3 minute synopsis of the recent video interview with Jim Rickards, author of Currency Wars, Senior Managing Director at Tangent Capital, by Stocks and Scotch.
This interview was just over an hour and covered many topics. This is only a synopsis of one portion. Please see the entire Googlehangout on Youtube here.
Jim’s new book, being released next April, is called The Death of Money – The Coming Collapse of the International Monetary System.
When Jim says the international monetary system will collapse, probably in the next five years, and maybe less, it’s not meant to be a provocative statement.
The international monetary system actually has collapsed three times in the last one hundred years.
It collapsed in 1914. It collapsed in 1939. And it collapsed again in 1971.
It’s not that rare an event.
When it happens it’s not the end of the world. It doesn’t mean we all live in caves or go back to the farm.
It means that the global economy muddles through a period of uncertainty while the major trading financial powers come together, sit down, and reform the system. The system does come back together again.
What intrigues Jim is asking, “What are the scientific conditions under which the system will collapse?”. This can help you see it coming.
Also, “When the system collapses what will the new system look like?”.
A lot of the behaviour in international finance today can be explained as countries preparing for the collapse.
We see China acquiring approximately three tonnes of gold in the last four years. Jim estimates that China has tripled its gold reserves. Why are they doing this?
Either they’re dopes or they know something we don’t know.
Jim gives them credit, and believes that they know something most investors don’t, which is what Jim talks about – a system collapse is coming.
Jim believes it’s going to be like a game of Texas Hold ’em and you’ll want a nice pile of chips in front of you. Gold is going to be the chips.
As an investor, Jim wants to do what China is doing. He wants to get some gold.
The people who understand gold is infinitesimally small.
Gold is not an investment and gold is not a commodity. Gold is money.
Warren Buffett say he doesn’t like gold because it has no yield, and Jim’s response is that it’s not supposed to have yield.
If you pull a central bank note out of your pocket we would all agree it’s money. But does it have a yield? It has no yield.
If you want yield you have to take risk. If you put the bank note in a bank, or buy stock with it, or buy anything else with it then you’ll get your yield, but you risk losing the value in the dollar. That’s the trade.
The reason gold doesn’t have a yield is because it’s money.
Jim recommends to investors to have 10 – 20% in gold and that’s your insurance policy for the rest of your portfolio. He knows people who own many thing, including stocks and bonds, and believe they are diversified. But all of their investments are denominated in dollars. If the dollar collapses their whole portfolio goes down at once.
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