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

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They, whoever they are, are projecting it onto you. Its their policies that your living under. Everytime your country attacks a defenceless nation economically or militarily. Everytime you pay taxes to the black hole you call interest on national debt.
They, whoever they currently are, are a parasite on you and there is overwhelming evidence that they are killing their host. The rich have gotten much richer, banks much bigger, government much more corrupt. The rules are changing quickly and they arent in your favor.

Im gonna stick with George Carlin on this one. nobody seems to mind…nobody seems to care… ha. dead on.

 

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I am really appreciating the input and discussion of bright and conscientious people on this website.  Even the comments that I don't completely agree with help me clarify my understanding, shed light and enrich my life.
Some opinion differences I am hearing may be explained by psychological structure (Myers Briggs Type).  An extroverted, sensate will attend to what is – like the charts of trade flow or currency exchange rates.  This personality structure see the physical world as "reality" and the inner world of thoughts and ideas as less real.  (My wife is this type.)   While an introverted intuitive wants to know why is this as it is.  They experience the "theories" as a "deeper reality."

I'm an introverted intuitive type and want to know the whys.  What are the true motivations, goals and methods of the rich and powerful who seem to be playing this game for world domination. A favorite cartoon on this subject:

(Bigger version of cartoon)

Knowing the whys help us when the sheep dog and farmer, each acting independently, coincidentally seem to be reach the same goals.  

Or when the quarterback throws a long pass and the receiver running full speed down the field unexpectedly cuts to the left and turns only to find that the thrown football falls directly in his hands.  (Did they PLAN that?)

Or the good cop-bad cop deception.  We might think "That one is really nice. He is trying to help me.  He'll protect me from that mean guy."  But when we understand that they are a team, we don't make that mistake.  

Or the replacement of one US president, who blatantly advances the interests of big oil, big money, torture, assassination and war-for-profit in every corner of the globe, with a kind, Nobel-peace-prize-winning humanist dedicated to "Change."  Yet somehow these same horrendous practices continue and accelerate.

I specifically want to thank treebeard for pointing out the issue of projecting power and emphasizing the way that we live in shaping the world.  This brings our power back into our own lives.  Also, not using names such as "The Elite" or "The Rich and Powerful" (with capital letters!) helps to not project power onto them.  Because, this group really is small minded, closed hearted and self centered.  Bullies on the playground who have not yet learned to share and be kind.  They may own shipping companies, oil fields, and skyscrpers–but they are moral midgets, nothing more than gang-bangers with private jets.  

Transparency lets us see who has become wealthy by warfare and theft and we can shun them.  We do not need to respect them.  We can shun them.  We can stop paying $1,000 per plate to have fund raising dinners with them. We communicate that we do not support their activity by where we shop, growing our own food, joining a local organic farm CSA and saving our money in a local bank or credit union.  We can refuse to buy their products by riding our bicycles.  We can choose our own values and support ways of living that are good for us, our children and neighbors and the health of the plants and animals that make up our true world.

But, in the mean time, we are like a family with a pet rattlesnake.  You don't want to just go absently strolling through the house in the dark.  You must know where your pet is at all times and watch him constantly!

 

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from what I remember, Rickards predicted this taking at least 5 years to put into place.  I believe we are way past putting a complicated SDR plan in place as the system is inherently fragile.  So the result will most likely be chaos IMO.
Having said that, this has always been a world of the bankers and for the bankers.  There is no way they don't benefit or game the system they run.  As appalling as a majority of them are, that is just fact and I've come to accept that.
over the weekend I was in Sonoma for my sisters wedding.  Her and her husband live in NYC.  They had a few Wall St folks at the wedding.  I talked with a couple of them looking for more knowledge, intel, etc.  Re: gold, as one guy who works in the sell side at a brokerage house put it, "we know the system is messed up. We know that everyone follows the Fed. Gold will not matter until it matters.  When it matters, you will see big money flow in.  You'll have your next leg in the bull market, then it will flow out and we'll move on to the next place where we can make money".  

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[quote=davefairtex]http://www.imf.org/external/np/exr/facts/sdr.htm
Its basically faux gold, with an artificial scarcity maintained by the IMF, and the agreement among the members that an XDR can be traded for currency maintains its value.  It all works as long as everyone plays along.  Of course, there is a default scenario for the SDR regime: if a desperate country - or group of countries - sends all its SDRs off to somewhere else for dollars, pays off all its debts, and then withdraws from the IMF - i.e. engaging in a default - the "faux" nature of the SDR becomes apparent.  The dollar lender is left holding a bag full of SDR, while the borrower has a fistful of dollars (!) that have real value - at least more real value than SDRs do.  Presumably the remaining nations in the IMF would be upset about the default but they would have to engage in military or economic actions for redress.
[/quote]
This is the essence of the SDR.  It is faux gold.  The idea is that the IMF, just another fully entrenched banking institution that produces nothing but preserves the power of the current holders of power (that also happen to be the same institutions and countries that can print up money out of thin air), will be the distributor and guardian of, well, just another fiat currency.
My prediction is that if we ever do move to an SDR world, where SDRs comprise the bulk of reserve assets, everything will appear fine for a while; the IMF will appear to carefully guard the scarcity of the SDRs, but then at the first hint of trouble they will merely print and distribute and redistribute them willy-nilly to fight whatever crisis they face.
That's just how humans, especially groups of them in bureaucracies, behave.
At the end of the day, humans cannot be trusted to limit themselves in ways that would prevent a crisis from building up and then happening, and they cannot be trusted to take their lumps when the crisis comes.  Always there will be an attempt to dodge the consequences.
This is the main reason I am a gold advocate.  You either have it or you don't.  On a gold standard, countries can either live within their means or not.  If they don't, then they suffer sooner rather than later, which is actually a good thing.

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Aloha!
Obama got elected on the opposite of that! Hard to believe so many American voters have been that gullible for so many decades now. Not to be biased let me throw in "Mission Accomplished" to the gullibility mix! Man … Capitalism sucks!

In 1918 many people in the world were tired of "Capitalism" and this can be seen in this pyramid poster from that era. So a lot of Russians and Chinese died since then to escape Capitalism, but I am pretty sure we could put any political system in that 1918 pyramid poster and there will always be a few at the top ruling the many at the bottom. But in 1918 they envisioned a "bag-o-money" at the top of that Capitalist Pyramid.

In 2013, 95 years later and maybe 100 million victims of wars, the pyramid looks more like this …

A "bag-o-money" is still ruling us no matter what we do and no matter how we arrange the pyramid …

So what can we count on? Well, we can count on greed and "bags-o-money" and we can count on crony governments and corrupt bankers who use debt as a means to their ends. I guess you can just substitute the word "leverage" for the word "debt". So we can count on those who are at the top of the "debt chain" to advance debt as the ultimate solution to all our earthly problems, including using new debt to solve all our old debt problems. Whether it is a USD a YEN a EURO or a SDR they are all denominated in debt! I would say debt has been a growth industry since we were hunter gatherers so I doubt the concept is going away any time soon. Yep, what can we as the eternal "many at the bottom" do about it? Not much at this point. I think the system has to collapse for any real significant change to occur. Even that is not a 100% guarantee since WW2 birthed Bretton Woods and the USD! Just one Empire replaces the other! If none of this is planned then it sure seems consistent for being random idiots in charge generation after generation after generation. The same political and monetary monopolies are at the top of the debt chain 100 years later. None of that seems random or unplanned to me. Ludwig Von Mises wrote a book on that stuff back in 1947 and he called it "Planned Chaos". Chapter One is "The Failure of Interventionism"! What is this phrase I hear a lot … "central planners"? I think there are elite plans for the masses I just think they always fall short when they get fooled by Human Action. Ah, human nature …  At just the wrong moment the masses do the opposite! Which US Sentor or Fed Chairman has a PhD in Chaos Theory? That's the earthling I want in charge!!!

So we can put men on the moon but we're still ruled by corrupt money and politics like in the days of Julius Ceasar. What good is technology then if all it does is magnify our flaws? I guess in the end if you have a lifetime supply of food and water and energy and clothes and shelter then you don't need to have a lifetime supply of "bag-o-money" or as its known today "debt derivatives"! Bob Dylan needs to re-write his song, "The Times They Aren't A Changin' Much" …

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Chris or Dave, a couple of questions on XDR regime:
1)  Could XDR's be "temporarily" exchanged for any currency?  Your XDR examples always talk about dollars which make sense given the position of the dollar today, however, I wanted to know if euros, krona, etc could be used if desired for "some hypothetical" reason… and…

2)  Would the rate of "exchange" or "swap" of XDRs to dollars (or other currency) occur at some fixed ratio (similar to Bretton Woods) or allowed to float as is the current regime when dollars are provided to other nations through large dollar to local currency swaps. 

I am just trying to see how this XDR regime would be materially different than what we have today.  Chris writes "but then at the first hint of trouble they will merely print and distribute and redistribute them willy nilly to fight whatever crisis they face."  If the US effectively controls the IMF, would anything really be changed or is it the idea that under an XDR regime a "US dollar denominated world" would somehow "theoretically at least" be fairer to all economies strong or weak?

Thank you in advance for your comments.

Bruce

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So given history as our guide, what do you think the chances are that they will confiscate all gold when the time comes? They have done it before. Its not below them to take your pension either. This could be the us, canada or anywhere. This is the problem with gold and silver. Its doubtful they will come take your solar panels, and that investment actually has a 25 year return on it.
Do you believe that they wont come take your gold, even though theyve done it before?
 

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It sounds to me like this XDR thing really means "Xerox Dollar Repeatedly"
Rinse, wash, repeat. Another day, another manipulaton using hocus pocus. So what else is new? As long as the masses stay parked in front of the boob tube or remain fixated on facebook or other useless crap, then the maestros leading this monetary opera are free to add yet another scene to the long running show.

Nothing special here, just more BS designed to kick the can down the road a little further.

Jan

 

 

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That was just what I needed to get a handle on this SDR thing! - thanks

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I agree with your observation sand puppy re: personality types interacting here (Myers Briggs). INTJ types for instance make up only about 6% of the general population but I'm guessing the percentage here at PP is at least 40% (including myself). Personality similarities are great for creating  a sense of community, but it also tends to create blind spots. Diversity helps illuminate the dark blind alleys missed by themajority who see the world from very similar perspectives. I suggest Chris and Adam find an expert on Myers Briggs AND investing who could shed additional light in this area.

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FerallhenOne of the good points made in the book "The Creature from Jekyll Island" is that in the times of the Roman empire and ounce of gold would buy a complete custom toga, belt and sandals.  If you bought a custom tailored suit, shirt, tie and shoes today,  you'd probably spend about the same.  For whatever reason, gold has not suffered "real" inflation.  It's likely another mineral or metal would have worked similarly, but carrying around enough copper to buy a suit is a little unweildy…
Keith

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I laughed when I read this.  I'm and INTJ too.

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Hugh,Thanks.
JM

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Dave, and Chris, jct et al.
First thank you for the very thoughtful discussion about SDRs.  Dave, your detailed post especially.

I confess it is even more abstract than fiat /fractional reserve currency thus harder to understand.  Makes one wonder- the harder it is for common folk to understand, the easier it is to control the puppet strings…?

But Dave, you mentioned two key phrases, very offhandedly, but are the core of the current problem.

"when things normalized"

"after the crisis abates"

That is the core of our current predicament.  Predicament, to paraphrase Chris, meaning no good solution, meaning we fell off the cliff, now how do we land?

All modern Keynesian economics have a core principle that government infusions of cash/ credit are 'temporary' measures, to restore the economy to some immutable growth curve, that is a law of nature, that somehow we stumbled off of.   None of the current Keynesian world views even entertain the idea that we are/ were on an unsustainable curve that is a figment of an economist's imagination and hypothetical mathematical model that only lives inside a hard drive platter (Bernanke) and does not live in the 'real world'.

If I understand a core principle of the Crash Course, all of the above is false.  We cannot live on an exponential curve forever.  Reality means we fall off that curve, at some point.  Due to physical limitations- the amount of oil that we can extract, the heat capacity of Earth, the fresh water available for growing food on Earth.  No amount of manipulation by any small or large group of powerful people can change that reality.  It is simply truth.  We must deal with it.  There are a number of choices for dealing with predicaments.  Some better than others- i.e. slowly and painfully (i.e. "suffer" with a more constrained consumption) transition off of population growth and fossil fuels versus killing half the world's population next year.  These are the hard discussions that I perceive Chris is promoting, and I agree we should have.  A corollary to this view: The closer we get to the ground, the smaller our range of choices are.

Which means "things do not normalize" and "the crisis does not abate". 

If this is true, all the Keynesian, and XDRian scenarios are based on incorrect assumptions.

If a hypothetical single man who is a house painter, with no living family (meaning no one else for the bank to sue) owes a bank $300,000, then falls off his ladder and becomes a permanent quadrapalegic, the bank aint' getting that money.  The crisis will not abate.  Things will not normalize.

Greece is that house painter.  It has broken its national neck.  It physically cannot pay.  Will they discover a mountain of gold or diamonds under the Parthenon to pay off their debt?  I don't think so.   Its debt will not normalize.  Adults and mathematicians know this.  The ECB appears not to know this.

Are not all of the countries of the world Greece?  We are all the house painters with just different types of permanent injuries.  We have massive debts that are far larger than our modest incomes, and with major physical limitations.

 

 

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Dave,
I already posted a defense about why it's good to know how and why a complex thing works, so I won't repeat here.

Another version of the mindset is to understand not just the duck, but the pond, the ecosystem around the pond, how they interact with the duck, where is the duck's place in the larger ecosystem?

What if the powers that be want you to be fixated on the duck on the pond, while they drive the bear in the woods behind you to your location? 

Perhaps a lame illustration, but I intuitively feel it is quite important to understand more that just a simple data set or just the pieces of the system that some TPTBer thinks that I should understand.  I want to understand the total system, in as much as I can.  You are a paradox by the way, since by your detailed postings you show how you are a great example of this concept, yet you profess to only want to focus on the duck.

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You said, regarding Chris and Adam's resident Gold analyst;

You are a paradox by the way, since by your detailed postings you show how you are a great example of this concept, yet you profess to only want to focus on the duck.
You are much nicer, more patient, and more level headed than I...    I will therefore continue to recuse myself from the dialogue here since banging one's head against the wall eventually causes harm to one's self... and I like myself too much for that.     
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LOLI think I was borderline INTJ and INTP when I took the test!
Very interesting!

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Tested INTJ Every time since high school =D
(4 times now)
Pretty cool observation Sand Puppy.
Cheers,

Aaron

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Most of you have probably already seen this over at the Expanding Our Reach thread (https://peakprosperity.com/blog/83045/expanding-our-reach), but in case you missed it:
 

I agree with you LesPhelps and I've had similar experiences:

First, I'd have to say that a big reason the Crash Course is not a household topic is that most people don't want to consider it, even if they essentially agree with it.

My wife is an excellent example.  She is totally in agreement that we are in trouble, but doesn't want the topic discussed and doesn't want to do anything more than very basic preparation.  

Others who I've shared the message with treat me like a lunatic.  That's not going to change until people are ready.  Peak Prosperity is not alone in this.  The message has been around literally for decades.  In some cases, as with Peak Prosperity, it has been presented intelligently and in a manner hard to refute.  Yet, it still is largely ignored.

I believe a major event will have to take place to make people pay attention, possibly even larger than another stock market crash.     

I've had the same experience.  I've started identifying more and more people who have inside themselves a deep vague sense of forboding for our future.  But it's too overwhelming or frightening for them to deal with, so they push it down deeper into their minds/hearts, and try to get back to every day life.  They don't want to think or talk about it, but they sense something VERY BAD is just around the next bend in the road.  They try not to think about it, but it keeps popping into their consciousness.

Maybe they don't need more facts or evidence, but maybe they need someone to help them emotionally deal with what they fear.  Many need more of an emotion-based intervention, not a fact-based intervention.  Most of us here have responded to the fact-based intervention (The Crash Course, for instance).  The personality  types of the majority of people need an emotion-based intervention.  Their style is not to deal with the facts until they have the emotional resources in place to do so.  Secondly, most people's initial attention is NOT captured by facts, but by emotions.  Many of us here deal with the facts first, then get our emotions involved.  (All of that does NOT mean that emotion-based approaches are devoid of facts, or that fact-based approaches disregard emotions.  It DOES mean people start at different places to deal with the same problem.)

Whatever happens next, I think we might benefit by appealing to the hearts as well as to the minds of our neighbors.  (BTW, within The Crash Course the section about exponential growth using Fenway Park filling up with water as an illustration is an appeal to emotion, and a powerful one.) 

What's the old proverb?  "When the student is ready, the teacher will appear."

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quote=Hrunner
We cannot live on an exponential curve forever.  Reality means we fall off that curve, at some point.  Due to physical limitations- the amount of oil that we can extract, the heat capacity of Earth, the fresh water available for growing food on Earth. 
No amount of manipulation by any small or large group of powerful people can change that reality.  It is simply truth.  We must deal with it.  (…)
If a hypothetical single man who is a house painter, with no living family (meaning no one else for the bank to sue) owes a bank $300,000, then falls off his ladder and becomes a permanent quadrapalegic, the bank aint' getting that money.  The crisis will not abate.  Things will not normalize.
Greece is that house painter.  It has broken its national neck.  It physically cannot pay.  Will they discover a mountain of gold or diamonds under the Parthenon to pay off their debt?  I don't think so.   Its debt will not normalize.  Adults and mathematicians know this.  The ECB appears not to know this.
Are not all of the countries of the world Greece?  We are all the house painters with just different types of permanent injuries.  We have massive debts that are far larger than our modest incomes, and with major physical limitations.
[/quote]
Hrunner, this is the core of the argument we make around here.  If you are living beyond your means, then someday there will a reckoning.
This is true economically and it is equally true ecologically.  The former is worrisome, the latter is downright frightening in its implications.
As we draw down fossil fuels, essentially depleting over 100 million years of stored sunlight in perhaps 300 years, max, the vast impact of this subsidy on every facet of life escapes most people because it is in every product, and surrounds us at all moments.  It is the proverbial water to the fish, and very few are aware of the true role of energy in our daily lives and living conditions.
No amount of QE can ever change the reality that we are currently, without any question, no doubt whatsoever, supporting billions of people's lives with food grown using fossil fuels.  Worse, we're depleting soils and ground water so that when we finally have to figure out how to grow foods using something besides fossil fuels, there will be quite an overdraw to deal with on those natural accounts, too.
The point is that any subsidy, be it an energy subsidy or an injection of thin-air (QE) money into an insolvent financial system, can create the appearance of health (hey, crop yields are still excellent so your point about depleting soils is invalid!  ha ha!!) but not the reality of health.
Being able to spot the difference between legitimate/healthy returns and bogus returns is vitally important.  Unfortunately, most people will vigorously defend their "right" to believe in bogus returns until something literally forces them to abandon that mindset.
I truly believe the people of Greece are just now getting to the point of understanding that their future is grim, which simply means they are among the first to have to confront the gap created by overspending in the past.  But the math was easy enough to calculate all along the way, even as it is easy enough to calculate the insolvency of Japan, the U.S., and a number of other 'developed' countries.