mean secret from the mass of investors and savers and every day investors. It’s not secret from each other. They are absolutely signaling each other on the kind of venues you mentioned, you know, 24 pages deep on the IMF website, there it is. I guess I’m enough of a geek that I actually read these things.
But, start with the G-20 Summit in Brisbane, Australia, November, 2014. They had a final communique that listed working papers, and if you read through those, that’s where the bail-in plan is. It’s just not the bail-in of Cyprus and Greece, although that was the model for it. This is the G20, so this includes President Obama, Angela Merkel, David Cameron at the time—they have a new prime minister—all, you know, Mario Draghi, the heads of all the central banks and all the G-20 countries agreed on this. And, they said, “No more bailouts. The next time there’s a crisis and you know it’s coming, we’re not going to use taxpayer money to prop up the banks. What we’re going to do is we’re going to haircut the bond holders, freeze the depositors, wipe out the stockholders,” and then they can go beyond that and close the banks themselves, which they’ve done before. So, it’s all there.
Now, I give this a name. I call it Ice Nine. Ice Nine might be a new phrase to a lot of listeners, but if you go back, one of my favorite authors, Kurt Vonnegut, wrote a great bank in the early 1960s called Cat’s Cradle. For those who haven’t read it, I highly recommend. It’s short, easy to read and it’s hilarious. It’s sort of a dark, comedic novel. But, in the book Ice Nine was a polymorph of water, an H2O molecule with two differences. The melting temperature was 114 degrees Fahrenheit, which meant it’s frozen at room temperature. And, two, if it came in contact with a molecule of water, it turned the water to Ice Nine. So, you had to keep it in a vial. But, if you released it in a stream, then all the streams, rivers, ponds, oceans in the entire world were turned to ice. The planet would become frozen and life on earth would die. It was a doomsday machine.
So, that’s the metaphor I use for the financial markets. Imagine you close the money market funds, right, which we know is now the law. We can see that coming. So, you close the money market funds. Well, everyone will go to the banks. So, then you have to close the banks. Well, then everyone will sell stocks, so you have to close the stock exchange. Then everyone will sell bonds, so you have to shut down the bond market and so on. And, then they’ll, they’ll leave, capital will flow out of countries, so you have to put up capital controls at the national level.
So, the point is you cannot lock down part of the system, because the pressure will just move somewhere else. You have to lock down the entire system. It spreads through contagion, through what they call spillover effects. That’s the technical name for it. So, I do use this Ice Nine metaphor, but I think it works, and I hope the readers enjoy it. But, it’s a metaphor for—but, it’s more than metaphor, actually. The physics and the dynamics and the math are the same for how things spread exponentially throughout the system. But, the whole thing’s going to have be locked down. They’ll say temporary. Remember, August 15th, 1971, when Richard Nixon suspended the convertibility of dollars to gold. He said, “I’m temporarily,” he used the word temporary. You can find that on YouTube, “temporarily suspending the redemption of dollars for gold.” Well, that was 45 years ago. We still don’t have the gold standard.
They’ll say it’s temporary just to kind of appease people, but then the question is where does it go from there? People might accept it, but it could get worse. It could break out into what I call money riots. And, then now you’re into more of a neo-fascist scenario where, you know, it’s still illegal under the Posse Comitatus Act to use the military as a police force under local jurisdiction. That’s illegal. So, what they’ve done instead is they’ve militarized the police. They said, “Look, if we can’t use the military as a police force, let’s turn the police into military.” So, whether it’s, you know, Kevlar vests, night vision goggles, flash bang grenades, armored personnel carriers, battering rams, the police are armored up; they look like Seal Team Six. They’ll be deployed to suppress these money riots. That, I’m not saying that will happen, but that’s a logical extension of the financial lockdown that I’m talking about.
Chris: Well, you know, obviously, the, if you’ve been paying attention to anything but mainstream media, we’ve been seeing all of those militarized aspects coming out in the Ferguson riots, now at Standing Rock, etc., and so forth. I mean, they got M-raps out there and yeah, guys with thousand-yard stares and the latest greatest sniper rifles for guys who are smoking peace pipes. I mean, it’s just, you know, a crazy sort of an overreaction.
But, what you’re talking about is something really, honestly, should have the elites scared. I’m catching myself a lot of sense of the elites being scared. And, the elites to me aren’t some faceless people who, you know, occupy the upper echelons of the seventh floor at the State Department. I mean, they might be a few of them. But, I go and I talk with people at financial conferences who are elites. And, let me tell you the most disquieting experience I had. I was talking at a wealth conference where there’s, you know, billions and billions in the room. These are all very, very wealthy families. It’s mostly a family office scenario, but a lot of top tier hedge funds are there. And, Jim, for the first time, I was no longer a contrarian. I was kind of center mass, right, talking…
Chris: …about the kinds of things you and I regularly talk about, which is, hey, all this money printing probably will come to no good. In fact, the people who had the most experience, 10, 20, 30 years operating hedge funds or private equity or, or family office foundation portfolios, the more experience they had, Jim, the more worried they were. And, these people are making their own plans on a personal level, like they also have their public/private position. Hey, publicly, I run this fund, so this is what I’m doing. They had great strategies. But, privately, they were going to cash, they were going to gold, they were very nervous. They were even thinking about what they were going to do if unrest cropped up. Like that was a very different vibe for me to experience, that I hadn’t experience in prior years.
So, you said before, like you, yeah, could the Fed double its balance sheet to eight trillion. Technically, sure, why not. But, practically, when they lose the trust, it’s over.
Chris: And, that’s what I think I’m detecting now is that loss of trust in people I consider to be financial elites.
Jim: Right. That’s actually right, Chris. It’s one thing when everyday citizens lose confidence in the elites, but what happens when the elites lose confidence in themselves. And, that’s what I see happening. I happen to live in a, fortunate to live in a fairly wealthy town in During, Connecticut. We’re next door neighbors with Greenwich. I know a certain number of billionaires. I don’t know one hedge fund billionaire who doesn’t have a vault with gold. So, these guys may be out there whipping and driving the stock market all day long, but they personally are, are going to gold. You’re exactly right about that.
The other point you make, and this, I not only agree, but I expand on this in the book, is that when you say elites, it’s not some like faceless, deep, dark conspiracy. We know who they are. It’s Christine Lagarde, Marty Feldstein, Paul Krugman, Janet Yellen, Mario Draghi, Larry Summers. They’re professors, they’re academics, they’re central bankers, they’re finance ministers. We know who they are. They hang out in Davos. They go to the Aspen Ideas Festival. You know, you and I bump into them at various conferences. You know, the one, the spookiest one you hear about is Bilderberger—sorry, Bilderberg, rather, the Bilderberg Group. You know, they get a lot of attention. I actually briefed the head of Bilderberg. He invited me in and with some of this cohorts and I gave a private briefing in Rockefeller Center. And, you know, nice guy and didn’t, didn’t have horns as I say in the book. He wanted, we talked about the euro, he was very concerned with the collapse of the euro. I said, “Don’t worry, the euro’s good to go.”
And, you know, by that way, I said that in 2012, and at a time when Krugman and Stiglitz and all these guys were running around with their hair on fire saying, “The euro’s collapsing and Greece is getting kicked out, and Spain’s going to quit, and Northern Tier and Southern Tier…” I said, “No,” I said, “Nobody’s getting kicked out, nobody’s quitting. The euro’s hanging together. They will add members.” Every, every one of those things has turned out to be true. They’ve gone from 16 members to 19 members. By the way, the next member of the Euro Zone will be Scotland, because as the U.K. leaves the EU, Scotland’s going to leave the U.K. I’m sure the Bank of England will not share what little gold they have left. So, Scotland’s going to be there. What are they going to do, have a Scottish pound with no gold? So, clearly, they’ll join the Euro.
So, the Euro is strong and getting stronger, but that’s because it’s never, it has never been an economic project. It has also been a political project, and you need to understand the politics of unification, world government and kind of where all this is going. So, yeah, we know who the elites are, but you’re exactly right, they’re losing confidence in each other, and I talk about that in the book.
One other, one other threat, Chris, and again, we talked about this cascade and complexity theory and that’s all, that’s all coming. But, there’s another threat that’s a little bit more of a clear and present danger, which is cyber financial warfare. Now, of course, I do a lot of national security work with the Pentagon and the intelligence community and others. We all know about cyber warfare, so I cease control, I hack into a piece of critical infrastructure like a dam and I open the floodgates and kill 300,000 people. I drown them in their sleep, because they’re downstream and I open the flood gates on the, you know, the Hoover Dam or the Grand Coulee Dam. We know about financial warfare, that’s what I did at the Pentagon war game in 2009. But, how about combining the two? Cyber and financial warfare, where it’s not just, you know, shutting down the New York Stock Exchange. That’s child’s play. What if I get into the order entry system and start spoofing orders to sell Google, Amazon, Facebook, boom, boom, boom, and you’re an executing broker and you can’t tell the difference between a fake order and a real order. And, you’re executing all this and that’s getting, that’s turning into its own cascade, crashing the markets. Same thing with the bank lockdown.
What’s happening, Chris, is that this is part of the war on cash. We’re being told, you know, if you want cash, you’re either a drug dealer or tax evader or a terrorist. You know, of course, you can be a totally honest citizen just trying to have some cash, like keep batteries and flashlight for hurricanes. You know, it’s good to have some cash on hand in case the power grid’s out. But, you will be treated like a criminal by your, your friendly local banker. But, before you slaughter animals, they have to be herded into a pen, and before you slaughter investors, they have to herded into a digital pen. They’re forcing us all into digital accounts at one of a small number of banks, so when they’re ready for either negative interest rates, confiscation, bank closures, we’ll be—if you’re in this system, you’ll be helpless. So, what I recommend for investors is don’t be helpless, don’t be a victim. Get outside the digital system. That could be gold, silver, fine art, paper cash, land, income producing land, natural resources. There are a lot of ways to do it, but you have to have something outside the digital system or you are completely vulnerable.
Chris: And, they’ve been feathering this nest for a long time. I mean, this has been very careful preparations and, and I think this is useful to talk about this war on cash that you just raised. Because, whether it’s Larry Summers coming out and saying, “Oh, hundred dollar bills are just too big.” I mean, I don’t know if Larry goes shopping, but if he came with me to the grocery store, he’d discover I could put $200 in a single grocery bag if I’m buying expensive meat or something.
Chris: But, you got him talking about that, you got Haldane out of the BOE talking about taking out the 500 euro note or whatever. You know, you got all these people talking about it, and then, of course, Rogoff [PH] out there famously saying, “Oh, this is all tax cheat terrorists, criminal…
Chris: …guys and stuff like that. But, just ham-handed, very heavy-handed things where clearly if they were just honest with us and said, “Look, what we really hate is that you can evade our policies and our…
Chris: …policies are we have to find a way to take a little bit from everybody so we can plug this big hole over here. And, if we can’t do that, we’ll have to go to the next layer of this. It’s a threat, it’s a financial threat is how I perceive it.
Jim: Right. Well, when I was, you know, back in the ‘60s when I was a young kid or early teenage years, we had a $500 bill. The United States got rid of the $500 bill in the late 1960s. Nickels, or, sorry, not nickels, but dimes and quarters were pure silver. So, you know, when I was kid if I had a dime, I went down to buy some candy, I was handing over a pure silver coin. And, you know, if you were an adult, you could go to the bank and get a $500 bill. Well, they turned the coins into zinc, they turned the, they made the $500 bill go away. We still have $100 bill, but by the way, since the late ‘60s, the $100 bill has lost 80% of its purchasing power. So, it’s like a 20. If you wait long enough, you won’t have to abolish the $100 bill, it just won’t be worth very much.
But, you’re right, Larry Summers has come out and called for the abolition. In Europe, they actually did get rid of the 500 euro note. Now, their largest denomination is a 200-euro note. But, they’re doing this—now, it’s always in the guise of, you know, counterterrorism, criminal gangs, tax evasion. But, whatever happened to liberty? I mean, I have no sympathy for terrorists and the tax evaders and criminals and drug dealers. I mean, I spent 10 years doing counter-terrorism for the CIA, so, but, but so what. I mean, whatever happened to liberty? Whatever happened to the freedom of people to decide what form of money is right for them, whether it’s cash, you want to put your money in the bank, that’s fine. It’s a choice. Gold, it’s a choice. What they’re doing is taking away the choices. Why? Because, they want to get ready for negative interest rates.
You know, negative interest rates, so I put $100,000 in the bank. If you pay me 1%, I come back a year later, it’s $101,000. But, with a negative 1%, I come back a year later, and it’s $99,000. They actually take $1,000 away out of my $100,000. But, I can just take the $100,000 out of the bank, put it in safe storage. A year later, I still have $100,000 and my next door neighbor only has 99, because they took it out of the digital account. So, people know that, and so you’ve got to get rid of the cash option before you impose the negative interest rates. It’s pretty straightforward. And, so they use the, you know, the drug dealer/terrorist connection to push an agenda which has nothing to do with counter-terrorism and everything to do with confiscatory negative interest rates. And, again, we’re all being herded into this digital pen. My advice is to, you know, do something about it. Don’t, don’t be a victim.
By the way, the war on cash is, people ask me how the war on cash is going, Chris. I tell them it’s over, the government won. I mean, people think they can get their money. Try going down to the bank, go down to the bank tomorrow morning and ask them for $20,000 in cash. First of all, they’ll probably tell you to come back. The teller’s face will turn white. He or she will call over the branch manager. They’ll ask you for all kinds of ID. They’ll ask you why do you want the money. They’ll file what’s called a currency transaction report with the Financial Crimes Enforcement Network, FCEN in, it’s actually in Northern Virginia. And, that’ll be put in a file right next to Al Qaida and, you know, Pablo Escobar. That’s how you get treated, okay. You’re just an honest citizen, hey, I’d like some cash, I’d like to be outside the digital system in case you guys decide to lock it down, which they will. But, no, you will be, that’s the best you can expect. And, they might even say, like, “Come back, because we don’t have that much money.”
Now, let’s say you went for $5,000. Well, that’s a different report. That’s called the SAR, the Suspicious Activities Report. Don’t think just because you’ve been going to the same bank for 20 years that these people are your friends. I mean, they’ve been terrorized by their own management. They’ve been trained to report these transactions. There is no upside for them not to report it. There’s plenty of downside if they don’t. And, so they will, and you know, it doesn’t, by itself, it’s, you know, it’s a report that goes into some government file. But, that is how you will be treated.
And, so as a practical matter, you cannot get large amounts of cash, even if you want to tell yourself that you can. The war on cash is over. But, people still have freedom to buy gold. It’s funny, the government has done such a good job of convincing themselves that gold is not money, that they forgot to declare a war on gold. But, you can see that, you can see that coming. I see the war on gold coming. They’re going to start, they’ll say, “Okay, now we got to do, you know, 1099s, and we got to do, if you’re a gold dealer you need a license, and you got to report all the transactions.” And, you know, etc., and, you know, take ID, etc., etc. All that stuff that surrounds cash will move over to the gold world. So, one of the things investors should do is, you know, kind of get your gold now while you still can.
Chris: I think that’s great advice. And, all of that makes a lot of sense. So, in the time we have left, we are recording this on October 31st, and you know, at the risk of making predictions, but here we are, we’re just days away from an election in the United States for the president. And, here’s, you know, this is something that I really think is potentially market-moving an event. I don’t really, not interested in the politics of it, but I am interested in the market side. Have you been tracking this and have people that you’ve been talking to been looking at this as a potential market event?
Jim: Absolutely, Chris. And, you know, one of the great things about doing programs like yours is that they’re timestamped. If you make a forecast, you know, you could be right, you could be wrong, but at least people will know when you, when you said it. And, I just got back yesterday from Australia. I was there for nine days, and I did some television interviews in Australia. I put them on my Twitter account, and before the FBI announcement, that was Friday, October 28th was when the FBI director said they’re looking into Hillary Clinton’s emails. And, that, obviously, has kind of hurt her electoral chances. But, before that, I did an interview, I said I thought Trump would win, not by a lot. It’s going to, it’s definitely going to be close. It’s absolutely going to be close. Hillary Clinton could win. I’m not ruling that out. But, I said Trump could win. In fact, I think he will win, and his odds went up.
But, here’s the point. And, again, I don’t want to get into the politics. I have the utmost confidence in listeners to, you know, make up their own minds and make the choice that’s, that’s best for them. But, the markets are fully priced for Hillary. The odds makers, the markets, the pundits, the polls, everything is all in for Hillary Clinton. Which means that you have one of these great asymmetric trading opportunities, which come along very rarely, where it basically, if you do the Trump trade, let’s say, if Hillary wins, you’re not going to make a lot of money, but you’re not going to lose anything. The stock market is not, the stock market is not going to go up if she wins, right. The stock market’s a little bubbly as it is. But, it’s priced for Hillary. If she wins, it’s not going to go up more because of it, because they already expect that. But, it’s going to, if Trump wins, it’s going to drop 10% almost overnight.
This is exactly like Brexit. I saw this in Brexit. I can’t believe it’s happening again within six months, but it is. I was in London, you know, the Brexit vote by the U.K. to leave the EU, I was in, that was on June 23rd, 2016. I was in London on June 20th, three days before the vote. I was in the London Eye, the capsule that’s the big Ferris wheel, with a camera crew. And, I don’t raise my voice much, but I was practically yelling at the camera, I was saying, “Short sterling, buy gold.” Because, the markets were fully priced for a remain to win. So, sterling was $1.50 and gold was about 12.60. I said, “If remain wins, sterling’s not going to $1.60, it’s priced for remain. And, like gold’s not going any lower, it’s priced for that. But, if leave wins, you’re going to see this, you’re going to see sterling drop like a stone and you’re going to see gold rally.” And, that’s exactly what happened. Sterling dropped from 1.50 to 1.30 in hours, and gold went up over $100 an ounce. It backed off a little bit by the end of the trading day. But, the immediate reaction was up over $100 an ounce. I had people writing to me saying, “Jim, thank you for, you know, paying my kids’ college tuition for this semester, because I followed your advice.”
I see the same thing set up. It’s, it’s, like I say, I do think Trump will win, but what I know is that the markets are priced for Hillary. If he wins, it’s an earthquake.
Chris: Fantastic. Well, I really love your views, Jim. We’re out of time here. We’ve been talking with Jim Rickards, author of the newly released book, The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis. Of course, maybe it’s not that secret of a plan and it sure won’t be if you get the book and read it. You can find it on Amazon, your local bookstore. And, hey, Jim, I saw on Twitter, a picture of you in a sound booth. You recorded this, too, didn’t you?
Jim: I did. I read the audio book. It’s a lot of work. I mean, man is it hard, but I like doing it and I think, you know, a lot of—audiobooks are a big part of the market and a lot of buyers like it when it’s read by the author. And, so I hope people enjoy that.
Chris: Fantastic. Well, I know it’s a lot of work. I’ve read one of my own. And, whoo, it is work. But, so, Jim, thank you very much for your time today, and we’ll put this up and we’ll see how the predictions turn out. And, can’t wait to see how this next year unfolds.
Jim: Thanks, Chris.