Jim Rickards confronts the James Bond conspiracies and reveals how to make a fortune through crises, crashes, gold, stocks and a Donald Trump victory. Recorded at Sydney’s Custodian Vaults with The Capital Network’s Lelde Smits.
Jim Rickards,the chief global strategist at West Shore Group, appeared on Bloomberg Markets to discuss the next financial crisis. Rickards said he sees next US downturn approaching a tipping point soon. However, the Federal Reserve’s response to restoring financial solvency will be much different because there’s no place left to go with monetary policy.
“The next time, they’re not going to print the money because they’re tapped out,” he states. “They’re going to lock down the system.” In a move Rickards refers to at the “bail in, lock down” plan, large sections of the financial sector will be deactivated to avoid bank runs and complete collapse. Rickards describes some of the more likely scenarios:
“Money market funds will suspend redemptions, bank ATMs can be reprogrammed to give you $300 per day for gas and groceries; they can selectively shut down the banks. We saw it in Greece. We saw it in Cyprus; we’re seeing it today in India. The banks are closing. They’re out of cash.”
In his latest book, Jim Rickards warns that the coming financial crisis will be unlike the 1998 and 2008 crises. There will be no massive money printing to pave over the crumbling system. Rickards joins us to discuss what to expect...and how to prepare. - Source
1) Is tomorrow THE day that the dollar “dies” and is replaced?
Tomorrow, Sept. 30, is when the International Monetary Fund (IMF) officially adds the Chinese yuan to its basket of currencies comprising its special drawing right (SDR). It has enormous long-term implications for the dollar.
Does that mean the dollar becomes worthless overnight? Of course not. Tomorrow’s event may not even make major headlines. You won’t hear about it in the news. And it won’t cause the dollar to crash immediately. This is a development with long-term implications, but in itself, it will not make waves. But that’s the point — the dollar will die — but with a whimper, not a bang.
The dollar replaced the British pound sterling as the world’s dominant currency last century. But it was a gradual process that took place between 1914 and 1944. It didn’t happen overnight, nor will SDRs replace the dollar overnight.
When you wake up October 1st, you won’t find anything noticeably different. You’ll still have dollars in your pocket, you’ll still get paid in dollars, those will be worth something.
But tomorrow will nonetheless be a very significant turning point. Membership in the exclusive SDR currency club has changed only once in the past 30 years. The SDR has been dominated by the “Big Four” (U.S., U.K., Japan and Europe) since the IMF abandoned the gold SDR in 1973. This is why inclusion of the Chinese yuan is so momentous.
2) Do I need to dump all of my dollars, stocks and other investments and get into gold?
No. I do believe you should own gold, and I believe it’s ultimately heading to $10,000 an ounce. But I don’t recommend you put any more than 10% of your investable money into gold, or any other asset for that matter. Some people say, “Jim Rickards recommends selling everything and going all into gold.” I don’t say that and I never have. You never want to put all your eggs in one basket.
I recommend a diversified portfolio that includes gold, fine art, raw land, cash, bonds, select stocks and some alternatives in strategies like global macro hedge funds and venture capital. You need to be nimble in today’s unpredictable macroeconomic environment. We provide guidance on these in my newsletter, Jim Rickards’ Strategic Intelligence.
3) What do you mean when you say the “New World Money” goes live tomorrow? The SDR has been around since 1969…
It’s true, the SDR was invented in 1969. And there were a number of issues of SDRs in the 1970s. Indeed, the IMF has issued SDRs three times since their creation more than 40 years ago. Each time was linked to a crisis of confidence in the U.S. dollar…
In 1969, the French and others recognized the United States was printing too many dollars. At the time, foreigners could still exchange dollars for gold, and there was a run on Fort Knox. The IMF created the SDR to smooth the rough monetary seas, issuing 9.3 billion SDRs through 1972.
In 1979, U.S. inflation soared out of control, past 14%. Oil-producing countries fretted the value of their dollar reserves was plunging. The IMF issued 12.1 billion SDRs through 1981.
In 2009, in response to the Panic of 2008, the IMF issued 182.7 billion SDRs during August and September. That was the first time the IMF issued SDRs in almost 30 years. That was in response to the global liquidity crisis when it looked like the world’s central banks couldn’t act fast enough. So the IMF issued over $100 billion of SDRs.
But the Panic of 2008 changed everything. Central banks around the world expanded their balance sheets enormously to combat the crisis. The Fed’s balance sheet exploded from $800 pre-crisis to about $4 trillion today, for example. They won’t be able to respond the same way when the next crisis strikes, which I expect sooner rather than later. They’re out of powder.
The only financial institution with a balance sheet clean enough to respond to the crisis will be the IMF. The IMF acts like the “central bank of the world.” It will have to issue massive amounts of SDRs to hold the international monetary system together. The result will be the end of the dollar as the leading global reserve currency. That’s why today’s developments represents such a dramatic change from the past.
4) Do you expect a major market move when Chinese yuan is finally added to the SDR tomorrow?
I’m not forecasting that… but it wouldn’t surprise me if it happened. The economy is on the brink of recession. We’ve had a full year, 4 consecutive quarters, with average growth of about 1.2% and with some revisions that may even go lower. This is not just weak growth, it’s extraordinary weak, and dangerously close to recession.
Global trade has fallen dramatically. Stocks are in bubble territory and volatility is returning. You never know what event will cause a crash, but it could literally come at any time.
The point is, it could be tomorrow… it could be six months from now. The real question is: What are you waiting for? No one can time these things… and when the trigger happens it’ll be too late. How many warnings do you need?
5) Will tomorrow’s SDRs have a positive impact on the price of gold?
SDRs are inflationary. If you flood the market in dollars of SDRs, gold will spike dramatically, probably taking it to $10,000. Will that happen tomorrow? Again, probably not. But the trend is in place. What are you waiting for? You can expect that the dollar will be devalued by 50–80% in the coming years.
6) “Can I buy SDRs?”
Officially, no, you can’t. The IMF is the only institution that can print and distribute world money. Only its member states that are within its elite “basket” can freely exchange SDR as currency. Typically, SDR’s are used to take loans or make repayments made by the IMF. They are also used by its members central banks to sell in order to help currency reserves during times of economic crisis.
Now, it is true that a “private sector” version of SDRs will become available, called M-SDRs. The IMF has published a technical paper introducing the concept of a private SDR market. In the IMF’s vision, private companies and corporations can issue bonds denominated in SDRs. Who are the logical issuers of the bonds?
Probably multinational or multilateral organizations like the Asian Development Bank and maybe big corporations like IBM and General Electric. Who would buy these SDR-denominated bonds? Mostly sovereign wealth funds. China will be substantial buyers.
But the only main recourse for everyday investors is to own “synthetic” SDRs. I’ve put together a way to own an “unofficial” stake in SDRs. Not only is this “unofficial” way perfectly legal, it’s the only way I know of for any private citizen to get access.
7) What’s the next important step in this New World Money Development?
On Oct. 7, the IMF will hold its annual meeting in Washington, D.C., to consider additional steps to expand the role of SDRs and make China an integral part of the new world money order. But there’s another looming development that has implications for the adoption of SDRs…
The return of the BRICS.
“BRICS” is an acronym for Brazil, Russia, India, China and South Africa, which are among the largest emerging-market economies and make up about 22% of global GDP. Five years ago, discussion in international monetary circles was all about the rise of the BRICS. It appeared the BRICS would mount a serious challenge to U.S. dollar hegemony. Then the BRICS story went quiet in 2014–15. It looked like the BRICS story was fading in importance. But now that’s changing.
At the G-20 Leaders’ Summit in Hangzhou, China earlier this month, BRICS made a very interesting demand. They may be 22% of the global economy, but they only hold 14.89% of the votes at the IMF.
Any individual country or group of countries with 15% has veto power over certain major IMF decisions, including the issuance of SDRs. Only one country has over 15% today, and that’s the United States. The BRICS are now demanding that their IMF vote move closer to their share of the world economy and past the 15% threshold.
If that happens, then the IMF will not be able to flood the world with SDRs in a liquidity crisis unless the BRICS agree. No doubt the BRICS will agree, but only if other steps are taken at the same time to destroy the privileged position of the U.S. dollar in global payments and reserves. The BRICS are back in town, and it has implications for the adoption of SDRs… and the dollar.
Jim Rickards joins Max Keiser, one of the top financial reporters worldwide, for an in-depth discussion on his latest book The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis.
During the hard hitting discussion they get to the heart of elite constructs in which Rickards notes, “This is not left versus right. Conservative versus liberal. Those phony distinctions these days. This is the elites versus everybody else.”
Jim Rickards is a three-time best selling author that advises the U.S government on financial threats and was general counsel to one of the most influential hedge funds in history. He holds 35 years of experience working in capital markets on Wall Street.
Rickards then dives into historic analysis saying, “In 1998 Wall Street bailed out a hedge fund, in 2008 the central banks bailed out Wall Street, in 2018 (I am assuming a ten year tempo, but it could even be tomorrow – that’s the point) who is going to bail out the central banks?”
“Each bailout gets bigger than the one before. Who is bigger than the central banks? There is only one clean balance sheet left, that’s The International Monetary Fund (IMF).”
The best selling author goes on to note that, “The next crisis is going to be bigger than the central banks. They are going to have to turn to the IMF. The IMF has a printing press and they have the Special Drawing Rights (SDR)… I call it world money. They don’t want to call it that, but that’s what it is…”
In an interview that stands out above the crowd, the best selling author and economist candidly breaks down how the elites plan of action for the next phase of financial crisis could unfold.
The International Monetary Fund (IMF) has established a plan for its special drawing rights (SDR) valuation basket to be revised at midnight on September 30. This IMF plan has laid the foundations for a new monetary standard based on world money.
While these SDR plans might seem complex, they’re actually not complicated. People will make it complicated or make it sound confusing but the Federal Reserve has a printing press, they can print dollars. The IMF also has a printing press and can print SDRs. It’s just world money that could be handed out and could be used to cause inflation.
I am often asked, “What’s an SDR? If I had 100 SDRs how many dollars would that be worth? How many euros would that be worth?”
There’s a formula for determining that, and as of today there are 4 currencies in the formula: dollars, sterling, yen, and euros. Those are the 4 currencies that comprise in the SDR calculation. As of the close of business on September 30th, or in effect when we wake up October 1st, there’s going to be a fifth currency added, which is the Chinese yuan.
The Chinese yuan does not meet the typical SDR criteria, so it would not normally qualify. However, this is a political decision by the IMF attempting to get China on the bus. In the 1960s we had an expression, “you’re either on the bus or off the bus,” and right now China’s off the bus but as of September 30th they’re going to be “on the bus.” They’re going to be part of the SDR.
Does that mean the dollar becomes worthless overnight? Of course not. You’re going to wake up October 1st, you’ll still have dollars in your pocket, you’ll still get paid in dollars, those will be worth something, but it will be a very significant turning point.
We will look back on that date a few years from now we’ll look back on September 30th, 2016 and reflect, “That was the day the dollar began its demise.” Officially that’s when the Chinese yuan was put into the SDR and the SDR gained the backing it needs from the emerging markets, from China and from the BRICS, to become the new world money.
It is definitely possible to see that coming. It will play out in stages. It doesn’t happen overnight, but it is one of those turning points. There are a lot of way to get ready for this, but don’t wait until it happens when the whole world says, “too bad about the dollar.”
This will be a key turning point. It’s one of those days when it should prompt people, really starting now, but certainly not later than September 30th, to act.
Here’s the point. The SDR world money, as I mentioned, is a “basket.” Today there’s 4 parts of the basket. In the future there will be 5 parts. The one that has been designed, the synthetic SDR, has the 5 parts because we know China’s coming in, we even know what their percentage is going to be.
What the SDR does is it takes you out of the currency wars. A lot of people are getting whipped around, with volatility for which they’re not getting paid. They’re having occasional large losses based on the currency wars.
The currency wars are not going away. Because you’ve got all 5 major currencies, it neutralizes the currency war activity and gives you a plan going forward.
Jim Rickards expects the currency wars to continue for at least another ten years. UNLESS the fiat system collapses underneath its own weight before that time. He sees gold as one of the only safe havens in this eventual collapse. The gold is moving into hands that won't be letting go anytime soon and the market is becoming increasingly less liquid.