Mike Gleason: It is my great privilege to be joined now by James Rickards. Mr. Rickards is editor of Strategic Intelligence, a monthly newsletter, and Director of the James Rickards Project, an inquiry into the complex dynamics of geopolitics and global capital. He’s also the author of several bestselling books including The Death of Money, Currency Wars, The New Case for Gold, and now his latest book The Road to Ruin.
In addition to his achievements as a writer and author, Jim is also a portfolio manager, lawyer and renowned economic commentator having been interviewed by CNBC, the BBC, Bloomberg, Fox News and CNN just to name a few. And we’re also happy to have him back on the Money Metals Podcast.
Jim, thanks for coming on with us again today. We really appreciate your time. How are you?
Choose From 10-100oz Pure Silver Trusted Bullion Dealer – Buy Now! silvergoldbull.com Jim Rickards: I’m fine, Mike. Thanks. Great to be with you. Thanks for having me.
Mike Gleason: Absolutely. Well first off, Jim, last week, the fed increased the fed funds rate by another quarter of a point as most of us expected, but during that meeting, we also heard Janet Yellen say she wants to normalize the Fed’s balance sheet, which means the Fed could be dumping about $50 billion in financial assets into the marketplace each month. Now you’ve been a longtime and outspoken critic of the fed and their policies over the years. So, what are your thoughts here, Jim? Do you believe they will actually follow through on this idea of selling off more than $4 trillion in bonds and other assets on the Fed’s books? And if so, what do you think the market reaction would be including the gold market?
Jim Rickards: Well, I do think they’re going to follow through. Of course, it’s important to understand the mechanics of the Fed. They’re actually not going to sell any bonds. But they are going to reduce their balance sheet by probably two to two and a half trillion. So just to go through the history and the math and the actual mechanics there, so prior to the financial crisis of 2008, the Fed’s balance sheet was about $800 billion. As a result of QE1, QE2, QE3, and everything else the fed has done in the meantime, they got that balance sheet up to $4.5 trillion. By the way, if the Fed were a hedge fund, they’d be leveraged 115 to one. They look a really bad hedge fund. But that’s how much the Fed is leveraged, they have about 40 billion of equity, versus 4.5 trillion of assets. Mostly U. S. government securities of various kinds. So, they’re leveraged well over 100 to one.
This post was published at GoldSilverWorlds on June 23, 2017.