Jim Rickards: Trump Owns The Fed

[Ed. Note: Jim Rickards’ latest New York Times bestseller, The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis, is out now. Learn how to get your free copy – click HERE. This vital book transcends geopolitics and rhetoric from the Fed to prepare you for what you should be watching now.]

Jim Rickards joined The Lance Roberts Show to discuss Trump’s first 100 days in office, the Fed and what he has identified as The Death of Money. During the conversation Rickards calls attention to the biggest underreported story facing Trump and what to anticipate in the economy going forward.

Lance started the conversation asking about Rickards impressions on Donald Trump’s initial first weeks in office and the “bumps out of the gate” coming out. Rickards began by noting, “Historians and pundits like to talk about the first 100 days of a president. It is a big deal because there is no doubt that a President’s power is at its peak just after the election. The second term and lame-duck periods are difficult to getting much done. With Trump it has been a mixed bag. He’s had some high profile legislative failures. They failed with repealing Obamacare and it appears it is going to take longer than expected with tax reform.”

“On the executive order side, this has been a revolution. Whether you look at climate change, more military spending the U.S profile in the middle east, trade and tariffs, etc. Trump has done a lot of what he said he was going to do. So, on the one hand a lot of activity and promises kept. I would think that to continue but with some high profile failures also… Most presidents get Congressional Honeymoon, but it appears Trump’s got more of a burning bed.”

Jim Rickards is a New York Times bestselling author who has recently released his most recent work The Road to Ruin. Rickards is an economist and lawyer who worked has spent considerable time working on Wall Street. He currently advises the intelligence community on currency wars insights and continues to develop exclusive macroeconomic analysis.

When asked about what he views as the most important narrative not being reported Rickards responded, “To me, the really big story that is not being reported on is the Federal Reserve. We all care about our money and our savings. The price of money, which is interest rates, is set by the Federal Reserve. That’s our central bank that has a Board of Governors in Washington. Well, there are 7 seats on the Board. People know Janet Yellen, she’s the Chairman. Trump is going to get to replace 5 of them over the next year and a half with 3 of them probably in the next few months. So, Trump in effect owns the Federal Reserve. They’re going to do whatever he wants because he is going to appoint all of its incoming members.” [Here’s Rickards latest take on the Fed in full – Click Here.]

“The question is then, what does Trump want? Does he want a strong dollar? Does he want a weak dollar? That all has a lot of significance for investors. Trump really owns the Fed at this point.”

When Lance Roberts then posed the question of where Trump might go with the Fed Rickards responded, “It will be very interesting to see who the appointments to the Fed are. There are 3 vacancies right now with a couple more coming. It will be interesting to note whether they are asking those individuals whether they favor auditing the Fed, that’s one that might have some traction.”

“There are trillions of ‘behind the scenes’ currency swaps. A currency swap is where if Europe needs dollars to bailout the banks because they borrowed in dollars, they can’t print them. So we swap currency where they give us euro and we give them dollars.”

“Our Federal Reserve, the U.S central bank, is sitting on trillions of euros. No one publicly has any idea what that amount is. Whether it goes up or down and where it stands right now. That is what would come out in an audit. I think it is a good thing.”

Rickards was then asked in part two of the conversation what he means when he discusses “The Death of Money.” When I say The Death of Money what I am really talking about is the loss of confidence in the U.S dollar. To be clear, right now, the U.S dollar makes up 80% of global payments and 60% of global reserves. Reserves are the money that countries save up from trade surplus.”

“So there is no question that the U.S dollar dominates the international monetary system. But the system is based on confidence. Confidence can be very easily lost and once it is lost, its very difficult to regain. Then the world will go looking for a substitute. This has happened 3 different times in the past 100 years. It happened before WWI, then again in the 1930’s during the Great Depression and then again in 1971 when Richard Nixon went off the gold standard. Every 30 or 40 years these big monetary resets do happen. We’re getting ready for another one, partly.”

When asked about the confidence that is currently boosting the markets, Rickards’ remarked, “First off, I don’t put a lot of stock in confidence reports… There is a high correlation between consumer confidence and the stock market. The reason consumers are confident is because the stock market is going up. As soon as the stock market goes down, consumer confidence is going to plunge. So what could cause it? Imagine that snow is building up on a mountainside. You could look at it and see its unstable and know it is going to collapse. All it takes is one snowflake to come along, start a slide and disturb others while gaining momentum. The next thing you know the whole avalanche is coming down. Who do you blame? The snowflake or the system as a whole?”

“What I am doing is looking at the system as a whole. It is the instability of the system that we need to be concerned about… There are lots of things that could cause it. That’s not the important aspect to focus on. My advice to investors is get gold now. Don’t go all in, I recommend 10% of your investable assets. That’s not 50% or 100%. That’s your insurance if everything I am saying is wrong, you won’t get hurt with that slice of gold… But if things do get bad and fall apart you’ll be very happy to have it.”

To catch the full interview on Trump, the Fed and more follow The Lance Roberts Show – CLICK HERE.

If you’d like to learn how to get your FREE copy of his recent bestselling book The Road to Ruin – CLICK HERE.

Thanks for reading,

Craig Wilson, @craig_wilson7
for the Daily Reckoning

The Daily Reckoning