Jim Rickards: The Fed’s Using the Wrong Models

James Rickards, author of Currency Wars, gave the following presentation at The Future of Money 2.0 in Bratislava, Slovakia on September 26, 2013.  A week later, Rickards gave the same presentation, though significantly abbreviated, at the Casey Research Summit in Tucson, Arizona.  In the presentation, he covers:

  • US Defense Department’s exercises in financial warfare.
  • Historical currency devaluations by countries to gain trade advantages.
  • Historical examples of re-establishing a gold standard after a currency collapse.
  • The current situation of Inflationary and Deflationary forces working against each other – an unstable situation.
  • Irving Fisher’s (and later Milton Friedman) theory of economics (Quantity Theory of Money … M x V = P x Q).
  • QE, Operation Twist, etc. have had no affect because money velocity is not responding.  2014 may bring efforts to put money directly into the hands of the people (e.i. Tax Cuts).
  • Complexity Theory may provide a better model for the Fed, as it shows that the economic system has become increasingly more interconnected across sectors.  It actually predicted the 2008 collapse and, unfortunately the model is even more densely integrated today, indicating a worse crash ahead.
  • The potential remedies the Fed or the IMF might enforce in response to the next collapse.

Jim Rickards on All the Taper Hype: Look at the Data!

Here’s some level-headed thinking from Jim Rickards, who was proven to be correct on his call that the Fed would not taper.  While the Fed would certainly like to taper, they’ve always stated that they would do so on the condition that the economic data continues to be strong.  But the economic reporting has been terrible, so the Fed didn’t taper and won’t until those reports show viable strength.  Jim also discusses what differences, if any, the upcoming Fed-chair change may make (none), gold’s future price expectations (higher) and his new book, The Death of Money (due out in April, 2014).


The Decline And Fall Of The Dollar & The USA

The following video from OneTruth4Life explains how America’s founding fathers created a sound money system, framed within Article I, section 8 of the Constitution.  It goes on to describe, in full detail, what’s happened since then – anti-Constitutional acts by certain government leaders and bankers, which debased the currency at various moments in history.  These acts seem to become more blatant as history proceeds, and have led to, or have been the primary motive for most, if not all, the military conflicts.  Furthermore, it will be the primary factor that will have brought the nation to its own doom at some point in the near future.


Tough Questions for Eric Sprott

Lauren Lyster puts the tough questions to Eric Sprott regarding gold and silver and whether or not investment in such is warranted, given the lackluster performance over the past year.  Sprott responds by pointing out that given the increases in quantities of the metal that have been purchased recently,  it’s highly likely that central banks have been leasing their physical gold into the marketplace in order to suppress the price.

  • In the last 12 years, the annual physical gold demand has increased by 2500 tonnes/year. But the supply of gold has remained flat.  Where does the new metal come from to meet this new demand?
  • Some rather prominent central banks have recently been subjected to questions asking about the validity of their gold claims held in foreign vaults (i.e. Germany and Austria).

The discussion continues to include:

  • The Fed is buying 90% of US Treasuries.  Japan and other central banks are practicing similar policies. Central banks of the world are trying to keep interest rates low for extended time frames, “which is ludicrous.”
  • Sprott expects silver to outperform gold in the next decade and points out the investment ratios he’s seeing from the entities making purchases of these two precious metals.
  • Lauren Lyster defines Hard Money and it’s relation to old and new central banking policies.
  • A record 47.7 million Americans are now on food stamps, according to the latest report from the Supplemental Nutrition Assistance Program (SNAP).

Expect Currency War to Continue in 2013

Author of Currency Wars, Jim Rickards explains that the Fed’s easing programs have thus far failed to create their desired inflation, which, in their view, is required to boost US exports.  Although Japan will be allowed to weaken their currency, all the other currencies of the world will be strengthened as the US strives to further weaken the US dollar. Of course, gold is still the currency of choice to preserve wealth.




Expanding the discussion, Lauren Lyster interviews Jim Rickards, where he clarifies the Fed’s tactics:

  • The economy has failed to recover despite the Fed’s actions so far because the consumer has not been willing to spend or invest.  Hence money velocity has remained nil.
  • The Fed is trying to induce more spending by: (1) Forcing a negative interest rate as an incentive for more borrowing, and (2) Scaring the public into buying stuff through the threat of future inflation.
  • The inflation, they hope, will be the result of all the currency wars with other nations, especially China – cheapening the dollar will make imports more expensive.

It’s a race between the Fed trying to achieve their goals and the whole system imploading because of a loss of confidence in the dollar.

Attacking the Rich?

All this talk in Washington about going after the rich to pay more taxes is just a smoke screen.  As Rick Santelli explains in the clip below, the arguments between the Democrats and Republicans are using numbers that ignore inflation & mislead the public on who they’re actually targeting with tax increases.

  • To say that the tax increases will only affect those making $250K/year is really talking about those making $165K/year (in 1993 dollars), which is a 35% miss when it comes to being honest about the actual situation our economy is facing.
  • Or worse, when they talk about only taxing the millionaires and yet begin their arguments with finding ways to tax those making $250K/year, that’s a 75% miss.

The main point is that by ignoring the inflation, these government leaders are purposely hiding their ever-increasing extortion of wealth from the middle class, not from the rich!


RT: The Empire of Debt and the Election

In this episode of Russia Today’s Capital Account, Lauren Lyster interviews Bill Bonner, author of Empire of Debt. The highlights include:

  • Do the statistics and reports generated by the government help anyone determine the real state of the economy?  GDP, CPI and Unemployment reports “mean something, but they don’t mean what they say it means.”
  • A economic system based on fiat/paper money has never lasted in the past. Ever since 1971, when Nixon closed the gold window,  the resources of the country have been used unwisely, investing in programs that destroy the country’s wealth.  In order for real economic growth, this practice must be changed so that resources are invested in initiatives that build wealth.
  • The outcome of the presidential election will not alter the current course. Instead, the election is basically a contest to determine which group of ‘zombies‘ will get government sponsorship. A Romney win will ensure the military industrial complex stays in business, while an Obama victory will further the social/welfare state.
  • The government employing stimulus as a policy to help the economy is ridiculous. Again, it doesn’t help the overall economy generate wealth, it only serves those favored cronies with close ties to those in political office.

Jim Rickards on War – Currency or Otherwise

In his book Currency Wars, Jim Rickards reveals his participation in war games sponsored by the Secretary of Defense in 2008. The objective of these particular games was to discover how nations of the world might use financial instruments to wage war on each other and to gain some perspective on their effectiveness.  In the video below, he goes a step further and hypothesizes on what events might take place between the US and China as the world economy continues to slide into the toilet.  Rickards ends the video with a probable sequence of events that will take place if we stay on the current path.

Greed, Fear, Bubbles and Market Madness

Grant Williams, of Vulpes Investment Management, provides us with a brilliant presentation explaining how greed and fear play into the making of economic bubbles.  After giving a few examples of historic bubbles of the past, Williams then goes on to describe two bubbles in the present.  Spoiler alert!

Williams presents the latter two bubbles happening today as one nearing a collapse and the other in a “sweet spot” ready to enter the hyper-inflating mania phase.

G. Edward Griffin: The Federal Reserve is a Cartel

Eighteen years ago, G. Edward Griffin wrote The Creature from Jekyll Island and exposed the Federal Reserve’s true nature.  Since that initial writing, the knowledge of the fact that the Fed is not a government institution, but a privately owned central banking cartel has expanded in public awareness. In this remarkably lucid interview with Casey Research’s Louis James, Griffin discusses:

  • The growing size of government
  • The decline of the purchasing power of the US dollar
  • The two-party political system is really a cover for a one-party system
  • The realistic expectations of public awakening prior to a collapse
  • The Fed is a cartel. Furthermore, it’s a partnership between the bankers and politicians
  • Why we have not seen hyperinflation (yet)
  • The system has changed from a free enterprise, competitive system to a politically connected, non-productive system, which will inevitably lead to totalitarianism
  • The possibilities for America to reverse course and avoid catastrophe

Nixon Shocked the Global Currency Markets

On this day, 41 years ago, Nixon shocked the world by removing gold convertibility for foreign holders of US dollars – it would be the end of the agreement made at  Bretton Woods, where it was decided that the US dollar would be pegged to gold and all other currencies would be pegged to the US dollar.  The message was so important that Nixon’s administration decided to preempt the most popular TV series, Bonanza, on Sunday evening prior to the markets opening on Monday.

What’s most aggravating is Nixon’s claim that he must save the dollar from the evil speculators trying to destroy the dollar – something we hear so much, even from modern day politicians.  Never do these con men ever mention that there wouldn’t be anything to speculate on if those in charge of the monetary system were honest and abstained from their blatant money-printing, inflationary policies.

Is More QE Coming, Or Not?

With the Fed purchasing 61% of all the US debt, it’s somewhat confusing why potential precious metals investors want to see more QE before making their move. And as the following chart from the St. Louis Fed shows, the money supply is still at uncharted, nose-bleed levels and showing no signs of decreasing.

US Dollar Money Supply

Nevertheless, analyzing a derivative of the TIPS Spread to identify when the Fed might reintroduce even more easing is what the economists over at Agora Financial have been doing.  As the chart below shows, the Fed may be waiting for the “Breakeven Inflation Rate” to drop below 2.2% prior to accelerating those printing presses.

Five-Year Forward Break-Even Inflation Rate

TIPS Spread

May 21, 2012

Below is a live graph from the St. Louis Fed showing the historical TIPS spread.  The TIPS spread is the difference between the yields of conventional Treasury securities (T-bonds) and Inflation-protected securities (TIPS).  The conventional security yield is normally higher and therefore shows on the top of the graph.  The TIPS’ yield is lower and at the bottom of the graph.

TIPS Spread

The spread between the two yields actually reveal the market’s expectation of coming inflation. If the spread widens out it means the market is expecting more inflation.  If the spread converges, then the market isn’t expecting much inflation.

The Fed has consistently sought an approximate spread of about 2%, which theoretically indicates a moderately healthy growth rate in the economy. During the crisis of 2008, the spread converged, signaling very little inflation expectation – even the threat of deflation as the conventional dropped below the TIPS.  The easing policies which the Fed embarked on had the overall affect of re-widening the spread.

Ron Paul on CNBC

Which presidential candidate would you be most be confident would NOT lie to you?  Here’s Ron Paul on CNBC taking up the philosophical arguments no other candidates are discussing, including one hell of a debate on gold and the debasement of the dollar with Morgan Stanley’s Stephen Roach.

Government Economic Statistics Are Misleading

Dr. Paul Craig RobertsDr. Paul Craig Roberts served as the Assistant Secretary of the Treasury under President Ronald Reagan.  He should know a thing or two about U.S. economic policy.  In this brief and simple article, he explains how government statistics on inflation, housing, employment and GDP have consistently under-reported actual data.

“In place of recovery, we have hype from politicians, Wall Street, and the presstitute media.”