Jim Rickards

A couple of luminaries share their perspectives on recent developments in the precious metal space. First, we have Jim Rickards sharing his thoughts on what today's Comex margin hike means for trading. And second, and just as important, is Peter Schiff, who grades WB president Robert Zoellick's call for a new gold standards, and its implications for the future. Both are as always insightful and enlightening.

Yesterday, with a modest dose of sarcasm, we pointed out the latest salvo by the fiat regime against gold, in the form of one Op-Ed by Edwin Truman, who very seriously suggested that America should sell all of its gold to plus less then 3% of its massive (and growing) debt hole. Returning the favor of "all seriousness" we said that this is "dumbest idea we have ever heard." Today, Jim Rickards, shares his view on this modest proposal in a far more politically correct manner, via a King World News exclusive. Here are Rickards' follow up thoughts on this most ridiculous suggestion we have heard in all of 2010.

Another fascinating interview by Jim Rickards, in the first part of which the LTCM GC explains why he has told his clients to get out of stocks (yes, it does have to do with market manipulation and the Fed - the two most popular topics on Zero Hedge over the past year): "Markets have ceased to function as they are intended - traditionally a place to exchange values, but more importantly to perform price discovery (people rely on markets to tell them what to do or to at least give them some guidance). What's happened is that all the markets have become so badly distorted that their price discovery function and therefore the information content around it no longer has any value. The market has become self-referential, an algo playing itself out, almost the way you would run a self-recursive equation on a computer and you get very unpredictable results from very simple equations. It has degenerated into a joke." Perhaps more relevant for those seeking some advice on where to put their money if not into stocks, is his observation that now that the Fed is in dire need to getting people to start spending, the only option left is to instill the fear of a dollar devaluation, but not against other fiat (as that would in turn lead other central banks to follow suit), but depreciation against hard currencies such as gold. "If you are the Fed and you buy up gold to $2,000 an ounce what have you done? You've depreciated the dollar by not quite 50%. Well that's pretty powerful stuff if you are trying to get people to spend money and dump dollars. So they are not out of bullets, they have what I call the golden bullet..." As Kohn today said, it is all about expectations... Well, why not make people expect that the dollar they have today will be worth half as much tomorrow versus gold?

Still confused by Jim Bullard's critical paper from last week Seven Face of The Peril in which the St. Louis Fed president, and voting Fed member, stated that he has no qualms about buying up Treasuries, further debasing the currency, and raise interest rates at the same time should deflation persist? Jim Rickards explains the (lack of) logic behind the argument, and evaluates the alternative: what if, just like every other time before, the Fed is wrong yet again...

In the latest two-part interview with Jim Rickards by Eric King, the former LTCM General Counsel goes on a lengthy compare and contrast between the Roman Empire (and especially the critical part where it collapses) and the U.S. in it current form. And while we say contrast, there are few actual contrasts to observe: alas, the similarities are just far too many, starting with the debasement of the currencies, whereby Rome's silver dinarius started out pure and eventually barely had a 5% content, and the ever increasing taxation of the population, and especially the most productive segment - the farmers, by the emperors, to the point where the downfall of empire was actually greeted by the bulk of the people as the barbarians were welcomed at the gate with open arms. The one key difference highlighted by Rickards: that Rome was not as indebted to the gills as is the US. Accordingly, the US is in fact in a far worse shape than Rome, as the ever increasing cost of funding the debt can only come from further currency debasement, which in turn merely stimulates greater taxation, and more printing of debt, accelerating the downward loop of social disintegration. Furthermore, Rickards points out that unlike the Romans, we are way beyond the point of diminishing marginal utility, and the amount of money that must be printed, borrowed, taxed and spent for marginal improvements in the way of life, from a sociological standpoint, is exponentially greater than those during Roman times. As such, once the collapse begins it will feed on itself until America is no more. Rickards believes that this particular moment may not be too far off...

Jim Rickards, who recently seems to have a quota of one media appearance minimum per day, is back on King World News today, discussing his sense of a shift in sentiment within the G-20 that the dollar may be approaching its "exhaustion" limit, and that as concerns that Russia, China and Germany may be moving to a commodity backed currency (oil and gold), the G-20 will need to preempt a paradigm shift away from worthless Fed-printed paper, to another vehicle, which however, is still under the control of the "developed world." The idea would be to use the IMF's SDR as a shadow replacement to a greenback which is at current recent record high levels not due to endogenous strength, but because all its peers are far, far weaker. And in an environment in which daily FX vol is hitting daily records, and thus increasingly reducing the credibility of capital markets, a gradual transition to a currency which represents nothing but yet another "liquidity pump" as Rickards calls it, just as the dollar was in the years from just before WW1 (thank you Fed creation in 1913) all the way through the 21st century, may be the only answer in which the existing oligarchy does not lose that all important controlling factor - the currency.

Jim Rickards, who some may say has gotten a little too much media exposure recently, is on King World News this morning, discussing the presentation he gave to the US Treasury (closed to the public) in which he lectured Tim Geithner on financial warfare, read China, and how flawed trade policies can impact this ever so critical and increasingly tenuous relationship. To be sure, it is better late than never that someone advised the UST on what the right path is. Unfortunately, righting the US(S) Titanic at this point is impossible as it would mean undoing 2 years of flawed actions and policies, and the cost would be unbearable. Another topic touched upon is the recent correction in gold. The price move over the past week should come as no surprise to anyone. On May 19th we noted Goldman's most recent move to a bullish stance in gold, and we concluded that "we may well be in for a gold retracement, at least from a purely
technical standpoint, as Goldman "distributes" its newfound gold
holdings" as Goldman moved to sell its gold to whatever few clients it has left. Sure enough, $70 dollars lower later, Goldman's ever-angrier clients who listened to this most recent horrendous tactical call, are only left with a receipt for a metric ton of KY. The gold move is nothing more than liquidation of real assets to cover margin calls in imaginary ones, such as LBO bonds which have moved from 10 cents on the dollar to par during the melt up, and are now seeing a bidless environment, a groupthink phenomenon of which a plunging FDC is the prime example. Those who have no reason to sell gold should obviously hold right - Rickards notes: "for every seller there is a buyer. The sellers are the daytraders, speculators and people in distress who need to raise cash, buyers could be foreign sovereigns, China, Russia, India, so we could be seeing a move from weak hands into strong hands. I see gold at $2,000 in the short-term, and $5,000 in the long-term." Also discussed is Germany's ban on naked shorting, which Rickards applauds, not so much as a policy move, but as a symbolic stand by European sovereigns against the bullying power of Wall Street, something we fully agree with is long overdue. "Merkel will definitely be supported by others. I know the French were a little but upset that she did it, but they are not upset because she did it, but that she did it first. Sarkozy will join in."

Jim Rickards, who recently has gotten massive media exposure on everything from the JPM Silver manipulation scandal, to the Greek default, was back on CNBC earlier with one of the most fascinating insights we have yet heard from anyone, which demonstrates beyond a doubt why any attempt by Europe to print its way out of its current default is doomed: "Look at what Soros did to the Bank of England in 1992 - he went after them, they had a finite amount of dollars, he was selling sterling and taking the dollars, and they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country, you don't need money you just need synthetic euroshorts or CDS. A trillion dollar bailout: Goldman can create 10 trillion of euroshorts. So it just dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can create money." Just wait until Europe finally realizes that the CDS "speculators" had all the cards in the poker game all along. And we hope Europe listens to the man: being LTCM's GC he knows all about failed bail outs.

Ealier today Jim Rickards of Omnis, formerly LTCM's GC, was on CNBC and was subjected to some "probing" questions by Joe Kernan in which the anchor asks Rickards if he is a "conspiracy theorist" for his recent insights into the potential investigation of JP Morgan's market rigging behavior by the DOJ. Rickards replies that he isn't, and follows it up with some gold price target observations based on "8th grade math": the former LTCM man sees gold going up by at least 10 times, and hitting $5,000 rather easily. We wonder if to CNBC there is any uglier word than "conspiracy theory" even when the "theory" is backed 100% by facts.