James Rickards: “When The International Monetary System Collapses—It’s Going To Be About How Much Gold You Have”
September 24, 2013 | By Tekoa Da Silva
I had the chance to reconnect with James G. Rickards, Senior Managing Director of Tangent Capital and author of the New York Times Bestseller, Currency Wars: The Making Of The Next Global Crisis.
It was a fascinating conversation, as James indicated that the U.S. Fed is manipulating every market in the world in an attempt to abort the country’s first depression since the 1930′s. As a consequence, he notes that emerging countries are abandoning paper currencies in favor of physical gold, in anticipation of a collapse in the international monetary system.
Speaking towards the recent non-tapering and continued Fed stimulus, James explained that, “The Feds are inflating the [stock] bubble as they did in the late-90s, and as they did in the mid-2000s with money printing and monetary easing…[it's] just money printing. It’s another bubble that will end badly, but the thing with bubbles is they can go on a lot longer than you expect. I mean it could go on well into next year before correcting.”
Many Western money managers believe the rising stock market is an indication of economic recovery James notes, “[But] most of them don’t understand what’s going on in the economy. They’re using the wrong models. Everyone is using cyclical models…expecting some kind of robust recovery…they’ve been wrong every single time, [and] the reason is that we’re not in a cyclical recovery…We’re in a depression. We are in a depression for the first time since the 1930s…[So] if you’re curious and you want to know what a depression feels like, it feels like this because we’re in one.”
“The problem with a depression,” James continued, “is that it’s not a business cycle. It’s a different [economic] condition and so cyclical remedies such as monetary easing don’t work…You need a structural remedy and that means changes in tax laws, labor mobility, regulatory policy, fiscal policy etc…I don’t see any resolution of the structural issues on the table and therefore I would expect that this depression will continue indefinitely.”
The Fed’s money-printing approach to solving the problem has resulted in a financial ‘backhanding’ of emerging markets and currencies James explains, in that, “Emerging markets [keep] most of their reserves denominated in dollars…and the Fed is manipulating the dollar, manipulating interest rates, manipulating exchange rates…manipulating every market in the world…[So] the Fed is like a drunk driver running over pedestrians and then blaming the pedestrians for being in the way…Things could easily spin out of control because of the Fed’s lack of understanding of how the emerging markets are really reacting to and dependent upon the Fed manipulation.”
In response to the continued Fed mismanagement and growing world currency war, it’s becoming clear according to Jim, that, “[Countries] want physical custody of gold…[they're] positioning for the day when there’s a massive loss of confidence in paper money…You’re seeing it with massive acquisitions of gold by Russia and China taking place through channels that bypass the London Bullion Market Association…They’re buying mines in Western Australia. They’re having the ore refined right there in Australia at the Perth Mint, and then shipping the gold straight to Shanghai. They’re completely bypassing the London market where they minimize their market impact, which is a smart move. That’s what you would do if you were trying to buy gold and not run up the price. You would do everything in secret and that’s what’s going on.”
While many still question the validity of gold, Jim notes that, “When the international monetary system collapses and it comes time to rewrite the rules of the game and create a new system…[it's] going to be [all about] how much gold you have. So it’s not surprising that everyone is trying to get their hands on as much gold as possible.”
“It’s a very deep game but you can see it playing out and it will come to an end in the next couple years,” Jim concluded.
This was another powerful interview with one of the true market visionaries of our time. It is required listening for serious investors and market students.
To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to to your desktop:
To learn more about James Rickards, visit: TangentCapital.com
To learn more about James’ new book, visit: The Death Of Money: The Coming Collapse Of The International Monetary System
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Tekoa Da Silva
Bull Market Thinking