James Rickards Exclusive - Prepare Now to Survive the Aftermath of the Next Global Financial Crisis

we're still in the aftermath of the 2008 financial crisis if this system is unstable the instability is growing the next crisis will be bigger people look at and say hey get me out of here get me into hard assets silver gold and I see people with 401ks 90 percent in the stock market I just say your this is an accident waiting to happen there's actually the first interview of the book tour don't forget to join us for our next live stream this Sunday night July 21st at 9 p.m. Eastern we'll go over current events gold and silver news and our interview with Jim Rickards once again join us for our next live stream coming up this Sunday night July 21st 9 p.m. see you then log and everyone and welcome to another edition of silver bullion television s me TV I'm your host Patrick Vieira once again if you have not already done so or you are new to this channel please do subscribe click on the belt we notify the new updates and do give us a thumbs up if you like what we do we are joined on SB TV today by James Rickards author of three New York Times bestsellers currency wars the death of money and the road to ruin he also has contributed as an advisor on capital markets to the US intelligence community and at the office of the Secretary of Defense in the Pentagon and we are delighted to have James here today as our guest good day James Rickards and welcome to SB TV how are you doing I'm doing fine Thank You Patrick great to be with you great we're glad you're on we've been trying to get you for a while then we're absolutely thrilled that you're here we know you've been busy writing your book so that's what we'll go ahead and talk about all right the coming crisis Jim your latest book aftermath which is released this year is the fourth volume of a quartet of your previous works namely currency wars the death of money and the road to ruin and you've mentioned in aftermath that these four books somewhat resemble the Four Horsemen of the Apocalypse of the book of Revelation can you share with us how are they alike and how it relates to the recent past and perhaps not-too-distant future of the international monetary system sure I'd be glad to you know it's it's a loose loose metaphor but you're right it's called the international monetary quartet for books currency wars the death of money the road to ruin and now aftermath and a lot of people have heard of the Four Horsemen of the book of Revelation and an interesting question is if you ask people to name them and they get through it with death in war they get through that pretty quickly but then they they can't get together - they're like plague or disease or whatever and actually one of them doesn't have a name it's it's the the black horse the third horseman but the the message from Scripture really talks you could you could say it's famine or plague of insects it's basically high prices of food but you can also say inflation that's another interpretation so it lends itself to the economy and then the fourth actually the first in order in terms of the scriptures that is the white horse and that's actually scholars can't agree on the translation from ancient Greeks so it's sometimes this victory sometimes is conquest but I use the word aftermath because it sort of captures both both ideas but the title people say what is the aftermath mean what aftermath of what and it there are two answers to that and they both apply the first one is we're still in the aftermath of the 2008 financial crisis it's the I know we've been in an expansion technically an economic expansion since July of 2009 we just passed the ten year mark where we're now in the one hundred and twenty first month of an expansion longest expansion in the US history but it's also the weakest expansion in US history and that's that's the point yeah we've been growing but we've been growing a little over two percent for ten years whereas if you go back to nineteen eighty and look at all the expansion it's the average is a little bit over three percent and you say well gee 2% 3% doesn't sound like a big difference it's a huge difference given the size of the economy you take that difference and compounded over 10 years so certainly a longer period you're talking about trillions of dollars of lost outputs estimates are four to five trillion dollars imagine somebody going into the Oval Office and handing the President and a check for five trillion dollars say mr. president here you you can use this any way you like but education infrastructure defense benefits whatever you like that's a lot of money right so that's how much we've lost in this expansion relative to past expansions I like it more to a depression depression does not mean continuous decline it does mean growth below trend persisting growth below trend notice depressed growth and that's what we're in so so in that sense because we have not normalized growth we're still in the aftermath of the last financial panic but I also take the story forward look at the possibility of the next financial panic and that's a lot of what the book is about pointing to things that you can see today that tell you the system is unstable the instability is growing I'm not saying we'll be a financial crash tomorrow although perhaps who shouldn't be surprised if there is but whether it's a year from now or two years from now sooner than later these things do happen on a regular basis that's going to happen what would the aftermath of that be like and there I make the point that very different from from the last crisis the next crisis will be bigger the central banks won't be the ones bailing you out someone's going to have to bail out the central banks and it could be more ruinous more wealth destruction and a different world now let's just say we're not helpless there are things you can do today to prepare for this and I talked about it in the book so aftermath refers to the slow growth aftermath of the last financial panic and the likely aftermath of the next one yes you know aftermath it does look into what will come after the next economic crisis but can you expand a bit and help us understand how big of a crisis we are expecting ahead and what were the warning size that convinced you that such a crisis is absolutely coming sure well first of all in terms of the scale and I make this point I I made this all the way back in 2000 made this point all the way back in 2011 and my first currency wars economists my second I'll talk about mainstream economists PhDs policymakers of the Fed scholars people at Harvard University MIT you know collectively the the economic brain trust if you will have got the modeling completely wrong they take the view that the economy is an equilibrium system it's self-correcting to some extent but if it gets a little bit out of sync because of you know one extreme or another or a financial bubble over-leveraged etc that's you know unfortunate but you can push it back to equilibrium so you're it's an equilibrium system if it gets a little out of whack a little bit of you know you use policy to get it back to equilibrium that model is does not correspond to reality it is not how things work in fact the economy is a complex dynamic system and once you get into complexity theory and you know it's it's a very powerful branch of physics it's been used in it's also a branch of applied mathematics has been used successfully in many phenomena a lot of natural phenomena you know forest fires earthquakes climate you know then other man-made phenomena you can apply to a lot of things it has not been widely applied to economics it should be because the economy is a complex system and I've looked at that in all my books but it hasn't been because other people don't wanna you know what economists or people in markets Wall Street analysts said either they don't want to take the time to understand it or if they do understand it they find it's not in their best interest to talk about because you know they like this warm fuzzy approach they just buy stocks keep buying stocks the stock market goes up and up that's good for Wall Street it's not necessarily good for investors in the long run you have short run you get some gains but long wants a little bit unstable but the minute you understand complexity the first thing you learn is that part of me is that the worst thing that can happen in a system and it was the worst kind of financial panic or crash is a function of scale the bigger the system the worse the potential collapse that much seems obvious but it's in exponential function or a super linear function what that means is that if you double the system double the scale of the system you don't double the risk you increase it by five or ten times and I I had this debate with the CEO and board of directors in Morgan Stanley I did a private briefing for them and I talked about this in Chapter 8 of the book you know kind of tell the story of this briefing and they would give him a so obviously a very smart group there wanting one of the biggest banks in the world and they gave me a lot of pushback they said well Jimmy don't you know our capital is up our positions are down we're taking less risk fewer derivatives more liquidity subject to the Volcker Rule you know etc etc and I said yes that's all true the the bank individually is safer than it was in 2008 but you're part of a system you're part of a bigger system the system as a whole is much more vulnerable and much more risky and that system collapses the collapse begins you're gonna go down with it in other words the fact that your individual bank is safer doesn't doesn't deal with the fact that the system is riskier and I look at systemic collapse and that's where all the banks just fall like dominoes and so you know that look their directors their board of directors a CEO they have to take take care of their bank but I was pointing out to them that there's they're part of something bigger and it's the stability of the bigger system that one needs to worry about all that happened in 2008-2009 you know the risk was was private you know so Bear Stearns had failed Fannie Mae failed Freddie Mac failed Lehman failed and and they were all going to collapse like dominoes in a matter of days in late September 2008 you know Morgan Stanley was days away from collapse Goldman would have been right behind it then city etc they all would have fallen well the the Federal Reserve stepped in and truncated that dynamic Bernanke and Henry Paulson just kind of waved their hands and said look we're guaranteeing all money market funds we're guaranteeing all bank deposits regardless of size we're going to backstop the European Central Bank with of dollars of currency swaps that you know the the problem in Europe is they were short of dollars European banks were failing also they were short of dollars they turned to the central bank well the European Central Bank doesn't print ours it prints euros but they needed dollars so what they did is the the ECB printed up a bunch of euros the Fed printed up a bunch of dollars and they did a currency swap and the Fed gave the European Central Bank all those dollars to bail out their own banks by the way that was not disclosed at the time this was all behind the curtain came out years later after after dodd-frank but my point being the central banks bailed out the the bail at Wall Street and bailed out the private banks but they didn't change anything that the debt didn't go away just moved up upstairs and moved from the balance sheet of the private banks to the balance sheet of the central banks and still there the the Fed has not normalized the size of its balance sheet they have not reversed quantitative easing they have not normalized interest rates it yeah they raised them somewhat and but the balance sheet down a little bit not nearly enough to deal with a new crisis or a new even a new recession so the question is in the next crisis who's going to bail out the central banks and there there's no one bigger than the central bank except the IMF they have the only clean balance sheet so now you're into world money world control it's a whole different scenario and again I talked about this in the book chapter 8 interesting another interesting chapter that you wrote was what you discussed Godzilla and the size of a blue whale you mentioned that no creature larger than a blue whale can exist on earth due to something called the terminal unit can you share with us why you wrote about Godzilla and what the terminal unit has to do with our financial system today sure the the terminal unit comes out of advanced physics and complexity theory it's done at places like the Los Alamos Institute in New Mexico the which are the Santa Fe Institute I meant to say the Los Alamos National Laboratory in the Santa Fe Institute in New Mexico the Applied Physics Laboratory at Johns Hopkins and other Institute's I've actually lectured on the financial aspects of complexity theory at a number of those institutions been able meet the top physicists in the world who deal on this month my problem is that the physicists get it the economists don't but but this comes out of the work of Geoffrey West I wrote a very good book called scale that deals with this an advanced level but but here's the point every so kind of using Godzilla as a as an example Godzilla's a fictional movie creature i first saw in the 1950s in the black-and-white film version but in the movie the first movie godzilla was about 150 feet tall I think there's another summer release guy so he keeps getting bigger now he's 300 feet tall but the question is why can a creature like that exist in the real world fictional yeah Hollywood special-effects no problem but can it exist in the in the real world turns out it cannot the tallest creature ever as far as we know and we're pretty good record is the giraffe it's 20 feet tall the largest creature is a blue whale it's about a 100 feet long why can't you have a 200 foot whale or a 50 foot giraffe well the answer in the case of height in case of the giraffe you're standing on legs or you're standing on basically legs two legs or four legs or whatever which have bones that hold you up well how much pressure can a bone bear or if you want to talk about architecture or steel beam or any support wouldn't be many support structure well that is as a function of the cross-section it's not the height doesn't really matter that much but the cross-section does it's the square of the area of the cross-section well but how much when you increase the size of a creature how much is the weight go up well that's a cubic measurement because you got height but you also get width and breadth so if your weight is increasing by a cubic function and your strength is increasing by a square function obviously the weight is going to go faster than the support and the creature will fall of its own weight that's why buildings sometimes collapse and creatures can't be above a certain size and and that's just math I mean it's just it's human nature's math Galileo figured it out physicists understand it today it's not because there's something bad about it's just because he can't can't happen it can't support us no way when it comes to the terminal unit so how much you know humans are on average you know five feet nine inches tall you know some taller some shorter but that's that's kind of the middle of the road a blue whale is 100 feet long but we both have the same size blood cells the the blood cell of a human is the same size as the blood cell of a blue whale that's the terminal unit no there's no matter how big the creature is you know the heart's got a pump the Bloods got to go through arteries and capillaries and etc and get to the tissue because it has to supply oxygen to the tissue everywhere on the body and if it doesn't the tissue dies and the creature dies and the point is as the creature gets bigger the amount of energy that the heart has to use is greater than the amount of energy being delivered to the tissue and the creature dies because he can't get enough energy to do his job so that's a limit that that's why blue whales 100 feet long and nothing and ever in biology has ever been longer in terms of in creatures in the sea and that's different because you know the water supports the way it's not about the way it is about the size so my point is once you can identify the terminal unit in any structure it doesn't have to be a living creature it can be an abstract structure or building what about the financial system what about the banks what about JP Morgan is there a terminal unit you know abstractly and finesse well yeah it would be the individual customer you know you want alone you got a credit card you make a deposit in the bank or an individual company that terminal unit doesn't change whether it's a small local bank and mid-size regional bank where the biggest bank in the world the terminal unit is the same so what is the limit on the size of the institution again analogizing to Godzilla or human being or giraffe or a blue whale they all have limits in theory there's a limit on financial institutions as well and if they get too big they collapse of their own way the same way a 50-foot giraffe would collapse or a real-life Godzilla would collapse well why don't banks clash well the answer is they do but the Federal Reserve puts up what I call a scaffold in other words in theory you could have a creature the size of Godzilla in the real world it couldn't it could not support its own weight but if you put a scaffold around it and propped it up in other words it could perhaps so the Federal Reserve and the regulators in the central banks are the scaffold they allow these financial institutions to be bigger than they normally could be without collapsing by propping them up with how do they do it you know guarantees Deposit Insurance off-balance sheet accounting too big to fail what happened in 2008 was evidence of this you know zero interest rate policy for six years so what does that do well if I'm a bank and my cost of funds is zero but I can lend money at 2% and I leverage it ten to one guess well I've got a 20% return on equity so that so co interest rate policy was taking money out of the pockets of American savers and putting it into Jamie Diamonds bonus over at JPMorgan and that's one reason for the rise of populism and I'm gonna get into politics too much it's not my subject but you can look at the election of Donald Trump in 2016 and say a lot of that was was unresolved anger at the way the Fed had bailed out the wealthy and the banks in 2008 but hurt everyday Americans so the point is the banking system is dangerous because it's bigger than and too complex and too risky relative to what it could support on its own but it gets propped up with the scaffolding of the Federal Reserve well what happens when the Federal Reserve gets in trouble what happens when people lose confidence in the dollar what happens when money supply people look at and say hey get me out of here get me into hard assets silver gold land fine art Natural Resources water oil something other than just money that's when the scaffold itself starts to collapsing you have a you have a catastrophe greater than 2008 having talked about Godzilla and the terminal unit do you agree with this view that the size of the depth does not matter to the US and how does mmm tea play into this yeah that's a great question I talked about that in an aftermath chapter two goes to the history of debt in the United States I caught a brief history it's not most people need to talk about debt and deficits they just the rice roll and they they fall asleep maybe that's understandable but in fact I could argue that economically nothing is more important than understanding how that works and then in Chapter five I talk about modern monetary theory so let me just kind of briefly you know make that connection a lot of people have a view of the the debt again the deficit is the annual shortfall so you have revenue you spend money if you spend more than you take in you have a deficit but we had a couple surpluses and I think 1999-2000 before that was 1969 but the US has been running deficits for a long long time we're looking at another trillion-dollar deficit this year so that's that's an annual concept but the debt the national debt that's the the total debt of all deficits in the entire history of the United States today that numbers around 23 trillion dollars if you can believe that but that's the national debt now a lot of people have a view that you know Kay George Washington becomes president and he borrows some money and every president borrow some money Thomas Jefferson Abraham Lincoln FDR you know Bush 43 Obama Trump and somehow we got to 23 trillion dollars and it kept going up that's not true that is not what happened actually George Washington had a national debt before he was sworn in George Washington became President of the United States the u.s. already had a national debt before we were a nation because we borrowed money to fight the Revolutionary War and people at the time said well what do we do about this we can't pay it and they said when I was just default you know mark is very good at that so when we just default too bad for those creditors and it was Alexander Hamilton who said no here's what you do because if you default you'll destroy your credit it said borrow new money and use the new money to pay off the old debt and then when the new money becomes due borrow some more and pay that off and just keep rolling it over and Alexander Hamilton created the US Treasury market the US government bond market and he said by borrowing money and paying off all debt you actually improve your credit and then you can borrow more and keep doing it we've been doing it for this point you know about 250 years ever since and so that was the the origin of the other government bond market but Hamilton working with Washington established the credit of the United States now what's happened since then is is not a straight line it's a cycle the national debt goes up and it goes down it gets paid off and it goes up again then it goes down again etc so it has been the cyclic or phenomena and what is the driver of the increase or the decrease the increase is simple it's worth when the u.s. is in a war we borrow money to fight the war win the war but then in times of peace we pay off the debt and the reason we do that is because we know that in the future we may have to borrow again and so you want your credit to be good you want some dry powder you know you don't you don't shoot off all your ammunition and target practice you save some in case you have to fight and and by the same token you don't exhaust the borrowing power of the United States because you may need that borrowing power at some future time in an existential situation which is what we face for example in World War two and in the Civil War so Lincoln drove up the debt to win the Civil War FDR drove up the debt to when the world win World War two and Ronald Reagan drove up the debt to win the Cold War but at least we got something for money we won we won all those worse but then after those wars the debt went down again so between for example after the war of 1812 and the mexican-american war 1848 sorry that the war of 1812 in particular we increased the national debt but Andrew Jackson paid it off in 1836 at the end of the Andrew Jackson's administration the national debt was zero so it did go up in Washington and Jefferson and Monroe but it went down again for other in other administrations including Andrew Jackson actually paid it off when Andrew left office he did two things in his final year he abolished the central bank of the United States and he paid off the debt so we had no central bank and no debt and that was the beginning of a great period of prosperity in American history but other presidents had to run up so he had this cycle as I described so it didn't go straight up it went up and down and up and down and now we're off the rails now we are off the rails now we are in uncharted territory the cycle I described has been broken now the debt is going straight up and it's in dangerous territory today the debt to GDP ratio is a hundred and six percent the highest since World War two but there's no effort underway to reduce it so now along comes mmt because you asked about mmt what does mmt say modern monetary theory and I explained to people first of all it's not modern and this goes back to the early 1900's 1905 in particular and it's not much of a theory because it doesn't have any empirical support no experiments to support it but the idea is that there's no let that basically you merged the Treasury in the Fed now these are legally separate and it's Treasury's part of the executive branch the feds an independent agency but you kind of merge them and you say look we can spend as much as we want and if we don't have the revenue just issue bonds and don't worry about the bond market because the Fed can buy the bonds and monetize it put it on the balance sheet wait 20 years or 30 years or whatever it is and get their money back what's the problem well when you put it that way it's a hard question to answer like yeah what's the problem legally there's no limit on that the the there are debt ceilings but they continually get raised and the Fed can print as much money as they want and the modern monetary theorists point to Bernanke binocular wouldn't agree with this but what did Bernanke do he increased the money supply by four trillion dollars between 2008 and 2014 to prop up Jamie diamonds bonus and bail out the banks while the modern monetary theorists but most of them were progressives the leading leading thinker is Professor stephanie kelton of a Stony Brook part of the state university of new york who's also the adviser to bernie sanders 2020 campaign she says look if Bernanke can increase the debt increase the money supply four trillion dollars to prop up the banks why can't we increase it four trillion dollars for the green New Deal or Medicare for all or tuition for all or free health care free child care etc that's when you hear these ideas coming out of there now when you know whether it's Bernie Sanders Elizabeth Warren you know it's at Joe Biden the leading presidential candidates it used to be there was an all-purpose answer they come up with some big program and I don't want to debate the program so the viewers can decide for themselves but there used to be in all-purpose answers you would just say hey we can't afford it we can't afford it the debts too big we need to get it under control and they would certainly go back to the drawing board today they don't you say we can't afford it they say yes we can we can't afford it Bernanke proved it just take the deficit as high as it needs to go and the debt to GDP ratio taken are you worried about 106 percent what about 120 150 Japan is about 250 what's the problem well it's a hard question to answer but the answer is legally you could do that but psychologically you cannot the limit on modern monetary theory and they don't talk about this is actually a psychological limit people instantaneously lose confidence in the dollar and I talk about this a lot in my book in aftermath and they say well yeah if that happens we could always you know raise taxes but the modern monetary theorists say that people cannot get out of the dollar they cannot get out of the dollar and the reason is that you have to pay your taxes and the only thing the government takes in payment of taxes is dollars they don't take gold they don't take silver they don't take you know whatever else you're selling they take dollars and so what happens if you don't pay your taxes well you get some nasty letters from the IRS but eventually they'll knock on your door put you in handcuffs and put you in jail and I've made this point and it's not a very popular point but I say you know they say state money is you you have to use state money whether you like it or not because it's required for taxes and I make the point that okay so you're saying that the confidence of state money comes from the barrel of a gun because you will get arrested and put in jail if you don't pay your time and absolutely pay your taxes I'm not kidding anything to the contrary but my point is people have alternatives that you know how much taxes Mark Zuckerberg paid he's worth about a hundred billion dollars depending on the time of day how much taxes he paid on that well relatively little because that's on Facebook stock so if he got his Facebook stock as founder shares and turns it into you know whatever a hundred billion dollar company or more if he doesn't sell the stock he doesn't have to pay taxes and a lot he has so some pay taxes on that but get capital gains raise and a lot of it he's given to foundations so Mark Zuckerberg has largely escaped taxes on a hundred billion dollars of wealth because it's in the form of stock that he's never sold what about the everyday American well you go to work you get a w-2 you they withhold taxes from your paycheck and you pay your taxes whether you like it or not so this whole idea that taxes are how we enforce confidence and money it's true to some extent for everyday people but it's not true for the super wealthy it's not true for the elites because they have whether its foundation is capital gains deferral you know trust etcetera they have ways around it but but everyday people can I say you can put yourself on your own gold standard or silver standard you just go buy some gold buy some silver put in a safe place if that goes up you don't have to pay taxes either you do if you sell it but not if you hold it and so Mark Zuckerberg holds the stock you can hold your gold and silver and as it goes up you don't pay taxes on it as I say if you don't sell it so yeah so I on the psychological barriers you print money increase the debt go off the rails in terms of the history of US debt which I talk about in Chapter two and in Chapter five I point out this flaw in modern monetary theory they say well you have to take dollars whether you like it or not not true to some extent yeah you got to pay tax on your your income but beyond that you can invest in things that you hold that are not taxed and or buy other assets again doesn't have to be gold or silver it could be lame our natural resources water oil could be a lot of things but the point is you know could be stocks for that matter if you don't if you don't sell them but the point is there are lots of wet legitimate ways around taxes so this gun to the head theory doesn't work but what what is true is that people can lose confidence immediately abandon dollars in ways you can't even imagine legally avoid taxes in ways that you can't even imagine and undermine this whole modern monetary theory increase velocity they could increase velocity as people get out of dollars they buy stuff well all that increases velocity could lead to hyperinflation you know the modern monetary theorist you know stephanie kelton is answer at higher inflation is raise taxes oh really you really want to destroy the economy yeah we're not we're gonna make make the dollar less valuable and raise taxes at the same time that sounds like a winning formula not really I mean that sounds like a disastrous for me but that's what they say so I debate them I'll be debating them soon at Bretton Woods but the modern monetary theory it he said doesn't hold water it's a recipe for disaster but people have not come up with good answers to it because of what Bernanke did and it kind of looks Keynesian you know what's wrong with deficits there's a lot wrong and I again I talked about that in the book there have been on plenty discussions on events leading to a huge economic crash or crashes but not as many have venture to discuss about what happens after the crash in after matter you do and and you wrote that the best description of life after a financial collapse is found in the mandibles a 2016 novel by Lionel Shriver right sounded really bleak Jim I don't well why did you find the post-crisis depiction of life in the mandibles to be realistic well first of all Lionel Shriver was very conscious of her book her books and novel my books are nonfiction but you know when you're looking at the future it's kind of the same if you if you're writing a novel about the future you make it up but if you write nonfiction about the future stuff that hasn't happened yet so in a way it's it's not invented I mean models and analytics that I use but you're still one you're forecasting you know you're you're talking about things that haven't happened haven't happened yet so we're covering the same grouse or she borrowed a couple things from currency wars which as an author and people said to me weren't you upset about ourselves no I was thrilled you're kidding she's an award-winning novelist she wrote a great book I'm I couldn't be more thrilled that she was borrowing some myself but I kind of repaid the compliment by talking about her book at the end of aftermath and a lot of people you know when you're when you're out there when you have best-selling books and you're on the lecture circuit and you're doing interviews you know people like to put words in your mouth they think they understand you and they say well you know Jim record says sell everything and buy gold the end of the world is coming I've never said that I think it's full we should all go all under one aisle I do recommend an allocation to gold or silver but you know not more than ten percent of your vegetable assets I think it's a good it's certainly a good hedge and it will in a real financial catastrophe it could perform so well that it's kind of insurance to protection you may be losing money and other parts of your portfolio but you'll be making in gold and silver so that's the insurance aspect of it but I've never said goal and I say 10% and I don't believe at the end of the world is coming at least it's it's above my paygrade it's not something I'm going to be forecasting but just because it's not the end of the world doesn't mean that things cannot change and history says they change all the time now you do have some apocalyptic scenarios like Mad Max or Cormac McCarthy has a very good novel called the road where it is completely desolate and you can imagine you know a nuclear war scenario or something like that that's not what I'm talking about that's not what I foresee that's not what Lionel Shriver was talking about what it is is that you have a financial collapse life goes on people still have jobs you still have an apartment the other police are still on the beat but things are very very different meaning you go to the grocery store and the shelves are bare and you buy things that you don't even need why would you do that well because maybe you can barter for them so you might buy some steal both so what are you gonna do with steel balls well you might not need them but maybe a couple weeks later someone wants some steel bowls and you can barter it for some food the police are there but they work on bribes so they're almost like private protection so if you pay them off they'll guard your house but it's not too bad somebody breaks into your house you're on your own and you know water outages they call she calls it dry out but you know the you know the you know the waters not clean you have to recycle it boil whatever the point is superficially it looks like life goes on but it's very substantially changed and in some ways it's a it's a regression the best-case scenario would be maybe late 19th early 20th century a farm or a small town like Grover's corners New Hampshire which was featured in Thornton Wilder's play our town the point being you don't have to predict the end of the world but you can't predict a changed world or a different world and are we ready for that and one of the ways to do that obviously is to have gold or silver because that will retain its value in every state of the world so even if you lose confidence in dollars you're not gonna lose confidence in gold and silver so I by the way are highly recommend her book I hope people enjoy my new book aftermath but and I talked about the mandibles in my book but for those who interested she wrote a great book and I highly recommend is buy read them both together I think you'll have a pretty good overview of where things are going we'll do Jim let's see the gold does hit 10,000 an ounce what what is Jim Rickards doing at that point is he buying more is he selling or is he just holding probably probably just holding but you know a couple a couple points I think are really worth mentioning first of all my $10,000 forecast it's an intermediate term forecast I'm not saying it's going to happen tomorrow or later this year it could be it could be several years away - it's not a made-up number I didn't just pick a high number to get headlines we get attention and nobody needs that it's actually a very simple mathematical that if if people lost confidence in the dollar which I do forecast and that could be the result of these bed money I'm out of monetary theory policy this is all connected by the way you have to look at debt and deficits modern monetary theory you know psychological aspects lost confidence velocity they're alive a lot of things in this and I do this chapter by chapter so you know there eight chapters in the book and my editor always asked me she said Jim I love these chapters where's the threat where's the thing that runs through it that that makes it a book and not just a collection of articles and the answer is every chapter isolates and talks about a separate vulnerability whether it's you know derivatives well your Robo trading the robots in charge the stock market people don't understand that ninety-five percent of all the transactions on the stock market are fully automated eighty percent of assets under management are in passive funds index funds ETFs etc the whole system's on autopilot and that's fine as long as it's going up oh man when it goes in Reverse it's going to drop with no bid because there's no active investors left to make a market or take the other side of the trade so we have chapters on that but kind of just coming back to you know your point Patrick about how this all all does all this connects the you know these these vulnerabilities are they're they're they're working to a row the system it's almost like termites in the foundation house looks good but it's getting closer to to the point of collapse every day and so if you lose confidence in the dollar and if you have to resort to gold to restore confidence what's the price and I was one of the key people say people who don't if people laugh at a gold standard an economist dismissed it and I have these debates all the time and the first thing they say I mean they don't really understand go over the first thing he says well there's not enough gold to support the economy you know when you look at the volume of transactions and credit and commercial transactions and you know foreign exchange markets etc there's not enough gold to support that amount of activity well that's nonsense there's always enough gold the question is price and at 1,400 dollars an ounce no there's not enough gold to support the current level of activity but at $10,000 an ounce there is and so it's not a question how much gold is there it's a question of what's the price if you peg the dollar you know $1400 per ounce of gold or you know put differently a dollars worth 114 hundredths of an ounce of gold you would have to drastically reduce the money supply by 80% to make that stick what if you did that you'd cause the worst depression in the history of the world this was the mistake well you know Winston Churchill made 1925 when they went back to the gold standard after World War 1 but if he said $10,000 announced with a 40% ratio of gold at the market to base money that could work and so that's where you get that number it's the price that goal would have to be to avoid a deflation deflationary depression in return to the gold standard well but if you did that nothing happens in isolation I explained this to gold holders like it was like I can't wait till go against the ten thousand dollars an ounce well be careful you wish for because gold at ten thousand dollars an ounce will only preserve wealth it doesn't really produce a big profit because the inflation would increase the price of everything else by five times now everything else would be destroyed so the I still like my ten thousand dollar gold even in a hyperinflationary environment because at least i preserved wealth you've made a nominal profit big one but you haven't made a real profit because of inflation but everyone else is wiped out so believe me you want that you want that golden sure you want that gold protection and the other thing I explained to gold I'll say gold bugs and it's kind of a little bit of a pejorative term but I say you know people say I love gold girls going up I want the old to preserve well yeah I agree with all that and I want a gold standard and they banging the table and again I said be careful what you wish for you can't make any money on gold with the gold standard the gold standard means the price of the dollar is fixed to a weight of gold the way to make money in gold is I mean if you want to make money in gold I'm not recommending this for the country but if you want to make money in gold you should be rooting for a really bad monetary policy P with the Fed who don't know what they're doing excessive debt to GDP you should be rooting for your modern monetary theory or all these really bad policies and flawed policy makers that's what you should be rooting for it because that will cause the price to go to skyrocket by the way the print is pretty much what we have so you know so again it gets your goal now while you still can because we've got a recipe for disaster but if you wanted something sound like a gold standard kind of thing judy shelton talks about and dr. sheldon is Donald Trump's nominee to go in the Federal Reserve Board if you want that and I do think it's a good idea that's the end of that's the end of profits and gold so so sort of a an uneasy tension on the one hand gold investors want the price of gold to go up okay but that will mostly preserve wealth whereas other things going down but if you want to go standard to restore stability so what you're going to get is a one-time gain then a lock-in and a new gold standard after that you should be investing in productive things like you know that might be a good time to buy stocks or technology and so forth so there's a little bit of a I don't see a conflict I'll say a paradox or a conundrum between higher gold prices which will preserve wealth and a gold standard which means gold will be locked in but you got to get from here to there so right now when we're not on the gold standard and policymakers don't know what they're doing great time to buy gold Jim you said you have yet to meet a hedge fund billionaire and you've met many correct who does not have a personal allocation of physical gold they are ready for what's coming their clients are not what does that statement mean well it means exactly what it says you know I'm not going to mention names but I lived thirty-five years in that and Darien Connecticut which is the next town over one over from from Greenwich wit and I worked for hedge funds worked for billionaire hedge fund managers a number of them are my friends so it's it's a world I'm familiar with a weather in New York or Greenwich Connecticut or daring up for that matter even around the world and so these are people these are individuals who are famous for their stock trading bond trading foreign exchange trading arbitrage you know quantitative trade in there many different global macro there many different strategies and they involve securities you know stocks bonds derivatives a commodities foreign exchange etc and that's what they're famous for but the interesting question is and then some of them a very good performance in very long track workers but the interesting questions what do you do with your own money now some of this invested and their funds and some of its doing the strategies I just described but you know these are conversations you'll have over cocktails or dinner or whatever and invariably I say do you have gold and I say yes and you know where your store it I'll leave that out but my point being they have physical bullion they have it in safe locations they don't put in banks they are these private non bank vaults or other security arrangements and they don't talk about it so yeah I'm not going to mention names but I've had this conversation many times and they all have physical go but then the next question is that will do the clients and by and large no I'm not I've had many conversation going back oh you know over ten years and going back to the the early 2000s where I'll talk to people the way I'm talking to you and the viewers right now you'll make a case for gold they'll listen to you and they'll go yeah that makes a lot of sense I can see the problems you're pointing to I can see the difficulties coming I'm gonna go out tomorrow and get some gold and then you see them a year later or six months later and say hey everybody that goal and go now I was busy whatever so it's people don't know how to buy gold they don't know where to store it they're unfamiliar with it nobody's the other gold dealers out there but you never hear mainstream economists or Wall Street analysts talking about goal because they want you to buy stocks and bonds because that's how they make money it's not necessarily you make money but it is how they make money so so it's the top I'm not a Salesman people say to me Oh Jim you always talk about gold because you make money selling go no not true not a dealer you know I have go for a rat for personal investment purposes but I'm not a dealer I don't I don't sell it i if you buy gold or not it's all the same to me I'll I'll give you my analysis my thoughts but I don't make any Commission's on it so it's just not true that I have a financial interest in promoting and I don't I do promote my books because they don't sell themselves so you know I'll talk about the the books all day and I hope the readers do listeners that do buy aftermath and read it because there's a lot in there long lost we're talking about but if you buy gold or not that's up to you that's your decision I don't get any Commission out of it but I do people say Jim doesn't if you have gold doesn't make you nervous they say no they don't think it would make me nervous would be five or hundred percent in stocks that that that would scare me to death and I couldn't sleep at night but but I don't I don't recommend a hundred percent gold I recommend ten percent gold big Slugger cash maybe thirty percent because it reduces volatility gives you a lot of option ality in a in a collapse if you have gold you're the purse re if you have cash your gold will preserve well put cash you can be the one going out and picking up bargains this is what Warren Buffett does and yeah this room for stocks and bonds in the portfolio bonds are perform very well lately and there's room for stocks but when I see people at 401k is nine percent the stock market I just say your this is an accident waiting to happen okay so that's all part of the barbell model which you'll have to read in the book but Jim Rickards can you let our listeners know how can they get a copy of your latest book aftermath sure the the official publication date is July 23rd so it's coming up very soon that's when it'll be on the shelves in the bookstore but right now you can pre-order it on Amazon Barnes & Noble pals their independent bookstore services online and where you can just walk into your local book store and pick up a copy so it's widely available but you can pre-order it now we're moving up to the rankings which is through the rankings which is amazing because we haven't even hit the publication date yet it's not officially for sale you can pre-order it but um where we're coming up to number one in a number of categories and Amazon tracks money investing and wealth management etc and as we get closer to to the publication date where we're hoping for even better results so yeah that's available online now and please have a look and I hope you enjoy the book I know I enjoyed it but God asked what are you working on next any projects that you're gonna start on now that now that the book is done are you taking a break yeah well you never get much of a break right now this minute we're doing I'm doing what we're doing which is uh this is the the beginning of the the book tour a book tours each day you know the old days authors went from town to town and sat in bookstores and signed books and that's fine that nothing wrong with that but of course the way we talk about books today is digital so we do podcasts interviews video interviews cable TV interviews live appearances so I'm really in the thick of that right now I'm glad I'm happy we were able to to schedule this interview to kick it off it's actually the first interview of the book tour so so that's fun but I'll be doing be doing some live appearances I'm Vancouver we will tour a little bit we'll be overseas mail it we'll be in London Berlin Vienna Sydney Australia in Melbourne Australia in the coming months but right now we're focused in in the u.s. USA and doing is I see a lot of a lot of interviews so very excited about well Jim Rickards were happy you you took some time to spend with us and also in the book there are some investment secrets that I found pretty interesting also so I do hope people will go out and get it but again we do thank you for your time and we wish you all the best with your with your latest book aftermath thank you thank you Jim I hope to get your on again sometime and take care okay we'll be in touch bye bye that was James Rickards author of aftermath sharing with us about the coming economic crisis and it's half math if you liked this video please hit the like button and subscribe to this be TV channel to be updated on new content and do also check out the SP TV podcast on iTunes and Spotify

Channel: Silver Bullion TV

Views: 236,627

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Keywords: james rickards, jim rickards, currency wars, the death of money, road to ruin, aftermath, gold, silver, silver bullion, sbtv, precious metals, financial crisis, economic crisis, economic collapse, modern monetary theory, us national debt, the mandibles

Id: ojuNdko_Bw4

Length: 50min 46sec (3046 seconds)

Published: Wed Jul 17 2019

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James discusses his latest book, Aftermath, and how we can prepare to survive the aftermath of the next global financial crisis.