When You Own Gold, You're Fighting Every Central Bank in the World

Here
is an exclusive interview forwarded to SmartKnowledgeU by German investigative
journalist Lars Schall conducted with James G. Rickards. Mr. Rickards is a
leading practitioner in the realm of capital markets, national security and
geopolitics. Mr. Schall’s interview with Mr. Rickards covers a variety of
topics including his thoughts on quantitative easing, the currency wars of the
past and the present, and central banks’ views towards gold.

Mr.
Rickards, you’ve stated not so long ago: “Quantative Easing is dead, long live
Quantative Easing.“ What do you mean by that?

What I meant was that formerly the QE
program by which the Federal Reserve purchases intermediate-term treasury notes
in the open markets, those in the three, five, seven and ten years maturity,
that program is officially over June 30th, and I did expect that it will not be
continued after June 30th – this is what I meant by: “QE is dead.“ However, the
Fed has been doing this for almost two years, and at this point through the
program they have acquired so many assets that their balance sheet is now
almost $ 3 trillion. When they started this program it was less than $ 1
trillion, it was close to $ 900 billion, but today the balance sheet will
approaching at the end of June $ 3 trillion, the exact number right now is
about $ 2.6 trillion, but they will be buying some more assets between now and
June 30th.

The point is when your balance sheet is
that large you have securities that mature over time – two years ago, if you
bought a two year note, that note is maturing sometime in the next few months,
and when that happens the Treasury sends you the money, and then you can keep
the money. But in the case of the Fed because they create the money in the
first place if the system sends money to the Fed, that money goes out of
existence, it actually reduces the money supply. But the Fed can choose to go
out and buy more securities by using their reinvestment buying power. So even
though they will not expanding their balance sheet they will be continuing to
buy securities to keep interest rates low. So that is what I meant by: “Long
live QE.“ In other words, they are going to continue QE, but in a different
form.

Is
this perpetual, even though maybe modified QE in your view by any measure
successful – or does this depend on which side of the proverbial “printing
press“ one does stand?

That’s a good question. In order to
define success you have first to figure out what the goal was and see if you
have reached that goal. And there is a lot of misunderstanding on that point. A
lot of critics of the Fed have said that their goal was to monetize the federal
debt in the form of printing money. Well, that is not the goal of QE, never
was. The goal of QE was to keep interest rates low, and in particular the Fed
wanted to create a situation with what they call negative real interest rates.
A real interest rate is simply the interest rate that you have to pay, so it’s
called the nominal interest rate minus inflation. For example, if the interest
rate is 2 percent, but inflation is 4 percent, then the real interest rate is
negative 2 percent, or 2 – 4. And when you have negative interest rates this of
course encourages people to borrow, because they can pay back the debt in
cheaper dollars – not only is the borrowing cost zero, it is below zero, and
therefore you can pay back the debt in cheaper dollars, so you don’t have to
pay back as much as you have borrowed in the first place in real terms. So that
is the Fed’s goal.

Now you have to ask yourself how does the
Fed measure inflation? They don’t actually use the inflation numbers that are
reported every month. They use intermediate-term inflationary expectations.
This is not the inflation of today, but the inflation that consumers and
borrowers think might be in existence two, three, four, five years from now,
because that is the one that really matters. If you borrow money for thirty
years on a mortgage or you borrow money for five years for a car loan, and you’re
trying to figure out the real interest rate you don’t use today’s interest
rate, you use your expected interest rate over the next five years, or in the
case of the mortgage the interest rate over the next thirty years. In order to
do that, the Fed looks at what they call the TIPS spread – we have an interest
rate in the United States called TIPS, which is Treasury Inflation Protected
Securities. Those are protected against inflation. The interest rate on TIPS is
only the interest rate you need to compensate for risk, but there is no
inflation element build into it. With the other treasury notes you have to
worry about inflation. So the Fed looks at ten-year rates and then they look at
the ten-year TIPS rate to figure out the difference, and that difference, in
theory, represents intermediate-term inflationary expectations. That is sort of
what they are targeting.

So the whole point of QE is to buy notes
in the five to ten years spectrum, keep those nominal interest rates low and
keep the TIPS spread low as a way of keeping the inflation expectations low.
And in that sense the Fed has been successful. People are continually amazed
given the U.S. debt situation, the U.S. money printing situation and the
potential high inflation why the interest rates are as low as they are. One
reason is, the Fed is buying enough securities to keep the interest rates low.
They don’t have to buy them all, they don’t have to monetize the debt, they
only have to buy enough. On that measure I would say yes, QE has been a success
and will continue to be a success, because as I have mentioned the balance
sheet is so large that the buying power by itself is enough to  buy
sufficient securities to keep interest rates low.

The
global commodity rally, that is now under pressure, seems largely liquidity
driven via cheap borrowed money. Do you think that there’s a direct link
between monetary policies in the United States and the Arab revolts via higher
food and energy prices?

Two times yes. But let’s take the first
part of the question: is there a link between monetary policies and higher
inflation prices? I think the answer is absolutely yes. We have seen this many
times in the past. For example, in the early 1930′s commodities prices
collapsed around the world, and that was partly caused by too tight monetary
policy, and in that case the Fed was not expanding monetary policy enough, and
that too tight monetary policy was collapsing commodity prices and causing
generalized deflation all over the world. In the 1970′s we saw then the
opposite: we saw a very loose monetary policy. At the beginning of the 1970′s,
oil was about $2 per barrel, by the end of the 1970′s it was $12 per barrel and
soon on its way to $20. That was in part due to a very loose monetary policy by
the Fed. There is clear evidence in this. We saw this again and again.

We see it again today. The only
difference today is that we have a more globalized world, we have more
economies participating in the world economy to compete with each other for
exports and market share. Labor in Asia now competes with labor in the United
States. All of that was not true, certainly not to that extent in the 1930′s
and the 1970′s. Also, the world is on a de facto dollar standard – dollars make
up 60 percent of global reserves and an even higher percentage in global trade,
of course, the price of oil and other global commodities are set in dollars.
When you have money printing, what is happening is that inflation is showing
up, but it is not showing up in the United States at first, it is showing up
all over the world – in China, Malaysia, South Korea, Thailand, Brazil and many
other countries.

That is because of the exchange-rate
mechanism. These countries are trying to keep their currencies low relative to
the dollar, which means they have to buy dollars by printing their local
currencies in their local markets. The result of that is they are creating a
flood of other currencies. That is why the inflation is showing up around the
world and not in the United States. Little by little that is changing. We are
at a point where a lot of those countries are starting to revalue their
currencies upward. This will limit the inflationary pressure in their own
countries, but it means that the inflationary pressure will now come back to
the United States in the form of higher import prices when we buy foreign
goods. This process will take some time to play out, but it will ultimately
force the inflation back into the United States. With that all said, there is
no doubt that the easy monetary policy of the Fed is responsible for higher
commodity prices around the globe.

Now, given that, yes, this is absolutely
one of the contributing factors to the unrest in Northern Africa, the Middle
East, but also in some parts of China, which haven’t grown to the extend
elsewhere, but the fact that they are happening at all is significant. Sure,
there are many other factors, for instance large numbers of unemployed young
adults. But rising food prices is sometimes what it takes to get the people out
on the streets. The longing for freedom and liberty and the unemployment
situation actually have been persisting for a longer period of time, but the
rising food prices may be that sort of proverbial straw that breaks the camel’s
back which causes civil unrest to come alive. So the Fed is doing a lot of
damage, not only to the U.S. dollar and the global economy, but I would also
say that they are actually provoking a lot of unrest around the world.

Would
you then also say that war and monetary policies are in general intertwined
subjects or at least could be?

There is no question that they can be.
Again, we saw this in the 1930′s, there was a long sort of currency war fought
by the major powers from the 1920′s to the 1930′s, which had to do in part with
the debt situation coming out of World War I. In Germany you had massive
reparations to pay to France and Great Britain, many others had massive war
debts that were used to finance the war costs by Great Britain and France to
the United States, so you had a world in debt, the whole world was in debt to
each other, and that was what precipitated these currency wars, these beggar
thy neighbor currency devaluations of one against the other, and finally all
major currencies devalued against gold, which happened in stages between 1931
and 1936. But none of the economic problems were solved, the real solution
would have been just to forget about the debt, but that did not happen until
very late in the process and only in stages, and by then when it did happen a
lot of the damage was done in Germany with the rise of the Nazi Party, which
lead directly to World War II. So that sort of currency war turned into a
shooting war.

Therefore, I think that one can’t
underestimate the potential for these global international economic effects to
turn into actual violent warfare. That did not happen in the second currency
war during the 1970′s and the early 1980′s, but there is always that potential,
yes. First, you have a currency war in which the countries try to devalue their
currencies against each other, but that usually doesn’t work – all advantage is
only temporary in that situation. Then you go into trade wars. What the
countries cannot achieve with the currency devaluation they try to do in the
form of tariffs, capital controls, embargos, unfair trade practices etc. But
that also tends to fail. It might protect certain industries in the short-run,
but it tends to reduce world trade and growth, and that causes even more
economic stress. Finally, countries will always find excuses for conflicts that
can absolutely lead into military conflicts. Those are things that I think the
central bankers underestimate.

Now
that you’ve mentioned the “Currency Wars“ of the past, let us look at the
current one of our time. Isn’t the real battle royal in that “Currency War“ the
one between gold and all fiat currencies, especially the U.S. dollar?

That’s where it will end up. I agree that
this is the endgame. You start out by devaluing with each other, but that ends
up in failure, and so you need something to devalue against – and gold is
always the last resort, because gold is the one thing that doesn’t devalue on
its own. For example, if the U.S. devalues the dollar against the Chinese
currency, and then the euro devalues against the dollar, U.S. exports might be
helped, but the dollar devaluation could be hurt by the euro devaluation, so as
I have said no one is really further ahead and you’re not getting the inflation
that you want. But one way you can always get inflation is the devaluation
against gold – or even maybe the devaluation against gold is the inflation.
Anyway, the purpose of this is to cheapen the currency, help exports and lift
commodity prices across the board.

This has happened two times, of course.
In 1933 President Roosevelt devalued the dollar against gold, and in 1971
Richard Nixon did the same thing. I think it will happen again. The currency
war is playing out for a while, but they don’t really get what they want and so
at the end of the day they have to devalue against gold. For instance, you will
see a lot of up and down between the euro and the dollar, the cycle is
repeating over and over and over, back and forth, and as a trader you can make
a lot of money on the swings between the euro and the dollar, but as an
investor it really doesn’t matter very much. My analogy for this is that the
passengers on the Titanic can go to a higher deck or to a lower deck, but they
can’t go all off the ship. The life boat, if you will to pursue that metaphor,
is gold. That is the one thing they can all devalue against. I think this is
where it all will end up.

In
2009 you have said on air at CNBC: “When you own gold you’re fighting every
central bank in the world.” What has led you to that conclusion?

Well, there are about 160.000 tonnes of
gold in existence, that would be all gold that was ever mined, whether it’s
jewelry, central bank reserves, industrial applications or artistic
applications, etc. That is approximately all the gold ever mined. About 30.000
tonnes of that gold is in the hand of central banks, which is not quite 20
percent of all the gold. They are able to use that to manipulate the price of
gold through central bank sells, central bank releasing of gold, or not selling
it, but simply holding on to it. There is good evidence that central banks have
pursued all those different policies from time to time. As an investor, even as
a very large investor in the area in the tens or hundred of millions, which is
pretty large, or even upwards to billions for some big institutions, those
amounts are still relatively small compared to central bank gold holdings. So
you’re a little bit in the short-run at the mercy what central banks choose to
do.  Although fortunately right now what I see is that central banks are
not unhappy with the price of gold going up.

There were times in the past when they
wanted to keep the lit on the price of gold to avoid inflation. But now is not
one of those times. Now is the time when the Federal Reserve in fact wants
inflation because they desperately want to reduce the real value of the U.S.
debt and a depreciation of the dollar is one way to do that. So they do want
the price of gold go up. However, they don’t want it to go up too quickly. They
want an “orderly adjustment,“ that is the exact word that they use – orderly
as opposed to disorderly. What does that mean? It means that gold goes up 10 or
15 percent a year, which it has by the way, of course, ten years in a row. If
it increases that way they do not mind it, because it cheapens the dollar,
which is what they want. But what they don’t want is to see it maybe double in
six month period or a spike, because that might cause a panic buying of gold, a
panic dumping of the dollar, and that can get out of control.

My point is simply that I think gold is a
very good asset to own, I think it does preserve wealth and will go up in
value, although it is not really going up in value – what happens is, of
course, that the dollar is going down, nevertheless you will protect yourself
against the collapse of the dollar. So investors should own it to some extend
and in dollar terms it will go higher, but don’t speculate that it will happen
too fast because the central banks are on the other end of the trade and they
don’t want that to happen.

Mr.
Rickards, a huge chunk of the foreign gold reserves located at the New
York Fed belongs to Germany. What are your thoughts related to the German gold
reserve in custody at the NY Fed? Let’s assume you would be the head of the
Deutsche Bundesbank with the best interests of the German people in mind – and
also keeping in mind that we’re heading to currencies backed by gold: what would
you do then in that respect?

It depends on the German gold policy. If
Germany wants to leave the monetary policy to the U.S. and is willing to accept
whatever policy plans the U.S. comes up with, they should probably leave it
where it is. That is a question of confidence. But if Germany wants to pursue
its own policies or perhaps have a more gold backed euro or maybe even go back
to a Deutsch Mark, then they should bring it to Germany and store it in secure
vaults under control of the Deutsche Bundesbank. The reason for this is: as
long as it is stays in the United States it is vulnerable to confiscation by
the United States. So you really don’t have the control over your own monetary
policy as long as your gold is in other hands. During the Cold War, given the
Russian threat, I am sure it made sense and was a smart move to have the German
gold in New York. But today I would rather be concerned about the Federal
Reserve printing presses than about Russian tanks, and thus I would like to
have it in Frankfurt.

How
do you react to all that “precious metals are in a bubble“ talk? Is this rather
amusing for you to observe and to hear?

Yes. It tells me that people who are
making that claim are not really familiar with the gold market. It’s funny how
there are a certain number of people whom I would consider as true gold
experts, but most people on Wall Street, for example, may have some analytical
skills, but they are not real experts in gold, they seem to go from trend to
trend – one month we see them talking on TV about tech stocks, the next month
they are talking about corn or ethanol, and the month after that they are
talking about gold. Those people tend to flip from topic and topic. They use
for that the very same analytical techniques and are not really prepared to
understand that much about gold.

Having said that, I want to argue that
gold is definitely not in a bubble. Here is why: First, the trade is very, very
uncrowded. I talk to large institutional investors all the time, and they have
zero allocation in gold or very small, maybe one percent or one and a half
percent. You look at these portfolios and they have 50 percent stocks, 40
percent bonds, and the rest hedge funds. To me gold is the most under allocated
asset in the world. If gold would simply go up from one percent to two percent
in portfolios, there is not enough gold in the world anywhere near current
market prices to support that shift. There is an enormous potential to go up
just on an extremely modest allocation in the direction of gold.

Secondly, there are ways to measure if
gold was in a bubble. You simply take the official gold supply numbers,
multiply that by the market price and compare that number with the money
supply. If you do that within the United States, you would come to a result of
17 percent. But in 1980, when gold was at $850 per ounce, that number was
actually over 100 percent. In other words, at that point gold was so high that
every holder of a dollar could have gone to the Fed, cashed in for gold and the
United States still would have gold left over. In that situation, where the
market value of gold is higher than 100 percent of the money supply, that is
arguably a bubble. But we are nowhere near that number today, it is not 100
percent, it is about 17 percent. The two things together tell me that we are
not in a bubble.

What
would be the most important signals (beyond positive real interest rates) that
the end of the bull market in gold is near?

Well, I gave you two metrics to explain
why gold is not in a bubble. I would watch them also when we get closer to a
bubble territory. For example, gold at $7000 an ounce with the current money
supply and the current supply of gold, then we would be back where we were in
1980, and that might indicate a bubble. But we have plenty of room between
$1500 and $7000. And remember also: a bubble can always overshoot.

What
is your opinion related to the decision of the University of Texas endowment
which bought $1 billion of physical gold?

That is very significant, because
obviously it is a large endowment with access to the best financial minds of
the world, very well advised, and they took that decision, which I believe is a
good decision, they will make money on it, and I think it will open a door. It
will make it more respectable for other endowments to do the same. There is a
little bit like a herding mentality among asset managers and endowment
managers, and even if they think there is good case for gold they don’t want to
buy it because they fear to be embarrassed or marginalized at conferences as
gold nuts. But when a very well advised and respectable endowment of that size
such as the University of Texas endowment buys gold it sends a signal to others
that they should looking at it. That increases the trend of purchasing gold, which
of course is very bullish for the price.

The
most interesting story in the future for me is the point in time when the
Middle East countries will no longer sell their oil and natural gas for paper
money. When do think will they be paid for it with precious metals?

Well, this is all part of an evolution
away from the dollar. It has a number of ways to go. I do think that what may
happen is that gold will be used as a pricing mechanism. In other words, Middle
Eastern and also Russian natural resource exporters may begin to price their
goods in units of gold, but accept dollars, but the problem, of course, is that
the amount of dollars won’t be fixed. Simple example: right now oil is, I use
rounded off numbers, around $ 100 a barrel and gold is around $1500 an ounce,
so it takes 15 barrels of oil to purchase one ounce of gold.

By the way, if you look at the oil to
gold ratio it has been very constant for a very long period of time. Of course,
the price of oil has moved between $30 per barrel and $150 per barrel, and the
price of gold has moved between $200 an ounce and $1500 an ounce, but if you
look at the ratio, it always hovers around that 15 or 16 to 1 ratio, and that
tells you something about the real intrinsic value of commodities.

But be that as it may, you could have a
situation where somebody in Saudi Arabia says: From now on a barrel of oil will
be 1/15 of an ounce of gold. Now, if you want to pay me in dollars that’s fine,
but you have to do the dollar-gold conversion (to figure out how many dollars
you owe me in a world of an increasing gold price) that means that you have to
pay more dollars for a barrel of oil. So even if they accept dollars you can
still have a world where it’s priced in gold, but gold is convertible to
dollars and you can pay with dollars but you have to pay a lot more.

I think that is one of a number of
solutions on the table. Another one is of course the SDR. The IMF is trying to
promote the use of SDR as a basket of currencies. But none of this is feasible
yet. It will require some years to study, it will require a conversion process
and some pre-announcement for the market. But the bottom-line on the whole
thing is: the exporters of natural resources and manufactured goods in the
Middle East, in Russia, China, Brazil, they all have indicated deep, deep
dissatisfaction with the current international monetary system and the role of
the U.S. dollar in particular, so I think you will see some shifting away from
that in the years ahead.

And
what are your thoughts in that regard related to the war in Libya?

I think that is a small matter within the
monetary system, but very important from an energy perspective. People have
underestimated the ability of Colonel Gaddafi to remain in power, and part of
the reason why they have underestimated it is because they may have been
unaware of the fact that he has, as the Financial Times and others have
reported, over 100 tonnes of physical gold. And interestingly, his gold is not
in New York, it is in Tripoli, and he is actually able to use it to pay his
troops. Even though he is now out of the international financial system and his
paper assets have been frozen, he still enjoys some freedom with that physical
gold. It is a sort of contained situation without large implications for the international
monetary system – but it is an interesting case nonetheless, because it shows
you that even in today’s supposedly ultra-sophisticated world there is still
some room for good old-fashioned gold to pay your troops.

Comments

[Shell Game]

Excellent interview, thanks for sharing SKU.

[HistorySquared]

Gold will crash when the real interest rate (nominal interest rate - inflation) turns positive. 

[Temporalist]

Yea like in 10 years perhaps.

[Nothing To See Here]

I can't understand this part of his logic :

"Now is the time when the Federal Reserve in fact wants inflation because they desperately want to reduce the real value of the U.S. debt and a depreciation of the dollar is one way to do that. So they do want the price of gold go up."

Can anyone with a better clue than me help out?

1- The Fed wants inflation so they can reduce the cost of the debt. Ok with that.

2- Depreciating the dollar is one way to go to reduce the cost of the debt. Ok with that.

3- So the central bank wants the price of gold to go up?!?

In my book, the price of gold reflects the depreciation of the dollar as well as inflation, not the other way around as this commentary suggests. I cannot see how the uptrend in the price of gold can help in any way in creating inflation or depreciating the dollar.

On the other hand, I can see plenty of reasons why central banks would not want to see the price of gold go up.

Finally, we should also all begin to understand that "inflation" means an increase in the money supply. Rise of prices is a consequence of inflation.

[TruthInSunshine]

Rickards still hasn't told his readers how he arrived at his figures on how much repurchasing of tnotes the Fed can handle assuming a windup of official QE operation is going to happen, or, in other words, how much 'bang' the "maturing assets" on the Fed's existing balance sheet will be able to purchase going forward.

As for gold, he is correct conceptually, but if the situation became so dire that more than 2% of people were openly transacting commerce for everyday goods and services in precious metals, including gold, the government would make doing so a felony; whether such measures would deter such activity, I leave for the individual to use his or her best assessment.

Back to the "rollover of maturing assets on the Fed's balance sheet" issue that Rickards speaks of, and which he claims will allow the Fed to continue significant 'stealth' QE operations, here is what I wrote months ago in response to this claim (which Zero Hedge backed my argument up  - The Fed Does Not Need QE3 And Can Fund Debt Monetization Merely From Rolling Debt And MBS Prepayments? Wrong ):

Rickards predicted this.

Here is my question for Jim Rickards and anyone else who claims that by rolling over income on existing assets that they own (MBS and Tnotes), the Fed can do large scale purchases of additional Tnotes for very long -

http://www.zerohedge.com/article/fed-complete-830-million-7-day-reverse-...

I listened to his 3/27 podcast. I am still mulling over what's he saying given how rapidly things are unfolding. There's a lot to chew on.

Rickards is a very smart guy, but he is the one who seems to be defending the Fed, and even goes so far as to claim they'd rather not be doing QE, etc. He almost seems to be caught up in the efficacy of their alchemy.

He also claims that QE is losing steam, as have low interest rates, etc., but that the Fed will do not do QE3, but rather, 'QE by stealth,' by simply reinvesting their (now) massive balance sheet (which includes principal and interest payments on MBS) into 'being a buyer at margin of treasuries,' in order to reduce nominal interest rates on treasuries.

If he concedes that QE is losing steam, how would such an approach do anything remotely effective in tamping down interest rates, when full blown QE2, which is 100 billion per month in POMO, has not only failed to lower interest rates, but has seen interest rates go higher?

I'd like to see Rickard's math if he modeled his claims.

I realize he put the disclaimer (rightfully so) that the Fed is not transparent, so he's been forced to speculate to some degree, but I'd love to see how much he thinks the Fed is going to be able to roll over into continuing treasury purchases if QE2 ends, because a lot of that has to do with maturity dates, interest to principal paid, default/delinquency rates, etc.

[Creepy Lurker]

Thank you, Truth. I was about to post basically the same question but in more naive form.  (mine was just, How long can they keep that up?) You saved me the trouble. I'm looking forward to the answers.

But in truth, the bigger question that prey on my mind, is: Will they confiscate?

[GoinFawr]

US Noface: Little girl, Y U No accept my gold?

Ans. It's already been Spirited Away

[cranky-old-geezer]

When You Own Gold, You're Fighting Every Central Bank in the World

No, you're protecting your wealth from your central bank's efforts to debase the currency. There's no "fight" to it.

You see them debasing the currency, you switch from currency to gold to prevent the debasment affecting you.  That's not a fight.  It's a simple currency - commodity trade.

... for example, if the U.S. devalues the dollar against the Chinese currency, and then the euro devalues against the dollar ...

Nobody is officially devaluing their currency these days. Forex markets are doing the devaluing ...as it should be.

China "pegs" its currency to the US dollar. That's bullshit. Forex markets determine how China's currency does against the dollar.  If the "official ratio" diifers from the forex market ratio, the "official ratio" is ignored, nobody cares about the "official ratio".

Central banks cannot control the value of their currency.  Markets determine the value of their currency.  People at large determine the value of a currency. People's perception of the value of a currency is what counts, and central banks have no control over people's perception.

This is why Bernanke cannot prevent a dollar collapse.  If people's faith in the dollar collapses for some reason, the dollar's value collapses. 

This is what happens in hyperinflation.  People's confidence in a currency's value collapses, most likely due to the government or central bank printing mountains of it and flooding the economy with it.

Gold is a defacto currency. Silver is a defacto currency. Not dejure, not by law, since no govermnent nor central bank recognizes gold and silver as currencies these days, but defacto, people at large recognize them as currencies.

Govenments and central banks HATE that.  They DESPISE people recognizing gold and silver as currencies.

Gold and silver are competing currencies to their paper currencies, and there's NOTHING they can do about it.   They HATE it.  They DESPISE it.

Right now our federal govenment is effectively printing $6,000,000,000 a day and pouring it into the American economy. 

Yes, technically they're issuing treasury debt and selling it to the Fed who prints the money which they in turn spend in the economy.

That's why prices on everything are rising. They're flooding the economy with $6,000,000,000 of new currency every day, and people are losing confidence in the dollar's value.

[Quinvarius]

First thing that came to mind from that headline:

http://www.youtube.com/watch?v=0iRTB-FTMdk

I trust the math.

[Syrin]

I converted 75% of all my liquid assets to gold and silver about 10 months ago.   So far, it's one of the best finacial decisions I have made.   Wasn't done as an investment, purely as a means of wealth preservation.

[Urban Redneck]

Rickards keeps on touting his self-sustaining QE theory, but there is major flaw in it.  In addition, to debt rescheduling, all the new borrowing needs to be covered.  Basel III will create a short term bump in Treasury demand.  However, the trust funds are now net Treasury sellers ($2 current borrowing cost just to tread water for each $1 trust fund draw down), and the federal government is still spending a couple TRILLION more than it brings in each year.  Foreigners will continue to dump US debt, USD currency pegs, and USD trade settlement, which will drive domestic inflation and borrowing costs- unless the FED and the Congress address coordinate and implement a sustainable policy solution this will eventually end in a USD currency collapse. 

[Temporalist]

From past interviews I think Rickard's point is that the Fed has only a couple of choices and debasement is the least politically problematic as well as the easiest tool to implement.  The QE is just to keep interest rates down is even how Bernanke describes it but if the buyers go bye bye massive problems.  Actually, because the TBTF banks are major buyers of US debt, being forced to essentially now, that liquidity seems like over liquidity now and they don't know what to do with it in the face of falling stock prices (without QE) and collapsing real estate because they won't buy physical gold with it of course as that would damage the very system off of which they feed.

[PulauHantu29]

Jim Rogers and many others say gold is th ebest hedge against both inflation AND deflation. Even pension funds and insurance companies ar ebuying gold now...they all say the same thing.."it makes sense."

[66Sexy]

Bob Chapman says gold and silver is the only thing that can protect you... and judging by recent action, i believe him.

[66Sexy]

By accumulating gold, you force central banks to accumulate it... they are forced to hedge their fiat slave money.

[Robslob]

The ONLY thing that comes to mind is this:

The Fed took credit for inflating the stock market (even though we now find out it wasn't).

The Fed is LOST...this much is clear...their behavior, taking credit for something that was NOT a goal and that they did not create, tells you everything you need to know...

Welcome to Fantasy Island turns into the Island of Dr. Moreau

[Temporalist]

You mean welcome to Jekyll Island.

[Cognitive Dissonance]

The Fed is LOST...this much is clear...

So when is it time for the Fed to use that last bullet on itself?

[66Sexy]

Yes we stood and watched as Bernake smugly attributed stock market gains as being the chief indicator of an "economic recovery". Gains that due to frenzied wall street buying because they knew there was no risk. He (the fed) was creating money to buy US paper; and to bail out foreign banks with taxpayer money.

[gwar5]

Schall does a lot of good interviews, and Rickards is always worth listening to. I saw this interview recently posted at another sight, via GATA link.

You don't typically see this in the protective bubble of the American MSM which is a validation of his views.  Only see it in the alternative media and foreign media.

[Azannoth]

My 'local' online shop just sold out of silver Maple's and gold Krugerands! Never seen this before, and I am checking the site almost daily

Gold in euros is going Parabolic right now

[Cognitive Dissonance]

OK, now look what you've done. Gold was sleeping real nice and then you had to start a panic. You should be ashamed proud of yourself.

[mickeyman]

"Every government on Earth . . . and the Illuminati to boot."

[Manthong]

"between 1931 and 1936.. the real solution would have been just to forget about the debt.. when it did happen a lot of the damage was done in Germany with the rise of the Nazi Party, which lead directly to World War II"

But the upside is that after only 60,000,000 deaths (give or take 10 million or so), the US government came out in control of everything.

That is an upside, isn't it?

[jeff montanye]

and yet they so didn't think so at the time: "who lost china?", "how did the soviets get the bomb?", "we won't defend south korea if it is attacked ... wait...", "i have in my hand a list of employees of the state department ....", "duck and cover", etc. etc. etc.

[Azannoth]

"..lot of the damage was done in Germany with the rise of the Nazi Party, which lead directly to World War II" the question no1 is asking is Why? did the Nazi Party gain power? and why did 99%(yes look it up if you don't believe it) of the Austrians voted for the Anschluss, Austria was not conquered by the Nazis they where welcomed with open arms what happend after can only be described as an economic mirracle in Austria

for more details read here http://www.ihr.org/other/weber2011soundofmusic.html

[eddiebe]

Obviously it's an upside for those on top. The downside to those on top is that those on the bottom get tired of being there. More and more we are living in interesting times and people here in the promised land will either wake up and demand more equality and freedom from their masters, or die in their sleep.
Not a good time to live in and urban environment or in suburbia for sure.

[eddiebe]

Bet you I could make it last at least til I croak.

[breezer1]

100 tonnes of gold can last how long?

[MarketTruth]

Ask the leader of Libya, as that is how he is financing his country's standoff as banksters steal his accounts/money in other countries. In other words, money elsewhere is worthless for him, yet his wise gold investment is keeping him in power per se.

Not that i agree with the Libyian leader, just using the above as an example that when all else fails...

HE WHO HAS THE GOLD MAKES THE RULES.

[gmrpeabody]

When his hired armies realize that they can take all the gold, he will no longer be making the rules. NATO will wait. When the hired armies realize that 100 tons of gold is hard to hide, they will deal with TPTB.

[eddiebe]

Throughout much of history: You got the gold, you got the power.
It's amazing how the central banks can keep the lid on the price of gold currently. Even more amazing how underpriced gold stocks are.
But going against the herd and climbing that mountain of worry is the price we have to pay to make money in the market.

[alexwest]

typical junk from mr 'James G. Rickards.
sentence in one paragraph contradicts another one in below..

##
The point is when your balance sheet is that large you have securities that mature over time – two years ago, if you bought a two year note, that note is maturing sometime in the next few months,
##

##
So the whole point of QE is to buy notes in the five to ten years spectrum, keep those nominal interest rates low and keep the TIPS spread low as a way of keeping the inflation expectations low
##

junk
alx

ps
i like his credentials, what fuck is that ? is he rich? is he in forbes 400 ? that all i need to know

'Mr. Rickards is a leading practitioner in the realm of capital markets, national security and geopolitics'

[He_Who Carried ...]

Ummm, I thought the central banks were net buyers?

[gwar5]

You don't see Rickards with much exposure like this in the Amerikan MSM which validates him. Most of his venues are in the alternative and foreign media.

Rickards is the one that said Americans should take their gold away from the FRBNY and put it in the facilities at West Point; and that Germany should consider repatriating their physical gold also held by the Fed, which is why Lars Schall asked him about that again.

Shills for TPTB dominate the 'all-is-well'  MSM propaganda that repeat the mantra  'it's all under control'.  Rickards is sounding the alarm bells and does not support that view at all.

[jeff montanye]

one quibble with rickards regards the idea that when you buy gold you are opposed by all the central banks in the world.  actually you are opposed by the u.s. and some western european central banks (at most).  they may or may not have the gold they claim; they certainly do not have more.  the central banks of the countries that have the majority of the foreign currency reserves (china, japan, saudi arabia, taiwan, brazil, korea -- first, second, fourth, fifth, sixth, eighth in rank) have between 4.6% and .2% of those reserves in gold.  those central banks are on the same team as those who have bought gold, imo. 

[gwar5]

Good point. He might-should have said -- Western central banks.

The rest of us are just more Chinese holding the burning FRNs. BTW, I keep hearing interesting rumors from credible sources regarding China secretly have much more gold than they allow to be known.  

[DoChenRollingBearing]

jeff and gwar5,

Actually, you are being your own central bank when you buy gold.

Most of the Western central banks have already front-run most buyers (in getting their gold at a low price).  But, I as well think gold has a long and majestic ride up in price.

If you have the time read FOFOA, IMO the best gold analyst out there:

fofoa.blogspot.com

[mogul rider]

Well this guy advises banksters and governments

You? - Joey the janitor isn't exactly what I call a big customer base

Get lost janitor troll - you are way out of your league