02/12/2017 - Jim Rickards: Real Assets Can Mitigate Risks During Financial System Lockdown Periods
“Central banks have printed so much money already, it’s not obvious that they can do it again from the current levels without destroying confidence in the dollar, and all major currencies. The question is, where will the liquidity come from in the next financial crisis if it can’t come from the central banks? The answer is the IMF. The International Monetary Fund has the only clean balance sheet out of the major financial institutions. It can print money. They call it the SDR, the Special Drawing Rights. I call new world money .. When it comes time for the IMF to issue world money (SDRs) to reliquify the world, there’s going to be a negotiation period. It will to take months to complete. During the last crisis this took 11 months. That was when the crisis hit in September, 2008 we saw Lehman Brothers hit a crisis, the IMF began to issue SDRs in August 2009 .. Even though they react on a case basis, it’s going to take, an estimated 3 or 4 months at least to get SDRs issued. In that interim period between the crisis and the time the IMF can react, central banks will be paralyzed. They’re likely going to lock down the system.
When I say lock down, they’ll start with money market funds. I can’t think of a greater misnomer than the money market funds .. If you lock down money market funds, people are just going to take their money out of the banks. Then you’re going to have to close the banks. Then people are going to sell their stocks, then you’re going to have to close the stock market. Every time you shut one path to liquidity, people are going to turn to another path.”
