04/07/2016 - James Rickards: “The only way every currency can get cheaper at the same time, is not against themselves, but against Gold!”
James Rickards, Chief Global Strategist at West Shore Funds and a widely renowned author is interviewed by FRA Co-founder Gordon T. Long in which they discuss Jim’s just released book The New Case for Gold. They also delve into issues concerning the false perceptions of the world switching back to a Gold Standard and the reasons for a suspected G-20 stealth “Shanghai Accord”.
THE NEW CASE FOR GOLD
James Rickards suggests that there is a new case for Gold and points out that everyone thinks that what they own currently, in terms of stocks, bonds and other financial securities, is actually only “electronic digits” representing claims on assets. The new reality of Cyber war and Cyber attack suggests the real possibility of a single group of people or political regime hacking U.S servers. The potential exists today for investors to lose wealth and there will be almost nothing any one can do to bring back that money, at least in any realistic period of time. Physical Gold cannot be hacked nor simply be erased from the world’s ledger. It is the most tangible and secure way of preserving wealth and James recommends a portfolio with at least 10% being allocated to physical Gold.
Being outside the system, and being non-digital are the two main reasons that smart investors economists suggest will ensure having some sort of security for your wealth. Gold meets both these requirements and in the next big financial crisis will provide you with insurance for the rest of your portfolio.
“They’re not going to bailout the system; they’re going to lockdown the system”
OUTSIDE THE BANKING SYSTEM – The Best Kind if Insurance
The financial system is inherently unstable based on:
1-Complexity Theory and
2- Financialization,
Gold acts as an insurance policy no matter what happens:
1-Inflation,
2-Deflation,
3-Bank failures, and
4-Bail-ins.
Gold is always gold – It’s outside the banking system, can’t be reproduced by fiat, It cannot be “hacked”.
“It is one of the few asset classes that perform well in both inflation and deflation. That is the best kind of insurance,”
Jim talks to FRA about methodically dispelling the decades old arguments and fallacies associated with going back to the Gold Standard. He additionally dispels myths such as:
- That John Maynard Keynes Called gold a “barbarous relic” (he didn’t),
- That there is not enough gold to support finance and commerce (there is, it depends on the price),
- That the gold supply does not grow fast enough to support world growth (it does if we are looking at real growth),
- That gold caused the Great Depression (it didn’t, it was the Fed in charge of managing the money supply),
- That gold has no intrinsic value (it doesn’t but neither has the theory of intrinsic value).
GOLD IS STILL A MONETARY ASSET & REAL MONEY
Rickards feels that over 40 years of “un-education or mis-education” has resulted in the new generation of economists and youth not understanding the importance or the value behind why gold is so important for our economy. We cannot blame the new generation for this gap inn their knowledge. We have not been teaching Gold as money in university curriculum and along with myths created about gold have virtually disowning it from economic thinking.
“The only way every currency can get cheaper at the same time is not against each other, but against Gold.”
Gold is the one form of monetary value that can’t fight back which is why they have completely stopped educating the U.S public on Gold as a whole.
A POST MONETARY RESET – Gold after the Next Crisis
The current financial system is inherently unstable and may soon have to be reformed. Gold will play a prominent role, if that happens.
The IMF is the third largest holder of official gold reserves after the United States. Gold is at the very center of international finance as the International Monetary Fund (IMF) with its Special Drawing Rights (SDR) reserve currency is regaining prominence. In addition, the current valuation of the SDR could not be calculated without using gold, even though one has to go back to the 1970s to understand why.
China is not only acquiring vast quantities of physical gold, it is also going through the hassle of infiltrating the London gold market and simultaneously setting up its own clearing mechanism in Shanghai. Russia has boosted its gold to GDP ratio to 2.7 percent, higher than the United States percentage of 1.7 percent.
All powers are acquiring gold to have some bargaining power when the international financial system will be reformed.
“The gold to GDP ratio will be critical when the monetary system collapses because it will form the basis for any monetary reset and the new ‘rules of the game.’”
Why? After redistributing the official gold holdings and having monetized everything from bonds to stocks, the world’s governments and central banks won’t have a choice left other than to devalue paper money compared to gold, the same trick President Roosevelt used during the great depression and with the same objective of getting rid of an unsustainable debt burden.
In a monetary reset, gold will be the chips that are used to play a game of poker. Russians, Chinese and even the Iranians are stock piling gold because of this fear. If Gold has a role in the future monetary system, Gold’s price has to go up. Gold cannot multiply at the alarming rate that we will need it for. But we can always increase the price which is why the current monetary system will fail in terms of Gold in the future and will still hold the parity between money supply and demand. James expects a price target of $10,000 for the future if this falls in line.
“You want some assets in TANGIBLE ASSETS!”
James new book The New Case for Gold is available in stores and online now and provides an in-depth analysis on the old and new reasons for why Gold is a necessity in our upcoming monetary system. As always for more analysis and interviews follow us on twitter @FRAuthority or Subscribe to our YouTube channel, Financial Repression Authority for weekly interviews.
Abstract Writer: Saad Gohir sgohir@ryerson.ca
Video Editor: Min Jung Kim minjung.kim@ryerson.ca
