Jim Rickards: The Fed Built a 5 ft Sea Wall, & Here Comes a 40 ft Tsunami!

Image: Jonny O'Callaghan

Image: Jonny O’Callaghan

The next crisis is going to be bigger than the Fed.   It is like they build a five foot sea wall and here comes a forty foot tsunami. There is only one clean balance sheet left in the world and that is the IMF. So the only way you are only going to reliquify the world in the next liquidity crisis is by the IMF printing their world money, these Special Drawing Rights or SDRs, and that is going to be the end of the dollar as a global reserve currency. 
The problem with the US is that the Treasury and the White House want a weak dollar.
I mean, what good does it do you when your own country wants to trash the currency? What happened to the strong dollar policy? It’s over now and we’re in the currency wars. That is going to lead to a collapse and ultimately we are going to see either gold or the SDRs the new store of value on a worldwide basis. 


By Adam Taggart, Peak Prosperity:

James Rickards, financier and author of the excellent cautionary best-sellerCurrency Wars, has recently released a follow-on book: The Death of Money: The Coming Collapse of the International Monetary System. In it, Jim details how history provides plenty of precedent for the collapse that has begun amidst the major world currencies.

The historical progression is predictable enough that Jim is comfortable claiming that the next economic crisis we face will be bigger than the ability of the Federal Reserve (and the other world central banks) to contain it. And that such a calamity will happen within the next five years:

Chris Martenson:  As you look forward the next three years what do you see coming? Are you predicting or seeing that this game changes to a new phase, The Death of Money? Is that coming in the next three year window? Or do you use this playing out over a longer timeframe?

Jim Rickards:  No, I think three years is about right. I mean, it’s not necessarily going to be tomorrow. It could be tomorrow, by the way, the system is unstable enough. But it doesn’t mean we are going to get that catalyst tomorrow. But this is not a ten year forecast. I mean, I do not think we are going to make it ten years. I think three to five years is about the right timeframe, maybe shorter.

But the reason for that, again, it is scientifically based in terms of the scale of the system. And by the way, go back and look at these crises. They come particularly fast. Memories are very short. I think we are all fighting with what I call the 2-second attention span.

On October 19, 1987 the stock market lost 22% of its value in one day. Today, that would be a 3,200 point drop in one day. In 1994 we had the Mexican Peso crisis. In 1998, the Long Term Capital Management crisis. And I was involved in that, by the way. I was the general council of Long Term Capital Management. I negotiated that bailout and I know how close the world came to complete economic collapse. In other words, every stock and bond market in the world would have been closed on September 29, 1998 if we had not finished that bailout the day before. That is how close we came. Just because it did not happen, people kind of forgot about it and think it was a small event. But trust me, I was there. That was a very near catastrophe. In 2000 we had the dot-com collapse, NASDAQ dropped eighty percent. 2007 the housing market collapsed. 2008 the Lehman Brothers panic.

So these things keep happening; but here is the problem, Chris: the Fed has printed almost four trillion dollars to put out the fire from 2008. What is going to happen if we have a liquidity crisis next month or next year? They are at the limit of their balance sheet. They are already insolvent on a mark-to-market basis. And again, that is not guesswork. I actually was told that by a member of the Federal Open Market Committee. They are leveraged 80-to-1. They cannot do more. They cannot print another four or eight trillion. They are at the limit of confidence. They are not at the legal limit, by the way. Legally they can do it but they are at the limit of what people will really trust, or before the Congress would intervene.

So the next crisis is going to be bigger than the Fed. It is like they build a five foot sea wall and here comes a forty foot tsunami. There is only one clean balance sheet left in the world and that is the IMF. So the only way you are only going to reliquify the world in the next liquidity crisis is by the IMF printing their world money, these Special Drawing Rights or SDRs, and that is going to be the end of the dollar as a global reserve currency. Because if the IMF is going to print SDRs to reliquify the world they are going to need permission from China and Russia and other members of the IMF. The US has a big voice at the IMF but we do not control it. And so that really is going to be the end of the dollar right there. We may still have dollars — in fact we will — but it will be a local currency like the Mexican peso or Turkish lira. It will just be walking around money. But it will not be used for the important things in the international monetary system. This you can actually see coming. You can see these developments coming.

Chris Martenson:  It has always been my perception that the IMF is a little bit of a US-centric organization, if not a lot. You think China would really go along with that?

Jim Rickards: I think China would favor it because the alternative is perpetuation of dollar hegemony. It would almost be to say that, no matter what the United States does, no matter how much we print, what deficits we run, what trade deficits we run, no matter how reckless we are, we can always print our way out of it. And there is a limit to that. So China would actually like to see SDRs. There is a lot of talk about; China making their currency a global reserve currency, being one. That is not even close. They are very, very far away from that. They do not want that because they would have to open their capital account. They would lose control. But they would not mind seeing the SDR as a global reserve currency. They just do not want the dollar. But they are stuck with dollars for the time being but the next panic when the IMF has to use SDRs to reliquefy the world; I think China is going to have a big voice in that. You can say it is US-centric but the problem with the US is that the Treasury and the White House want a weak dollar.

I mean, what good does it do you when your own country wants to trash the currency? What happened to the strong dollar policy? It’s over now and we’re in the currency wars. That is going to lead to a collapse and ultimately we are going to see either gold or the SDRs the new store of value on a worldwide basis.

 

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Click the play button below to listen to Chris’ interview with Jim Rickards (34m:46s):

iTunes | Download | 
TRANSCRIPT

Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host Chris Martenson. Well, things just get crazier and crazier in the world. And it seems the only way to keep your bearings is to take two steps back and look at the big picture. And this is especially true when it comes to what the central banks are up to and the geopolitical and economic realities that are taking shape as a result of that. So to help us take a necessary third step back today we are speaking with one of my favorite guests, Jim Rickards, seasoned financier, risk manager, and author. His recent bestseller, … read more


Comments

  1. It’s the end of the beginning.

  2. It’s the end of the world as we know it… and stackers feel fine!  ;-)
     
    One thing, though.  If it comes down to a complete financial collapse of the US, the Fed WILL find a way to stretch the game out whether their balance sheet is $4T, $6T, or any other trillion.  By going the Zimbabwe route, they can probably stretch it out another year.  That will look good to them when their other choice is IMMEDIATE collapse.  Got gold or silver?
     

    • I don’t see it Ed simply because what will happen will be beyond fed monetary control. When average people, 95% of us, can no longer feed themselves and their families, or stay warm, all holy hell will break loose. The fed cannot mitigate that scenario. More printing will only make those throngs angrier and angrier. That is when martial law and camps become the order of the day. God, I hope it doesn’t come to that. Perhaps enough of us learned something from the Bunkerville event.

    • If they get that year before civil war breaks out. People are fed up, pissed off, and itching to get rid of the fed shoe on their neck

    • @SilverSlicker
       
      Well, it might or might not come to that.  Remember that major turning points in history often occur via several stages.  In the end stages, I have to agree with you.  But before that point, lots of things can and will happen.  Many of them will be expected but not all of them.  A lot of us thought that the whole fiat money scheme would have died YEARS ago, yet it lumbers on.  IMO, it would have died in 2008 had it not been for extraordinary elite actions that kept it stumbling forward for another few years.  And I do mean stumbling, as our economy shows today, nearly 6 years after the fact.  Right now, the Fed seems most interested in selling their “economic recovery, low inflation, and rising employment” lies.  Many are buying it too.  But not the stalwarts on SD!  At this moment, we seem to be quite a way from not being able to be fed or warm.  I agree that if that changes, all hell WILL break loose and the Fed will not be in control.  Neither will their lackeys in the US Gov.  But more printing WILL occur because that is ALL they know to do.  Even in Zimbabwe, their stock market was hitting all time highs right up until the point of total economic collapse.  We aren’t there yet and probably won’t be for a year.  After that, who knows?
       

    • Ed_B … “the whole fiat money scheme would have died YEARS ago, yet it lumbers on.  IMO, it would have died in 2008 had it not been for extraordinary elite actions that kept it stumbling forward for another few years.”
       
      I couldn’t agree more, Ed … except I’d set the date at either 1929 or 1963. In the first instance the sheer shock of the scheme’s devastating effect was laid naked for all with eyes to see and in the second, the unmistakable logical sequence of ongoing deterioration exhibited its most prominent milestone since the loss of circulating gold. And still, the little tell-tale signs ‘fall to hand’, when the cent devolved to zinc in 1982 and now frequent mention is made of the nickel’s debauchery.

      It’s all so reminiscent of a descending curtain … it’s truly stupefying the audience hasn’t recognized ‘the show is finished’ and it’s time to beat the crowd about to fill the streets.

  3. “There is only one clean balance sheet left in the world and that is the IMF” but I thought that we could pull any letters out of a hat construct a building and give it a clean balance sheet and let them print the money.  Just the same I’m going to make my stack of Silver grow.  I’m not buying Gold so I can carry water for the IMF.

  4. I am afraid bullets will be flying & aimed at blue helmets on American soil?

  5. Got Currencies?

    Of course,||| SILVER ||||*******

  6. Talk about a double barrel shotgun blast of scenarios. He let rip with every reasonably possible contingency development possible. More confusing than helpful actually.
     

  7. Rickards?!  i don’t trust this person one bit.  he’s a fast talker, a slick talker & to me that equals ex-C.I.A.   the one thing i do know for certain is that since 1913 this country has been scammed royally, gold stolen from my grandparents, farmland swindled in the first Great Depression.  the country has been gutted & the treasury looted.   ALL of this laid at the feet of the private FEDERAL RESERVE BANK & it’s owners, Rothschilds et al.   SWINDLED, i tell you.   the elderly are being stolen from & our youth are being marked for debt slavery as i type this.   i refuse to listen to Rickards, & talk about S.D.R.’s issued from a criminal I.M.F…… & they are a bunch of criminals, you all know that.
     

    • Exactly what do you disagree with that he said?
       
      When he talks about SDR’s he’s referring to the most likely outcome as the dollar “dies”. I think you may be inferring he’s promoting that while I think he’s agnostic.

  8. SDR? What the hell good is that?? It’s still just another piece of paper BS is it not?!

    Meet the new boss, same as the old boss….

    What BS

    • As I understand it the proposed SDR’s would be based on a basket of currencies that may or may not include gold but one that would most likely reflect economic trade balances, ie include Euros, Chinese Yuan/Renminbiand other currencies but a much smaller role for the USD.

  9. Lynnybee  I consulted with your guinea pig and she agrees—Rickards is a bald headed skunk

    • @AGXIIK
       
      Worse yet, AG, the SOB is a LAWYER!  I only ever met one lawyer whom I totally trusted.  His name was Mr. Charles Creighton and he was a fine gentleman of the old school.  It is likely that there are a few more like him out there but Rickards clearly is not one of them.

    • Ed_B … “Worse yet, AG, the SOB is a LAWYER!”
       
      Aye, Lad. The Barristocracy … ‘shield bearers’ of the ‘Noble Class’. In their regard, I have some philosophical affection for Shakespeare’s scripted provocation from Henry VI, “The first thing we do, let’s kill all the lawyers.”

  10. missiondweller  my two issues with rickards are
    1.  He is working the alt media like a day job to sell his book
    2.  He has been a deep state apparachik for decades and that makes him suspect IMO.   

    • On Keiser’s show, Rickards made a public statement that he didn’t think the government was involved in 9/11.  Anybody that spouts such nonsense is a shill. He plays financial war games with his friends at the CIA. So what does this tell you?  He’s all for keeping the system going for the elite.  SDRs or whatever, it’s all the same crap that keeps the oligarchy in power.  Bring the tower of babel down.

    • @Hapa
       
      “Anybody that spouts such nonsense is a shill.”
       
      Or so obtuse as to not be worth listening to.
       
      But I listen to Rickards’s comments because they can be strained to remove tidbits of elite thinking on various issues. Knowing an enemy is the 1st step in learning how to defeat them.

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