Jim Rickards: We're Witnessing One of the Greatest Failed Experiments in Economic History

Jim Rickards, author of the best-seller Currency Wars, sees the world's central banks embroiled in a "race to debase" their currencies in order to restore – at any cost – growth to their weakened economies.

In the midst of the fight, the U.S. Federal Reserve wields oversized power due to the dollar's unique position as the global reserve currency. As a result, actions by the Fed create huge percussive ripples across the battlefield, often influencing events in ways little understood by the players – and especially by the Fed itself.

In Rickards' words, the policymakers at the Fed "think they are dialing a thermostat up and down, but they're actually playing with a nuclear reactor – and they could melt the whole thing down":

It will play out in all markets. When I say collapse, it is a loss of confidence in paper money.

Take the Fed, for example. The Fed has printed almost $3 trillion since 2007. Now, that is without a liquidity crisis. I mean, we did have a liquidity crisis in 2008. And the first round – I would say QE1 was a legitimate central-bank response to liquidity crisis. But QE2 and QE3: we will look back over them and we will see them as enormous blunders in one of the greatest failed experiments in economic history.

But the problem is, the Fed printed trillions of dollars without a liquidity crisis. What is going to happen when we do have a liquidity crisis, which I expect in the next couple years, where there is a 2008 panic starting again? What are they going to do? Print $6 trillion? $9 trillion? There is a limit on what they can do. And so at some point, it is going to get handed over to the IMF, and they are going to have to print SDRs (special drawing rights). That is the IMF world money. Because none of the central banks have clean balance sheets at this point; they look like hedge funds.

And so it really is a loss of confidence. Confidence is the key word – a loss of confidence in paper money. And that confidence is going to have to be restored somehow. And there are really only two ways.

One is the SDR, which no one understands. So maybe they can re-liquify the world by printing SDRs and that will create massive inflation, but no one will really understand where it is coming from.

And the other way is gold, which would restore confidence. But to have a non-deflationary price of gold, you are looking at $7,000 an ounce – very possibly higher, maybe as high as $9-10,000 an ounce. I know that sounds extreme. But it is really just eighth-grade math, if you look at the money supplies and look at the physical amount of gold. People say you cannot have a gold standard because there is not enough gold. Well, that is not true. There is always enough gold; it is just a question of price. So the theoretical question is, what is a non-deflationary price for gold if you have to go back to a gold standard? And the answer is, it's north of $7,000 and up.

So that is the kind of thing that you might see. It is not what any central bank wants. It is not what the elites want. But it is the kind of thing you could get if you had to restore confidence. So that is what the future of the international monetary system will look like. But right now, the Fed is still behind the wheel, and they are still driving the bus over the cliff.

Click the play button below to listen to Chris' interview with Jim Rickards (32m:46s):

This is a companion discussion topic for the original entry at https://peakprosperity.com/jim-rickards-were-witnessing-one-of-the-greatest-failed-experiments-in-economic-history/

Let us play a game. It is so much fun. It is called make-believe.
Let us pretend the a country that has a long history of loving gold, say India, has a surge of paper (Or computer digits) into it. The Indians spend all their digits buying Gold. And then the digits rush back out with equal alacrity. And then where would India be? It would have all its wealth trapped in gold. It would be trapped because any Indian worth his salt taxes would cling on to his gold as a talisman against famine. Gold to him would be his virtual pantry.

But if some external force, say the Climate Catastrophe, had to decrease rainfall on the wheat belt of the USA by 2" there would be a world-wide shortage of food energy. Food energy would become more expensive compared to gold, and the clever Indian's pantry would shrink. Once he had eaten all his gold India would be left penniless.

Meanwhile some other clever country, having sold all its gold to the East and invests heavily in 3d printing the internet, robotics and fundamental energy research still has an ongoing product that they can exchange for food after the masses have made the ultimate unacknowledged sacrifice to the evolutionary progress of mankind.

Unfortunately no such clever country exists.

If we take a conservative 4% for real inflation, then real interest rates are negative.  So bonds are in trouble.  Remember in 2008/2009 stocks and bonds went down but bonds went down much less which is to be expected since bonds have calls on assets of the borrower whereas stocks can go to zero.

I dont trust lawyers, economists, nor bankers…and certainly not anyone who has been all three.
seems like an ultra elitist mouthpeice to me. Ever so gently guiding us toward the one world currency like the Rothchilds want.

does anyone really believe that they dont know exactly what their doing? give me a break. Its all planned out. Been that way for a very long time. No expirimentation, all lies and manipulation.

Copied and pasted from another thread:
 

 

Rickards has been trying to soften the blow of this scenario for years.  He's also a known councelor to the Financial Elite/Banking Cartel so, what he says, is what he's being told to say.  Pretty simple.

CNBC doesn't allow (especially any longer) people to come onto their show unless that person is there to help the cause (Ron Paul Excluded).  

In other words:  Don't trust Rickards.  He's working against the citizen, not for the citizen.

skip the swirl of ideas and complexity.
if dollars are paper or digits or a concept. why does it matter if gold is valued in dollars? 0 digits/dollars ,1000 digits/dollars or 7000 digits/dollars?..what's the difference if all digits are digits and worthless because they are not really backed by anything? and in reality just digits.? zero x zero is zero.it takes a human to say oh no, it(zero) has worth.it's a digit…not zero… but where? how? if electricity stops, how does one get digits?well they are there somewhere aren't they? right.here i have a 3 cent piece of typing paper that says i have here 1 million digits or dollarsso i think i have 1 mil digits, but all i actually have is a 3 cent piece of paper that claims i do. is this stupid or what?

.that makes gold worthless too in my understanding.because it is valued in worthless digits or dollars. where a potato has value because it is food.who cares if an once of gold goes from 200 digits to 1000 digits? digits are worthless and so are dollars…they are akin to feathers and shells, and tulips. smart people know this, and smart people play dumb ones.

but if the potatoe is full of chemicals, then it's no longer food but poison.it too has no value.so we all end up holding useless currency , dollars, gold, or potatoe.surely not stable. we hold useless ideas and nothing solid.

for the saver:

it's like storing sunlight and energy or storing my labor today to use in the future. i don't see any good means of storage.natue does. it take 60 years for an oak tree to store enough of the sun's energy to heat my house for a winter. wood is a natural battery-- a store of energy. my work is energy…where is 60 years of my energy stored? in gold which is valued in paper and digits? in a sheet of typing paper that comes in my mailbox saying i own 1000000 digits? where?

in digits? no in paper ? no   where? where is my life stored?

i think we are living in the biggest scam in history. i think once discovery of these thoughts hits mainstream the party is over. it's very fragile. and when this flushes, trust of all sorts goes out the atmosphere so to speak.

open to comments.

 

Common Fellas. Since when is a plan a conspiracy?
Some people might fantasize that they have got everything under control. Humour them, they too are people.

The size of an empire is dependent on its speed of communication. World government is an Emergent Property of the internet.

Not that that is going to save us from the findings of the  Limits to Growth report.

My nightmares are far more frightening than worrying about who (Or What?) has the top job.

When this baby hits, they can have it.

gold cannot be created. every particle of gold dug up from the earth since time immemorial still exists. Gold has survived as a monetary standard since will before Christ, before paper ever existed. gold has value because it took mens labor blood sweat and tears to find and produce. You cannot create gold as you can paper. gold lasts for-ever. gold is the ideal commodity to serve as money, and silver comes in second.  ETC ETC paper dollars can be printed by any country with good counterfeiting equipment. counterfeiting is cheating and lying. ETCETC

gold cannot be created. every particle of gold dug up from the earth since time immemorial still exists. Gold has survived as a monetary standard since will before Christ, before paper ever existed. gold has value because it took mens labor blood sweat and tears to find and produce. You cannot create gold as you can paper. gold lasts for-ever. gold is the ideal commodity to serve as money, and silver comes in second.  ETC ETC paper dollars can be printed by any country with good counterfeiting equipment. counterfeiting is cheating and lying. ETCETC

At the end of the day neither imfbucks nor gold have any real value. Symbolic only, subject to manipulation.only energy has real value, and unlike jim who has given us the strategic 2 options, i have a thrid option.
Energy is currency, and the ability to generate energy is the reserve for that currency.
 

the whole point is people see value in worhtless shit.
 

i sell art…it's perceived value…so is gold, dollars, cds ,clams, feathers. shells.tullips…whatever ?.!

 

deflation:  losing your stored labor value., nest egg

 

 

 

[quote] gold has value because it took mens labor blood sweat and tears to find and produce.  [/quote] No, it's the other way around. People invest labor to find and produce gold because other people value it. If no one valued gold, there'd be no point in mining it. Investing labor in a thing doesn't automatically make it valuable. It's all too easy to invest great labor into something that no one ends up wanting. On the other hand, lots of people want gold, so (for folks so inclined) it becomes worth investing effort to find and produce it. The whole idea of "money" is a man-made construct, but there are practical reasons why gold has become so widely accepted as a medium of exchange and store of value. It's durable (chemically stable, corrosion resistant), malleable and ductile (can be formed and reformed), and rare (but not too rare). Its aesthetic appeal is a bonus! None of the above can be said about paper money ... [quote] a potato has value because it is food [/quote] True ... until someone eats the potato. Potatoes have a different kind of value than gold does.

 

Barting is useful but limited in its scope. This is why men created money as a generic intermediate medium to "bart" what they needed. The money must have some practical characteristics:

  • Its ratio of value/volume must be high: No one wants (or can) store truckloads of it to buy few potatoes.

  • Durable. Wear is an issue.

  • Workable (Malleable, ductile, etc…).

  • Rare. this allow control supply and thus maintain its value.

Gold has these characteristic. Other metals too up to a certain point.

If gold takes the high shelf, we need at least another metal for lower shelf. Silver is such an option for everyday grocery.

I don't think gold or silver will be the universal money. They are real money, they will stay real money. Paper money will still exist through new sets of rules. This is the only way to maintain (or try to) a 7 billion crowd.

Having some gold and silver on hand is not a bad idea.

To follow…

JM

Arthur,
You're a smart dude, but you're wrong if you believe they don't have control of this situation.  
Look at the graph at around 2035 and imagine, who will benefit the most when all of those lines turn for the worst for most of the population.  Who will be in control of the resources, energy, food, police forces, military, etc…?  It won't be the masses, but the elite (Rothschilds, Rockefellers, Warburgs, etc…). 
These "Conspiracy Theories" as many like to call them, are extremely well documented, and for the most part, have been CONFIRMED by most of those families!  Again, it's all documented.
Cheers.

Arthur,What is the source of the graph?
Thanks
JM

i'm not trying to discus gold's attributes or it's shortcomings. i'm not in that discussion. i'm saying to say gold is "worth" $7000/ounce just tells me at the moment the faith in a us dollar is low.compared to an ounce of gold. an ounce of gold is still an ounce of gold. it hasn't changed. the dollar has. so we all know for many reasons, the dollar is worthless. so why would we valuate gold in a worthless currency? that does not make sense to me.
the ability of gold's buying power in the future is unknown just as much as the value of a dollar and it's buying power is unknown… people are fickle and many other things. i just don't see the financial system as it is as sustainable and more like an avalanche of mistrust waiting to happen. i don't see gold as necessarily standing out as a secure store of my labor. the house i built is.(until something destroys it) i don't see anything as risk free, but to place a lot of trust on a future value of anything seems foolishness.these are times that prove that point.

one nervous large investor, country, event could start a run on the claims the owner has. the claims can't be paid off in full, a few cents on the dollar perhaps if that. now it's not a matter of closing the banks the doors, it's a matter of turning off some computers.

i don't see the emporer's new clothes, i see the people;s new clothes. we are running around thinking we have something of value when we don't. my own greed sets me up for my own folly.

...does anyone really believe that they dont know exactly what their doing? give me a break. Its all planned out. Been that way for a very long time. No expirimentation, all lies and manipulation.
At one point during my work history, I was a mid-level manager in a company that was acquired by a larger company.  After a particularly unpleasant meeting with the big guys from the acquiring company, we got together and asked my boss, "are they deliberately setting us up to fail here?"

He sat back a moment and thought.  And then said this:

"You see a duck gliding across the lake.  How is he moving?  Is he paddling furiously underneath the water, is the wind blowing him across, or is it some current that is the motive force?  How can we tell from here?"  To this day, I have no idea if it was all some grand plot, or if they were just idiots, but seeing the other mistakes that the acquiring company made, my money is on "idiots."

Martin Armstrong does not believe that "they" are in charge.  He claims to have seen behind the curtain, sat in meetings with central bankers and finance ministers and politicians and big money, and he has found only general cluelessness and short-range and self-interested thinking.  He would seem to prefer that someone really did have a plan, but he hasn't encountered it yet. 

http://armstrongeconomics.com

As for me - that's above my pay grade.  I'm not invited to the meetings!  Regardless of what moves the duck across the water, all I am concerned with is - is that duck moving or not, and what direction is it going.  Whether it is obliviously gliding with the current or paddling furiously beneath the water to move towards its objective - for the life of me, I can't tell from where I am.  And the outcome for me is identical so…I just watch and see where the duck is headed and save my energy for stuff I can control.

I am also reminded of the axiom: no battle plan survives contact with the enemy.  If they exist, and they do have a plan, most likely it won't survive contact with reality either.  So why worry?

 

Thats the problem. Even a little defiance in a place like this is enough to make a difference.
They are scared to death of us. Scared that we will take away all that they have stolen.

and we will.

My focus, as almost always, is agricultural. One of the factors no one is talking about–not even Jim R & Dr. Chis in the above podcast–is that the USA is the Saudi Arabia of wheat. In my opinoion, part of reason why the dollar continues to be the reserve currency (for now) will be stripped away once climate change (floods, storms, drought) plus overtaxed aquifers combine to bring on a new dust bowl.
A grannery is a form of stored wealth. So is a pantry. And if I were a farmer who only had enough to feed his family and someone offered me gold for their food, guess what my answer would be?

Local resources are wealth. If we allow those resources to be stripped by distant lands, we are being depleted. A sad example of this is was highlighted by Ferfal when he mentioned that, during Argentina's 2001 collapse, that people worrked producing food for export, while starving. They were, basically, farming for the bankers to pay off bad loans. That is not food-as-wealth, it's economic colonialism.

On the other hand even small amounts of personal growing space are wealth. In the former Soviet Union, for example, one fourth of the value of agricultural production in 1973 was produced on the private plots peasants were allowed  which was 2% of their arable land. During WWII in England and the USA we had Victory Gardens. And on the collective side, even impoverished Cuba managed its economic abandonment by the defunct USSR by planting every available growing space.

So, 10 to 20 perecent of your wealth should be in precious metals, Jim? Sounds reasonable, but… Jim, Chris, we love you, but your solutions don't really help the common man all that much. Statistically, the common man is poor and getting poorer. And if individuals are personally out of debt-slavery enough to have a net worth, I wonder what portion of their wealth should also go into building up soil, saving seeds, learning how to grow things…including those trees ferralhen sugggests are a great store of wealth.  I agree with FreeNL that the ability to prodice energy is wealth, too,so I suppose a portion of your wealth should go into things that either lower your energy use or produce enegy outright.

I am not lambasting Jim R for his views, or criticizing Dr. Martenson. This was a good podcast because it advised gold as a minor part of one's portfolio. The information will be useful to those who have the resources to apply it, and can be ignored by those who do not. I was concerned that some of our community might rely on precious metals as a be-all and end-all solution, and this podcast suggests that it is merely part of the puzzle. The other parts of the puzzle of where to put one's resources are addressed elsewhere on PeakProsperity.com

"The Fire in the Madhouse at the End of Time."
Terence McKenna.

I was familiar with the concept of Strange Attractors pulling the present into the future. Terence McKenna added to my understanding of our present predicament by cogently arguing that events are happening faster and faster as we reach an asymptote. His lectures were about 1 hour long, but if you have the patience they are worth it.

On the other hand he did not have access to newer information which is an illustration of the acceleration of events that he was rabbiting on about.

He was no intellectual slouch.

http://www.youtube.com/watch?v=NCaK35DQ4uk