Why the coming recession could force the Federal Reserve to swap greenbacks for digital dollars

Paper bank notes are being upgraded for a digital future around the world

The Federal Reserve has never been more famous than it is today. It drew praise, and ire, for its handling of the financial crisis a decade ago, and the extraordinary measures it took subsequently to stimulate the U.S. economy have made it an important driver of financial markets. Meanwhile, President Trump has made its chairman, Jerome Powell, a household name by frequently criticizing the central bank’s policies on Twitter and to the press.

A movement, meanwhile, has been brewing among economists, financial-services professionals and central bankers to encourage a rethinking of the technology of currency — those paper notes we carry in our wallets — with an eye toward issuing a digital currency. Some argue that could give central banks the tools necessary to break free of chronic disinflation and persistently low or negative interest rates, while providing Americans a risk-free means to transact in a world where digital commerce constitutes a growing share of the economy.

“The debate isn’t about whether we need [a digital currency],” Michael Bordo, an economist at Rutgers University and a fellow at the Hoover Institution, the public-policy think tank at Stanford University, told MarketWatch. “It’s about how you do it.”

Americans already use digital currency for most of their purchases. In 2018, they used physical dollars for just 26% of transactions, versus 62% with digital currency, which includes credit cards, debit cards and bank transfers, according to the Fed.

A central-bank digital currency could work much like the mostly bank-issued digital money Americans use today, with some key differences. First, it would be backed by the full faith and credit of the United States government and, therefore, risk-free. The local bank that manages your savings account could fail at any time and the dollars in your account (beyond those insured by the FDIC) would disappear. A Fed “e-dollar” would persist as long as the U.S. government does.

More important, an e-dollar could pay interest. The idea that cash should pay interest dates back to monetary economist Milton Friedman, who argued in 1969 that the most efficient monetary system would be one in which cash bears interest equal to that of short-term government bonds, to encourage greater use of the dollar.

In good times, earning interest on your e-dollars would simply make everyone a little richer, but in times of crisis it could also be used to institute negative interest rates, essentially a tax on holding cash. Such a policy would likely strike Americans as governmental overreach, but, Bordo argued, the alternative is worse.

Central bank ammunition

The current economic expansion is the longest in U.S. history, but warning signs of a recession abound, including slowing economic growth and the recent inversion of the yield curve for U.S. government debt. In response, the Fed reduced interest rates in July and hinted at more cuts to come. But economists worry that the Fed will not have enough ammunition to fight the next downturn, as the central bank has typically had to cut rates by at least five percentage points to stimulate the economy following a recession.

The Fed may be forced to restart its program of “quantitative easing,” or the purchase of long-term government debt to push down long-term interest rates, though there is growing concern that this is an ineffective tool. Take a look at Japan, which has been mired in a decades-long economic malaise. Interest rates have been stuck near zero for almost 20 years. Despite a massive program of government bond buying that has led to the Bank of Japan’s owning more than 40% of all Japanese government debt, it has still suffered four recessions over the past 20 years.

The eurozone hasn’t fared much better despite imposing negative interest rates on large banks, as it’s suffered two recessions since the financial crisis.

Bordo said the problem with negative rates in Europe and Japan is that, without a central-bank digital currency held by the public at large, those rates can only be imposed on banks, which hurts banks’ ability to lend and does little to encourage the magnitude of spending needed to jolt economies back to normal levels of growth.

The U.S. economy could soon face the same situation, Bordo said. “We could be in a situation like Japan,” he said. “The way things are going in the world, where growth is slowing and deflationary pressures persist, we’re probably headed in that direction.”

How would it work?

The Federal Reserve already issues digital dollars, but only banks can use them. They’re called “bank reserves,” and this form of digital currency received a great deal of attention over the past decade for its role in the Fed’s quantitative-easing program, with the Fed buying government bonds from banks and giving them newly created digital bank reserves in return. Banks can settle debts among themselves using this digital currency, but it never circulates in the consumer banking system.

One way the Fed could implement the e-dollar is by simply allowing any American to open an account at the Federal Reserve, where other forms of money, like a check from an employer or a deposit at a private bank, could be exchanged in e-dollars.

“The only way we can transact with central-bank money today is to use reserve notes, but digital payments are now the norm,” said Ousmène Jacques Mandeng, an economist at the London School of Economics who spent much of the past two decades working for financial institutions including Credit Suisse and UBS. “If you wanted to buy something on Amazon, you can’t pay with central-bank money. Shouldn’t central banks say that our money can be used in this environment? It’s a very practical issue of public choice.”

Meanwhile, an e-dollar system could be engineered so that payments are nearly instantaneous and costless, Mandeng said. This would be a major upgrade for many Americans, who now pay hefty fees for wire transfers. Newer payment services such as Venmo and Google Wallet, meanwhile, rely on automated clearing house, or ACH, exchanges that often take days to process money transfers.

A concern among economists is that personal Fed banking accounts could erode private banks’ profitability and, therefore, reduce the flow of credit they provide to businesses and consumers. Others argue that banks would simply change their business models, and could attract deposits by offering higher interest rates than cash would bear, or by offering discounts on loans and other services for customers who maintain a certain balance.

But given the risk that an e-dollar could significantly harm the banking system, proponents of a central-bank digital currency say the safest approach would be to allow supervised commercial banks to offer specially designated accounts for it.

While regional Fed banks have produced research that points to significant economic benefits from a central-bank digital currency, the Federal Reserve Board of Governors declined to comment for this story. In addition, the board’s public comments have revealed a skepticism on the potential benefits to consumers. In a May 2018 speech, Fed Gov. Lael Brainard said “there is no compelling demonstrated need for Fed-issued digital currency,” because consumers and businesses can use private digital currency already.

Meanwhile, the Fed announced a plan Aug. 5 to develop a service called FedNow to allow banks and fintech companies to offer real-time money transfers, which will create stiffer competition for the ACH system run by the bank-owned Clearing House Payments Co., thus undercutting one argument for a central-bank digital currency.

Fighting monopoly power

For some central banks around the world, neither convenience nor better implementation of monetary policy is the primary reason for considering the issuance of digital currency. The Swedish Riksbank, for instance, is most concerned with the rapid decline in cash usage in its domestic economy, which has been much more pronounced than in the United States. The nominal value of cash in circulation in Sweden has fallen 50% over the past decade, and cash now accounts for only 13% of Swedes’ purchases, according to Hanna Armelius, senior adviser at the Riksbank.

The decline, she said, threatens to create a negative feedback loop — as fewer Swedes prefer cash, more merchants will decline it as payment — and the Riksbank does not want to find itself in a situation in which the public has no access to the central bank’s currency.

“At the Riksbank we would like it if [nondigital] cash continues to be in use, but we have to be prepared that the marginalization of cash will continue,” she said. As private digital money plays a greater role in the economy, “we could end up in a situation where one or two companies become so dominant that they can extract monopoly rents.”

Todd Keister, a visiting scholar at the Federal Reserve Bank of Philadelphia, echoed that concern. “Monopoly power concerns are important,” when thinking about central-bank digital currency, he said. “There is a natural monopoly in payment networks. What’s to stop Visa V, -2.05% and Mastercard MA, -2.56% from raising their fees? Enabling an alternative for transacting digitally is really important.”

A wake-up call for many central bankers has been Facebook Inc.’s FB, -2.88% proposed cryptocurrency, Libra. Given Facebook’s scale — it claims nearly 2.5 billion users worldwide — a successful rollout of its own digital currency could give it unprecedented power over the global economy.

Cash usage in the United States is nowhere near as low as in Sweden, but studies suggest that it is declining, from 31% of all transactions in 2016 to 26% in 2018, with cash use most predominant in small transactions. Only 6% of purchases of more than $100 were made with cash last year, according to the Federal Reserve.

There is anecdotal evidence, meanwhile, that businesses are increasingly refusing to accept cash. State and local governments have been combating this trend with legislation forcing stores to accepting payment in cash out of fairness to the roughly 15 million Americans who don’t have access to debit cards or other digital forms of money. Proponents of the e-dollar say it could offer a cheap, safe means for poorer Americans to transact in digital money while also giving businesses the freedom to refuse paper money if they find it cumbersome.

Alan Blinder, former vice chairman of the Federal Reserve Board of Governors, said in an interview with MarketWatch that maintaining a public role in currency, and constraining the monopoly power of potential issuers of digital money and current players in the payment space, is a reason for the Fed to start taking the issue seriously now. “In paper currency, the Fed has a legal monopoly — nobody else is allowed to do it,” he said. “It’s called ‘counterfeiting.’ ”

Blinder added that the Fed hasn’t, and won’t, take the same approach to digital currency, but he said it could prevent monopoly power in the space by “coming in with its own competition,” and issuing a digital currency that would serve as a “public option” in the marketplace of digital money.

The next evolution in monetary policy

This is not the first moment in American history when there was debate over whether public or private institutions should be the primary currency issuers. The Constitution grants the federal government a monopoly on issuing coined currency and to define the national monetary unit, which Congress named the “dollar” in 1792. But transacting in gold and silver coins is cumbersome and expensive, and so paper currency, issued by a variety of state-chartered banks, and the federally chartered Bank of the United States, quickly became the young republic’s primary medium of exchange.

Following the dissolution of the Second Bank of the United States in 1837, a system of “free banking” developed, whereby entrepreneurs were allowed to launch banks with relative ease, as long as they met a certain standards set by the states. The system was not ideal for interstate commerce, as businesses had to keep track of the market values of the many notes in circulation, some of which were counterfeit or issued by failed or insolvent banks.

Rutgers economist Bordo said there are parallels between today’s Wild West of digital currencies — in which increasingly popular debit and credit cards exist alongside cryptocurrencies such as bitcoin and etherium — and this past era of free banking in America, a period marked by frequent financial crises and bank failures. The U.S. economy suffered from high transaction costs inherent in an economy marked by currency competition.

That system fell apart during the Civil War, with Congress passing legislation in 1864 that enabled the Treasury Department to issue paper currency, not convertible to gold or silver, that was deemed legal tender for debts public and private. The law was necessary to help finance the Union’s war effort and set in motion a series of statutes that ended state-chartered banks and created a national banking system, wherein federally chartered banks distributed U.S. dollars backed by gold. U.S. dollars wouldn’t be directly issued by the government until the Federal Reserve System was established in 1914, to create a single institution to manage the money supply and oversee the banking system.

The trend of more control over paper currency by the U.S. Treasury and Federal Reserve increased the efficiency of the U.S. economy and boosted growth, and many economists expect that a central-bank digital currency would do the same. John Barrdear and Michael Kumhof, research economists at the Bank of England, estimated that the introduction of central-bank digital currency could increase the size of a given economy by 3% “due to reductions in real interest rates, in distortionary tax rates, and in monetary transaction costs.”

Supercharging blockchain innovation

Though central-bank digital currency as envisioned by most prominent researchers would not be a cryptocurrency, believers in blockchain technology see central-bank digital currencies helping to unleash its potential.

There has been considerable hype around the idea of using blockchain to “tokenize” such illiquid assets as real estate, fine art and gemstones and allow investors around the world to trade slices of these assets with the same ease as they trade stocks and bonds today.

“If you accept tokenization is going to be important, then these ecosystems, like all other financial market infrastructures, will ideally have access to central bank currency for financial settlements,” said the London School of Economics’ Mandeng.

“Central banks should be technology-neutral,” he added. “If [the Fed] allows banks to settle their transactions in central-bank money, why shouldn’t individuals who trade in tokenized assets have the same access to this risk-free currency?”

Will the e-dollar see the light of day?

While the Federal Reserve is unlikely to issue e-dollars anytime soon, it will surely be watching digital-currency experiments undertaken by central banks around the world.

The National Bank of Cambodia is issuing its own blockchain-based digital currency to make its underdeveloped banking and payment system more efficient. The currency will be usable both on private mobile payment applications and commercial bank accounts, giving its underbanked population access to safer and more secure forms of payment. The Bank of Canada, the Bank of England and Norway’s Norges Bank have also been seriously studying the issue. Sweden appears closest to adopting its digital currency, the e-krona, after its parliament set up a formal inquiry into the question.

The Riksbank’s Armelius told MarketWatch that the disappearance of cash, and potential associated problems, “has been a political issue for years now,” and estimated that the process of implementing an e-krona “will take years, not decades.”

Meanwhile, Bank of England Gov. Mark Carney proposed in a speech on Aug. 23 at the Kansas City Fed’s annual summit in Jackson Hole, Wyo., that central bankers around the globe could coordinate to issue a digital “Synthetic Hegemonic Currency” to replace the dollar as the world’s reserve currency. He suggested that such a tool could eliminate problems that have resulted from the U.S. dollar’s serving that purpose, from erratic capital flows in emerging-market economies to an overvaluation of the greenback that can suppress American exports.

As for the e-dollar, Blinder, the former Fed vice chairman, argued that the U.S. central bank has the power to implement a digital currency via authority already granted it by Congress. But, he added, it’s unlikely to make such a move absent broader political consensus.

What may bring about this consensus is another question, and Bordo of Rutgers pointed to U.S. history as providing a potential answer. He said that big shifts in currency policy have typically occurred “when the politics line up” due to some sort of crisis. The system of free banking was ended only because of the exigencies of the Civil War, and the Federal Reserve System was created from the wreckage of the 1907 financial crisis.

As economic storm clouds gather over the United States, and as the Federal Reserve appears to lack the ammunition to save the country from the sort of prolonged malaise that has overtaken other wealthy economies, it’s possible that the next crisis-driven revolution in monetary policy is at hand.

“What makes the politics line up is the next recession,” Bordo said. “When they find that the tools they have aren’t working, then the arguments will start to be listened to.”

Reserve Currency set by Country that offers Regime Protetion (Petro-Dollar)

Reserve Currency Status

Brainard’s speech didn’t address recent concerns regarding the reserve currency status concerns of the US dollar or China’s current lead in the CBDC race, which could advance its national interests. The reserve currency status is among others determined by the resilience of a country’s payment system, depth and trust in the well-functioning of the capital markets and exchanges, appeal to and innovation acumen of its tech industry and financial market infrastructure, international thought leadership, lead into climate change solutions and the global military might and power base, which reinforces adoption of a currency. (Customers pay for oil in the currency of the nation which offers regime protection at the oil fields. Asians and Europeans move every month out of their home currency in favor of the US Dollar to pay for their imported oil bill).  Global adoption can also be ensured if censorship or control concerns, linked to the use of the CBDC, can be substantially mitigated.

Referring to innovation acumen and climate change solutions, could the central bank digital currency project incorporate scientific data observations regarding climate change triggering terrestrial and atmospheric trends? Could TRACE, a consortium tracking greenhouse gas emissions 24/7 by satellite, foster a balance between monetary policy and a thriving planet and be made part of this initiative? Could monetary policy be framed incorporating observations from those data trends, with support from climate scientists? Could digital currency be directed at ZIP code levels, impacted by climate change calamities? From a supervisory perspective, could solvency weightings for banks’ asset exposure be dynamically set as a function of the data observations and the remaining finite carbon budget? Could bank stress testing scenarios under CCAR (Comprehensive Capital Assessment and Review), undertaken to assess the banks’ adequacy of solvency levels, be articulated as an extended continuum of such climate change observations?

Innovative monetary design ingenuity linked to climate change solutions can only solidify the continued appeal in the US dollar as the global reserve currency.

The Current Five-Headed Crisis

The current crisis is five-headed in nature, characterized by a

  1. public health crisis, a
  2. financial crisis, a
  3. social justice crisis, a
  4. climate change crisis and a
  5. trust crisis in institutions and international trade.

Could a central bank digital crypto currency address each of the crisis challenges? How could financial inclusion offer a dent into the social injustice paradigm? How could distributed, decentralized and crypto-graphed data sharing enhance trust in institutions?  How could the Central Bank consensus protocol be made more energy efficient than the private crypto-currency protocols? How could smart contract design introduce a central bank digital currency-based reward economy?

Instead of offering mere helicopter money, could compensation be offered in exchange for contributions to the regenerative (climate change) and caring economy (childcare and parental care at home)? How could blockchain supported supply chain data trace the global export and import flows in relationship to FX trades and exchange rates? How could market intervention and/or sustainable change to circular economic paradigms be steered on the back of those data?

Need For A New Anchor Currency 

The debasing of currencies by the most important central banks ($6 Trillion of QE in the US alone), the arising currency tensions in the emerging markets (e.g. Lebanon, Turkey, South-Africa,….) and the COVID-19 default impact on total debt outstanding of $258 trillion per Q1 2020 will only accelerate the need and call for debt rescheduling and ensuing FX rate mechanism interventions. If gold is no longer an option, could a central bank issued stablecoin, finite in supply, become a store of value or new anchor currency to manage the restructurings and market support activities?

Brainard’s speech makes reference to a new initiative with the Bank of International Settlement’s Innovation Hub. This initiative could provide a useful avenue to design such Central Bank stablecoin.

The collateral base of the stablecoin could consist of a reserve of natural capital assets, consisting of

  • 50% of land and forests,
  • 35% In renewable energy initiatives, and
  • 10% in the top 100 most compliant ESG companies and
  • 5% in biotech research.

The collateral base would be managed dynamically, but would also benefit from monetary policy and prudential supervisory decisions aimed at regenerating the natural capital base on earth and replenishing its finite carbon reserve.  The supply could be managed, within a range, as a function of the TRACE observations.

On the occasion of Bretton Woods II, the new Central Bank Stablecoin could be introduced and offered, akin to the gold standard, as a fixed rate against all other fiat currencies, including the US dollar.

Conclusion 

Milton Friedman once observed, only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. Then, ideas once dismissed as unrealistic or impossible might just become inevitable.

Buffett’s Chance for a Blockbuster Deal Faded When Fed Stepped In

Warren Buffett struck some of his famous deals — taking lucrative stakes in Goldman Sachs Group Inc. and General Electric Co. — by swooping in when others panicked during the last financial crisis. He’s treading more carefully this time around.

With a record $137 billion of cash piled up at his Berkshire Hathaway Inc., Buffett fielded questions over the weekend from shareholders who wanted to know why he hadn’t acted as companies clamored for liquidity amid the pandemic-related shutdowns. This crisis is different, Buffett said.

“We have not done anything because we don’t see anything that attractive to do,” Buffett said at his annual shareholder meeting, which was held by webcast. The deals in 2008 and 2009 weren’t done to make “a statement to the world,” he said. “They seemed intelligent things to do and markets were such that we didn’t really have much competition.”

The famous investor’s reputation allowed him to serve as a lender of last resort during the 2008 financial crisis, racking up deals that generated 10% annual dividends from household-name companies. But as panic about the virus and shutdowns assaulted equities in March and even began to freeze debt markets, the Federal Reserve beat him to the punch with an unprecedented set of emergency measures.

“There was a period right before the Fed acted, we were starting to get calls,” Buffett said at Saturday’s meeting. “They weren’t attractive calls, but we were getting calls. And the companies we were getting calls from, after the Fed acted, a number of them were able to get money in the public market frankly at terms we wouldn’t have given.”

Buffett’s cautious reaction to the latest crisis drew plenty of attention from investors. While Berkshire bought back $1.7 billion of its shares in the first quarter, it was a net seller of stocks through April as it shed stakes in four major U.S. airlines.

The approach seems to put him in the camp of other notable investors who think markets may not have seen the worst of the impact from the pandemic. Buffett said the prospect of buying back Berkshire’s own stock isn’t much more attractive than it was in January, even as the share price dropped.

“He received much more demanding questions,” said Tom Russo, who oversees investments including Berkshire shares at Gardner Russo & Gardner LLC.

The sale of stakes in Delta Air Lines Inc., Southwest Airlines Co., American Airlines Group Inc. and United Airlines Holdings Inc. continues Buffett’s tumultuous history with the industry. He swore off the sector years ago after a troubled bet on USAir, then in 2016 he dove back in. In March, he told Yahoo Finance that he wouldn’t be selling airline stocks.

“Well, he just rejoined Airlines Anonymous,” said Bill Smead, chairman and chief investment officer of Smead Capital Management, which owns Berkshire shares.

Buffett, Berkshire’s chairman and chief executive officer, gained fame for turning a struggling textile company into a conglomerate now valued at $444 billion. But as Berkshire swelled in size, the billionaire investor struggled to supercharge its growth amid soaring valuations in the recent bull market. That’s weighed on Berkshire’s stock price, as the Class A shares fell 19% this year, more than the 12% decline in the S&P 500 Index, and have trailed the benchmark’s returns over the past decade.

In the meantime, Berkshire’s companies keep throwing off earnings, building the $137 billion cash pile that’s equal to nearly 31% of Berkshire’s market value. Buffett acknowledged that Berkshire doesn’t need that much on hand, adding that he still aims to keep his company as a “Fort Knox,” stout enough to weather the pandemic.

Buffett said he couldn’t promise Berkshire would outperform the S&P over the next decade, but he could vow not to be reckless. Maintaining that discipline is gratifying to longtime investors, said James Armstrong, who manages money, including Berkshire shares, as president of Henry H. Armstrong Associates.

“He bears a lot of responsibility and he never has any trouble remembering that Berkshire isn’t his,” Armstrong said. “Despite the criticism in the press and the public eye that he should deploy that cash, he continues to, every day, make his calculation of price to value and say, ‘I either see a good investment or I don’t.”’

Berkshire’s meeting lacked the familiar presence of his longtime business partner, Charlie Munger, as well as the thousands of audience members who normally attend the event in Omaha, Nebraska. Buffett said that Munger, 96, was still in fine health, but it didn’t make sense for him to travel from California or to have another vice chairman, Ajit Jain, come in from the East Coast in this age of social distancing.

Buffett, 89, instead was joined by a top deputy who lives just hours from Omaha, Greg Abel. A vice chairman overseeing the non-insurance units, Abel is considered a candidate to take over the CEO job someday. While Buffett still dominated the time, Abel spoke up about incoming calls before the Fed acted and gave investors a taste of his leadership style and his knowledge of Berkshire’s varied operations.

Buffett’s businesses haven’t been spared the effects of the shutdowns. The railroad BNSF reported reduced volumes as Covid-19 disrupted commerce, while footwear and apparel businesses were hit with a 34% decline in first-quarter earnings.

Munger said earlier this year that some small Berkshire units might not reopen after the pandemic. Buffett clarified the point, saying Berkshire was never willing to prop up a business amid unending losses. “There are businesses that were having problems before and that have even greater problems now,” he said.

Buffett remains cautious about the current crisis, saying that the range of economic possibilities was “extraordinarily wide.” Still, he ended the meeting on his classic optimistic note that people should never bet against America. And he left open the possibility that Berkshire’s dealmaking days will return.

The panic in markets “changed dramatically when the Fed acted, but who knows what happens next week or next month or next year? The Fed doesn’t know. I don’t know and nobody knows,” Buffett said. “There’s a lot of different scenarios that can play out. And under some scenarios, we’ll spend a lot of money. And under other scenarios, we won’t.”

US coronavirus ‘bailout’ scam is $6 trillion giveaway to Wall St – Economist Michael Hudson explains

Facing the Covid-19 pandemic, the US Congress rammed through the CARES Act — which economist Michael Hudson explains is not a “bailout” but a massive, $6 trillion giveaway to Wall Street, banks, large corporations, and stockholders.

Max Blumenthal and Ben Norton discuss the enormous financial scam with Hudson, who reveals how the economy actually works, with the Federal Reserve printing money so rich elites don’t lose their investments.

TRANSCRIPT, show notes, and links: https://moderaterebels.com/transcript…

PART 1 OF 2

Part 2: https://moderaterebels.com/transcript…

Michael Hudson’s website: https://michael-hudson.com

Jim Rickards: His Gold Price Prediction Explained…($50,000+ )

Jim Rickards, legendary gold expert, says soon 👉YOU MIGHT NOT BE ABLE TO BUY GOLD AT ANY PRICE!! 👈I reveal the insider information YOU NEED to understand Jim Rickards reasoning and determine if you should buy gold now or wait. And how gold could go to 100k an ounce!! Jim Rickards is the foremost expert on the price of gold, when he talks the markets listen and YOU SHOULD TOO. If you’ve followed his work you know Jim Rickards is one of the premier macro thinkers in the world. And if you don’t know who Jim Rickards is, you need discover his ideas RIGHT NOW. Understanding and listening to Jim Rickards now, could save and make you a lot of money in the future.

Jim Rickards is a heavy hitter in the world of macro economics and gold. He’s revered as one of the top thinkers in the country and he’s made some huge calls on the price of gold saying it can easily to to $10,000 to $50,000 an ounce. Jim Rickards comes to that conclusion in a very scientific manner. It’s really just about math.

In this Jim RIckards video I explain how he comes to those conclusions and then go on to reveal how the price of gold could actually go to $100,000 an ounce!! As shocking as it sounds its realistic, but you’ve got to watch the video to discover the details.

This is a must watch Jim Rickards video, I discuss the following:

1. How experts like Jim Rickards, Peter Schiff, and Jim Rogers think the dollar will crash.
2. You’ll discover the actually math behind how Jim Rickards comes to his 10k-50k gold price.
3. I reveal how, using Jim Rickards logic, the gold price could actually go to 100k and higher!

If you’re interested in the gold price or Jim Rickards you’re going to love this video!!

For more content like this that’ll help you build wealth and thrive in a world of out of control central banks and big governments check out the videos below!!

And if you’d like to support the channel via PayPal here’s our link! THANK YOU!!! 😁

What are the ingredients which Suggest a Financial Crisis?

@RaoulGMI identified the following factors contributing to a crisis, before Coronavirus:

  1. Stocks: Largest Equity Bubble of All Time: (Pension Crisis & Buyback Bubble)
  2. Demographics:
    • Largest Retiree Wave, all wanting to sell stocks and bonds at the same time
    • Millennials are too poor and indebted (make 20% less than parents)
  3. Corporate Credit: Largest Credit Bubble of All Time
    • ($10 Trillion + Off balance Sheet = 75% of GDP)
  4. Student Loan Bubble:
    • $1.6 Trillion
  5. Auto Loan Bubble
    • ($1.2 Trillion)
  6. Indexation Bubble
  7. ETF/Market Structure Bubble
  8. Foreign Borrowings (Dollar Standard Bubble)
  9. Monetary Policy Bubble (The Central Bank Bubble)
  10. EU Banking Crisis
  11. A Trade War:
    • The Trade Wars “shattered” supply chains
  12. Coronavirus
    • Largest Supply & Demand Shocks of all Time

 

Big Picture:

Central Banks have been fighting for the last 20 years:

  • Full Scale Debt Deflation and a Solvency Crisis

Turns into:

  • A loss of confidence in the Dollar Standard and the Entire Financial Architecture

(page 29-30)

Jim Rogers: The Reset has begun: you have no idea what’s coming

trigger coming well we’re gonna we’re
24:50
having we have had a very substantial
24:53
rally governments everywhere have pulled
24:56
out all the stops printing spending
25:00
buying doing everything they can to get
25:03
markets up so yes we are having a rally
25:06
it will probably continue for a while
25:09
remember Michele there’s an election in
November you know that’s only six seven
months away from now so especially in
the u.s. they’re gonna do everything
they can to get reelected is that good
for my kids no is it good for you no
you’re good for me
no but that’s what’s going to happen but
I would suggest to you that the bear
market is not over yet we may even have
one more blow off rally if they do
something really dramatic if the suppose
I found a cure for the viru
s or
something like that we’ll have a blow
off rally blow off top and then the bear
market will resume because this bear
market is not over yet

okay it’s gonna be the worst in my
lifetime Michelle and Michelle oh I’m
older than you so it’s gonna be the
worst in your lifetime too
right now do you think it’s gonna be
comparable to 1929 do you think it’s
gonna be much worse well he could be you
know 1929 was caused because politicians
kept making mistakes one mistake after
another all over the world
so you know
the rest of that story at the moment I
wouldn’t say this will be absurdly worse
than 2008 I doubt if it’ll be worse than
29 but it could be I mean we have a lot
of completely totally incompetent people
around the world in government’s
we
always have but especially now the
Japanese it’s to me it’s in unfathomable
what the Japanese are doing and
Washington it’s unfathomable to me
what’s going on so they could really
bumble this very very badly mr. Trump
and his guys love trade wars they like
war so real war I mean so conceivably
this could get much worse and we could
bungle it
and have a 1929-30 of 30s be
more like it
there it is kind of thing at the moment
I don’t expect it but watch these guys
they’re good at making mistakes these
guys are crazy Korea I mean you look at
some of the things that are German you
now Michelle even their German cities
now that have huge financial products
John when I was a kid there was nothing
27:37
more righteous and virtuous than German
27:41
spending even German cities now have
27:44
problems so this is not just us this is
27:47
a lot of places go into that for us
27:51
please
27:52
what you see globally you know that
27:57
Illinois is bankrupt
27:59
you know the Connecticut’s bank run I’m
28:01
starting with the u.s. you know that
28:03
many cities and states and companies in
28:07
the US have got huge debts America’s the
28:10
largest debtor nation in the world the
28:13
Japanese might even be per capita more
28:17
indebted than we are because they just
28:20
the population is declining the
28:22
population has been declining for ten
28:24
years the debt has been skyrocketing for
28:26
thirty years and they’re just down there
28:29
printing and spending as fast as they
28:31
can
28:32
demands got very very serious problems
28:35
of facing it then you turn to the other
28:38
parts of Asia yes some of them are doing
28:41
better less bad I should say Korea the
28:45
38th parallel is going to open soon when
28:48
that happens
28:49
Korea the Korean Peninsula will be the
28:53
single most exciting place in the world
28:55
for a decade or two China’s doing its
28:59
making mistakes but you know Michelle in
29:01
China they still have interest rates
29:04
interest rates are 2 3 percent which is
29:07
somewhat low but it’s fairly normal the
29:10
Chinese are spending money but they’re
29:12
not spending everything in sight I mean
29:15
I have to say that the Chinese have done
29:17
a less bad job than just about anybody
29:20
in the world I’m startled I’m impressed
29:22
at how well they’re handling this so far
29:26
Russia’s a disaster
29:28
everybody hates Russia but I’ve as I
29:31
said I’m investing in Russia now and
29:34
have been for a while
29:34
it’s hated so much Europe I don’t know
29:40
if the euro will survive all of this I
29:43
own very very few euros going forward I
29:46
don’t want I don’t own much in Europe we
29:51
discussed the u.s. a bit maybe Venezuela
29:54
is a great place to invest we share you
29:58
and I are citizens of the land of the
30:00
free we’re not a we’re not free to
30:03
invest in Venezuela we’re not free to
30:06
invest in Korea we’re not North Korea
30:08
we’re not free to invest in Iran or some
30:11
places around the world that are great
30:13
investments but because we’re citizens
30:15
of the land of the free we cannot invest
30:18
they’re very depressed extremely
30:26
depressed has been for a while so
30:28
agriculture continues to be a great
30:30
place to look you know how to drive a
30:32
tractor Michelle not at the moment
30:37
not many tractors in San Diego are they
30:40
do grow up in San Diego no Indiana
30:45
yeah Indiana tractors in India I know my
30:50
grandpa
30:52
attractor I never learned yet in the
30:58
next 20 years that’s what I want to talk
31:01
to you about too we touched on this in
31:03
our last interview the fact that the
31:06
things that are going to be most
31:07
valuable in bear markets are the thing
31:11
the tangible items you know tractors
31:16
agriculture things like that food so you
31:21
know what I want to mention something to
31:23
you and I want to get your thoughts on
31:24
this there was a news article that came
31:27
out that Vermont had said that they were
31:30
stopping selling seeds I mean like fruit
31:34
seeds food seeds because it wasn’t
31:36
considered to be a necessary item at
31:39
this time don’t you find that odd I keep
31:45
telling you politicians keep making
31:48
mistakes no I think most rational people
31:50
would say what telling see he is
31:54
certainly essential vital to the world
31:58
economy in 2020 I told you these guys
32:01
really mess things up Michelle we could
32:05
have a horrible horrible head time ahead
32:07
of us and this is one of the perfect
32:09
examples of the kind of things that
32:11
these people do you know Michelle the
32:14
studies show that the people who are
32:16
good at being politicians in America
32:19
anyway are the people who were good at
32:22
playground in elementary school in
32:25
primary school they were great at
32:28
playground put as far as knowing
32:31
anything or learning anything but you
32:34
heard seeds are not essential Michelle
32:37
it was this the most absurd thing I’ve
32:40
ever heard of especially right now when
32:42
they’re talking about possibility of
32:43
food shortages here and there you know
32:45
it was a small article but I just it
32:48
caught my eye and I just wanted to get
32:50
your impression don’t give up with you
32:53
know they’re gonna be more of certain
32:54
things coming in the next year will be
32:57
many more although not just in America
32:59
you know all over the world
33:01
it’d be very strange that you should be
33:04
worried
33:06
expound on that just a little bit for us
33:09
please
33:10
well you know in the in the let’s go
33:13
back to 29 and since you brought it up
33:15
before in 29 American Congress was
33:18
considering raising tariffs and starting
33:22
a trade war 2000 of the best of the most
33:27
extraordinary economists in America took
33:30
about ads and said do not do this it
33:33
will be very bad for the American
33:35
economy and for the world economy
33:37
Congress did it anyway they had all the
33:40
experts saying to them starting a trade
33:43
war in 1929 is going to be bad for the
33:47
world they did it well you know the rest
33:49
of that story the market almost
33:51
immediately collapse the senators were
33:53
clear they were going to pass this law
33:55
and then economy started collapsing
33:58
banks and your banks in America started
34:01
going bankrupt in one of the largest
34:04
countries in Europe at the time the
34:06
government made two failing banks merge
34:10
so they failed I got a big failure when
34:13
they thought they were gonna save the
34:15
world about putting these guys together
34:17
turning in a real you know one then it
34:20
became one of the largest makes in
34:21
Europe failing needless to say that was
34:24
the 1930s mistake after mistake so don’t
34:29
think we are any smarter than other
34:30
politicians in history we’re gonna make
34:33
plenty of mistakes too I don’t who knows
34:35
Trump loves trade wars he thinks race
34:38
wars are good he thinks he can win a
34:39
trade war history shows he’s totally
34:41
wrong but who cares he’s the president
34:44
if he thinks it and once it it might
34:47
well happen and in 20 years 40 years we
34:51
look back and say oh that was a mistake
34:54
but in Miami what are your thoughts on
34:57
the president well mr. Trump did win the
35:02
election I suspect he will win the next
35:04
election as well who cares what I think
35:08
he’s probably going to win the election
35:10
he’s smart enough to do that he’s
35:12
adapted enough to you know that’s what
35:14
politicians are paid to do when
35:16
elections he won big
35:19
you’ll probably win the next big ones it
35:21
was very difficult in American history
35:23
to unseat a sitting president you know
35:28
if you’re the president you need votes
35:30
over here in this state you can spend
35:32
money over here in this thing
35:34
his opponent cannot do that and that’s
35:37
why it’s hard to defeat a sitting
35:40
president I if I were a betting man and
35:42
I’m not a betting man but if I were I
35:44
would bet mr. Trump will win you would
35:47
do you think that mr. Biden would make a
35:50
better president than mr. trunk I have
35:56
learned that I should not invest on what
35:59
I want of what I think I have to invest
36:02
on facts and what is happening in the
36:05
world I cannot in make an investment
36:07
because I think mr. Biden would be
36:10
better I have to make investments based
36:13
on what will happen and I’ve just got to
36:16
tell you that mr. Trump will win now mr.
36:20
Trump can bundle it and mr. Biden might
36:22
win then I would have to make
36:25
investments based on that fact doesn’t
36:29
matter whether I like him or dislike it
36:30
doesn’t matter whether I like Trump or
36:31
dislike it I have to based my
36:34
investments and my life what is
36:37
happening in the world I cannot let
36:39
emotions get too involved in it
36:42
with otherwise come I make enough
36:44
mistakes did not tell you about my first
36:46
wife I was foolish young hormones
36:56
emotions are not rational judgment so
37:01
what you’re saying is it’s very
37:02
interesting as an investor’s perspective
37:05
you see as as I’m not a professional
37:08
investor I don’t really look at things
37:11
that way but I can see that as a
37:12
lifelong global investor you look at
37:15
things from what you believe politically
37:18
will be happening and therefore you can
37:20
foresee certain ways that things may go
37:25
very interesting I
37:31
to try taking all the information spin
37:35
it around
37:36
come out with a decision on the other
37:39
side and then act if I had my emotions
37:43
get involved if I drink too many beers
37:45
and make decisions you know it’s not
37:48
gonna make enough mistakes is certainly
37:51
not going to work so into play to say
37:54
people say to me sometimes how can you
37:57
invest in that country it’s a horrible
37:58
country I say listen I don’t care if
38:02
it’s a horrible country investors are
38:04
supposed to make money and if you invest
38:06
it might make it a better country you
38:08
know you could be much better country if
38:11
you go there and invest in help change
38:13
things so please try to keep your
38:16
emotions out of it that’s so interesting
38:20
because people do say that they say how
38:23
could so and so invest in such-and-such
38:25
or there’s terrible things going on over
38:28
there or you know don’t they understand
38:31
the humanity of it but the perspective
38:33
is if years your perspective is that if
38:38
you invest in it you add money to the
38:40
situation in and you have a little bit
38:44
of influence that you may be able to
38:46
make things better rather than just
38:48
turning your back upon a situation
38:50
because it wasn’t right we shall right
38:53
now Venezuela is a catastrophe in every
38:56
way the United States says Americans
39:00
cannot invest there now I assure you the
39:03
people in Venezuela would love for
39:06
people to come there invest and he’ll
39:09
make things better and if Americans went
39:12
there and invested it he’ll make things
39:14
better the Venezuelans would say while
39:16
the Americans are great they helped us
39:18
you know but right now we cannot go
39:22
there and invest and help them and
39:25
change things you know if you ask me
39:28
we’ll be better off have we sent the New
39:31
York Yankees there for an exhibition
39:33
trip at baseball team if it’s a
39:35
Venezuelans love baseball that would
39:37
have much more influence in health than
39:39
boycotting and having sanctions and
39:42
saying nobody can go there and nobody
39:44
invest what you know I don’t live in
39:47
Washington that’s why I’m not a
39:49
politician it’s just so enlightening
39:53
it’s so enlightening because
39:54
automatically you do think well that
39:57
country’s doing terrible things
39:58
so-and-so look at this corporation
40:01
investing all current sorts of money
40:02
into it but in fact you’ve just
40:05
enlightened me into a completely
40:07
opposite point of view well and first of
40:10
all I know the US government has been is
40:13
way those are the people etcetera
40:16
etcetera have also learned Michelle in
40:19
my life don’t miss into propaganda
40:21
because it’s nearly all what governments
40:25
always have a view and they always spout
40:28
propaganda I have learned in my life
40:32
not to listen to propaganda to try to
40:35
ignore it because you go there yourself
40:37
and see what’s really happening and you
40:40
might come away with an entirely
40:42
different view I have learned the show
40:44
if you get your advice from governments
40:47
on investing well you’re gonna go broke
40:50
it’s mainly propaganda that comes out
40:53
and it’s artificial it’s is this on not
40:56
just American problem I mean everybody
40:58
everybody shine for everybody Japan
41:01
they’re all good at Russia oh my gosh
41:04
some of the stuff that comes out of
41:06
government mouth is astonishing so
41:09
please try to learn I teach my children
41:12
I you know I used to read newspapers
41:15
from five different countries every day
41:17
they all thought they were right they
41:19
all said they were right but then you
41:21
get many different views and you might
41:24
figure out what’s really happening my
41:26
kids you know they don’t read newspapers
41:27
they get on the internet they know about
41:32
international networks you know there’s
41:35
one from England there’s one from
41:37
Germany there’s one so the Middle East
41:39
is more from Japan is one from China
41:41
Russia us watch all these different
41:45
points of view they all say they’re
41:47
right how do you sure you CNN says it’s
41:51
right every day Fox says it’s right
41:54
every day but some of the Russians so
41:57
did everybody
41:58
you put them all together you might you
42:02
might get right you’re more likely to
42:03
get right if you listen to lots of
42:05
points of view rather than just one so
42:09
I’ve tried to learn about propaganda try
42:12
to learn that it is nearly always wrong
42:14
whoever the source it was a great saying
42:18
it’s famous in World War one in America
42:21
a famous American senator said it but it
42:24
turns out it comes from a Greek
42:26
philosopher and that is that the first
42:30
casualty of war is truth look in other
42:35
words when war starts I wouldn’t
42:37
propaganda starts truth completely
42:39
disappears so you must learn that you’re
42:42
still too young you learn that go back
42:44
and ask your parents in India it will
42:47
tell you your grandparents in Indiana
42:49
they know they know that people can
42:52
mislead young people and you know I mean
42:57
it just seems like it’s just all
43:00
propaganda anymore it was gonna use
43:03
another word now I want to turn real
43:21
briefly to China
43:22
real quick Jim it’s sort of a
43:25
complicated topic because there are many
43:27
people that are actually blaming China
43:30
for the entire worldwide scenario that’s
43:35
taking place right now we actually have
43:36
US politicians that are calling for
43:39
lawsuits against the country of China
43:42
over this situation now do you think
43:44
that china is in a stronger position
43:47
right now or weaker after the
43:50
coronavirus well everybody in China has
43:54
lost a lot of money this is cause China
43:57
a great deal they’ve had some deaths in
44:00
some lockdowns they are come seem to be
44:03
coming out of but if you could believe
44:06
what you see on the internet and on the
44:08
TV they seem to have done a much better
44:10
job of handling
44:11
that we have with us anyway so yes
44:15
relatively they’re coming out stronger
44:18
they were all weak everybody is hurt by
44:21
this but China’s neighbors have done a
44:23
much better job and by the way call it a
44:26
china virus viruses you know in 2009
44:30
nobody called the h1n1 virus we started
44:34
in America and nobody called the
44:36
American bombers closed airport’s closed
44:39
countries say encountering this you
44:42
cannot do that you know and I don’t know
44:45
you may not know but in 1918 the world
44:47
had this gigantic flu epidemic all over
44:51
the world kill millions of millions with
44:53
an L
44:54
it started at an army base US army base
44:58
in Kansas I wouldn’t call that the
45:02
American flu even though it started in
45:05
American military but you know what they
45:07
called it the Spanish flu was very very
45:11
good this is the Spanish flu stop it
45:17
American military base in Kansas but
45:20
American PR propaganda very very good
45:23
job the world still calls it the Spanish
45:26
flu so all this is absurd it’s the flu
45:30
forever it started you know and so far
45:33
John’s done a better job that we have of
45:35
handling it if you can believe what
45:37
seems to be on the internet and in the
45:39
press Jim it is always such an honor to
45:45
have you on this show I could continue
45:46
talking you know I want it before I let
45:52
you go I want to ask you something among
45:57
global investors it’s no secret that you
46:00
continue to carry the reputation of
46:02
being one of the top in the world and
46:04
it’s interesting to note that you have
46:07
said that some of the most profitable
46:09
times in your life took place in exactly
46:14
this kind of a bear market situation so
46:19
talk to us about your mindset your
46:22
philosophies and your perspectives about
46:25
when and how fortunes are most easily
46:29
made well we were just talking about
46:32
Asia and it’s remarkable you know agent
46:34
civilization has been around a lot
46:36
longer than we have those of us who
46:38
speak English there they all have a word
46:40
in China it’s way G in Japan it’s Kiki I
46:45
forget what it is in Korea but what the
46:48
word means what kiki japanese where kiki
46:52
means is disaster and opportunity are
46:55
the same thing and if you and if they
46:58
been around a lot longer than we have
47:00
but if you think about it it’s true
47:02
whenever there’s a disaster it’s
47:05
horrible for many people but there’s
47:07
also opportunity I mean if your house
47:10
burns down
47:11
Michele it’s terrible but it’s an
47:14
opportunity for somebody to rebuild your
47:17
how to sort of by the Prophet whatever
47:19
it is and the Asians know this at least
47:24
they have words for if we have a word in
47:27
English I don’t know it but that’s the
47:30
way I hope I have learned to try to look
47:33
it like when I see it this front pages
47:36
on a newspaper of some kind of disaster
47:38
I also try to you know sometimes give
47:42
money or try to help but I also try to
47:44
figure out okay someone is going to
47:47
benefit from this let’s figure out who’s
47:50
going to benefit where we can invest and
47:53
by the way when you invest in places
47:56
like that they’re very happy
47:57
Haiti money and they know it you might
48:00
be doing it so you’re an investor and
48:01
want to make money but the people who
48:04
receive your investments in a disaster
48:06
area they’re very very happy that
48:10
somebody has come in to invest because
48:12
it’s a help to them as well
48:14
but if you can remember Kiki Kiki which
48:18
is the Japanese word and I’m sure that
48:20
I’m pronouncing it harmless but it means
48:22
disaster and opportunity are the same
48:25
thing try to learn that go back into
48:28
peak your grandparents in Indiana they
48:30
did a good job remind him of Kiki Kiki
48:35
that’s a wonder that’s actually a
48:37
brilliant thing for everyone to remember
48:40
that a disaster and an opportunity are
48:43
the same thing I assure you you turn on
48:46
the TV next time there’s some kind of
48:48
horrible disaster somewhere whatever it
48:50
is trying to think you’re gonna feel
48:53
sorry for everybody yes and you might
48:55
want to help and you should but you also
48:57
then you should try to start saying well
49:00
wait a minute okay who’s going to
49:02
benefit from this where is the
49:06
opportunity I told you if your house
49:08
burns down it’s horrible but it’s good
49:12
for somebody somebody loves the fact
49:15
that your house burned down you don’t
49:17
but it’s good for somebody the guy who’s
49:19
gonna rebuild your house or whatever
49:21
okay
49:22
it was delight to see you again Michelle
49:25
very very pleased I everything is okay
49:29
and I guess everything is okay in San
49:31
Diego everything is fine here in
49:33
Singapore as far as I know so hope to
49:36
see you again sometime oh absolutely
49:39
sometime soon thank you so much for
49:41
coming on this show today I’m wealth
49:44
international okay what did you say
49:50
I said watch wealth international oh you
49:57
mean portfolio of global what did I say
50:00
yes a portfolio well in that all the
50:02
same international we hope that your
50:12
portfolio has wealth yes it doesn’t if
50:16
you watch portfolio well – you will get
50:20
in your portfolio thank you so much for
50:24
coming on the show today mr. Jim Rogers
50:27
author financial commentator and
50:30
legendary international investor the
50:36
industry experts panel I’m Michele
50:38
holiday at portfolio wealth global
50:47
thanks Jeff
50:55
[Music]
50:58
you
51:12
you