Rickards: Gold as the New Currency Standard

[Ed note: As political instability continues to rise and market volatility fluctuates, discussions about gold and a new gold standard continue to surface. Economist and currency war expert, Jim Rickards draws on history, theory and personal experience to offer a New Case For Gold. CLICK HERE to learn how to have a FREE copy of the book sent right to your door.]

Jim Rickards joined the Business News Network, a Canadian based channel focused on finance and markets, to discuss his views on markets and why the gold standard would offer stability. The bestselling author offered highlights on his take on what to expect from the United States central bank, the Federal Reserve, and why he views gold as a real alternative.

When asked about his sense on gold and why we have not seen it take off yet he responded, “I think we are getting close. There are still some strong headwinds around gold. In the very short run, my view is that Janet Yellen will raise rates in March and I do expect that. That’s not fully priced in. As that gets priced in, it will make the dollar stronger. The dollar price of gold is just the reciprocal price of the dollar. So if you have a strong dollar, it is a lower dollar price for gold. If you have a weak dollar, it is a higher dollar price for gold.”

Jim Rickards Gold Standard

Jim Rickards is a New York Times bestselling author who has recently hit the bestseller list again with his book The Road to Ruin. Rickards’ is an economist and lawyer who worked on Wall Street and has advised various U.S government intelligence outlets regarding capital markets and offered inside analysis on global currency operations.

“The Federal Reserve is tightening into weakness, I do expect Donald Trump to appoint doves. The Fed has flip flopped nine different times since 2013 between “risk on and risk off” where now they are calling it “Trump on, Trump off” where they tighten and then they’re going to ease. They literally don’t know what they’re doing. Right now they’re in tightening mode, but I expect by April or May they’re going to have to flip flop again with a combination of new appointees and a slowing economy. I would look for ease by then. That will be a “rocket booster” for gold.

The host then asked Rickards his sense of exactly why gold she be the new currency standard he remarked, “Look at what’s been going on in the currency markets the last couple of years. In January 2015, the euro fell 20% against the Swiss franc in two hours. By August 2015, the Chinese did a shock devaluation of the yuan and lowered its currency 3% against the U.S dollar instantly. June 2016, right after Brexit, the pound sterling fell 14% against the dollar. These are currencies. These are not lottery ticket stocks. Why are currencies moving 5, 10, 15 percent against each other? That means the entire system is unstable.”

“You are going to have a crack up. It is going to lead to a global liquidity crisis that will be worse than 2008. It is not too late to solve that problem.”

“We need a frame of reference. The gold standard is one way. You could have a commodity basket, which is what John Maynard Keynes recommended in 1944. There are other solutions, you could even have a dollar anchor is the U.S wants to stand up to its obligations. Right now we have nothing. The system is highly unstable. You should expect a collapse of some sort.”

The host at BNN then posed whether markets and the economy have set themselves up for failure? Rickards’ responded, “Financial crises and liquidity crises are different than the business cycle. The business cycle will have ups and downs, we have had a very weak expansion but it has been going on for eight years now. All of that is different from a financial crisis, though sometimes they will come together. In 1987, the stock market crashed 22% in one day. That would be the equivalent of losing 5,000 points on the Dow Jones. There was no economic recession.”

“In August 1998, we had the Long Term Capital Management (LTCM) crisis where global markets almost came to a complete halt. I negotiated that bailout as counsel to LTCM and had a front row seat. We did not have a recession then either. Sometimes you get financial panic that comes without a recession. Often you get business cycles without a financial panic. Sometimes they come together, as was seen in 2008.”

“I am much more focused on systemic risk and the possibility of a global liquidity crisis which stands independent of whether the economy is speeding up or slowing down.”

To catch the full interview on the economy and a gold standard potential with Jim Rickards CLICK HERE. To get your copy of The New Case For Gold CLICK HERE to learn how to have it shipped directly to your door.


Craig Wilson, @craig_wilson7
for the Daily Reckoning

The Daily Reckoning