The death of the dollar

I [Koos Jansen] had the privilege to meet with Jim Rickards, while he was in The Netherlands for one day, to do an interview about his new book The Death of Money. Accompanied by friend (and author of the book The Big Reset) Willem Middelkoop we met at the hotel were Jim was staying and for one and a half hours we fired questions at him. Below you can read the highlights of the conversation:

 

March 12, 2014

Koos Jansen: Do you think there will be a collapse in the worldwide monetary system, including chaos, social unrest and bank failures because all policy makers will do too little too late?

Jim Rickards: My new book, The Death of Money, is about the demise of the dollar. A world wide monetary collapse and the collapse of the dollar are the same thing. The dollar is the keystone of the system today, if the world loses confidence in the dollar the whole system collapses. Could there be disruptions, social unrest and other problems before the monetary system collapses? I think we’re seeing them already, in the Ukraine, in the Crimea and the Chinese navy sending vessels to these islands they are in disputes with near Japan. US monetary policy was also a contributing factor to protests in the Arab Spring’s early stages. We’re seeing signs happening already and that will continue.

I do expect that policy makers will continue to pursue the wrong policies, they won’t make the structural adjustments that are needed; unemployment remains high, growth remains weak and deflation continues to have us in its grip. These are all things that will lead to social instability, income and wealth inequality and we could see a lot of stresses before the collapse of the monetary system.

Central banks and governments have made it clear that the big banks can’t fail. That’s what they stated, all these too big to fail banks will not be allowed to fail. Now what are the consequences once they’ve said that? It invites reckless, parasitic and exploitative behaviour on behalf of the bankers. This allows them to grow too large which destabilizes the system. I don’t think we’ll see big bank failures along the way, but big banks will fail as part of the collapse. It’s the policy of too big to fail that leads to the dysfunction of the system that will lead to the collapse.

Jim-R-interview

Koos Jansen: Will the coming collapse of the monetary system be more severe than any prior one?

Jim Rickards: The point I’m making in the book is that the international monetary system has collapsed three times in the last one hundred year. In 1914, 1939 and 1971. So it does happen, it’s not that unusual. When it happens is not the end of the world. What it means is that the major trading powers, the financial powers, come together and reset the system. There is actually a name for this, it’s “the rules of the game”. That’s not a phrase I made up, it goes back one hundred years. So the major powers will rewrite the rules of the game, but here’s the problem. The last crisis we had the Fed reliquify the world. There were tens of trillions of dollars in swap lines with the ECB, they guaranteed all the bank deposits in the US and they guaranteed all the money market funds in the US. It did prevent things from getting worse, but the problem is the Fed raised their own balance from $800 billion to $4 trillion after the liquidity crisis. We had a liquidity crisis in late 2008, but we haven’t had one in the last five years. So now what happens if we have a liquidity crisis tomorrow? They’ve got no more dry powder; they can’t go to $12 trillion.

The next crisis will be bigger than the last one, and it will be bigger than the Fed because they already trashed their own balance sheet. Then the only balance sheet left is the IMF’s.

Koos Jansen: How will the power be distributed in Asia after the monetary reset?

Jim Rickards: It will be based on gold.

Willem Middelkoop: I know wealthy Americans taking measures like getting a second passport and moving their money offshore. Do you see this happening in your surroundings?

Jim Rickards: Yes, I see it all the time. There are billionaires who build vaults in their own houses because they don’t trust Brinks.

Willem Middelkoop: What does that tell you?

Jim Rickards: It tells me that they see what I see, in some ways, but not willing to talk about it. They’re ready for the collapse but want to milk the system in the meantime.

 

_____________________

For Rickards’ CV see here. The whole interview can be read here.

Published in: on May 9, 2014 at 11:36 am  Comments (16)  

16 Comments

  1. Reblogged this on oogenhand and commented:

    PEOPLE, THIS IS VERY IMPORTANT!!!

    • Indeed.

      P.S. of 11 May: This radio podcast also responds to the fad against gold—like Helmut Schmidt’s angry rant below (which I abridged because Schmidt ignored arguments such as those in this interview by Chris Martenson).

      • Also, keep an eye on Benjamin Fulford. He tries to rally the BRICS under a new Jewish leadership.

  2. He is a quack and charlaton.

    It’s very simple. Anyone who believes some stupid shiny metal is money doesn’t understand what money is. They stupidly think of it as a “thing” a material object.

    • You got it perfectly backwards. Quacks are precisely those who believe that paper currency is real money:

  3. Unfortunately for you, I have the entire history of civilization on my side. You have some stupid youtube videos that don’t have any basis in reality.

    There are numerous historical texts going back 150 years that detail quite succinctly the history of money with references to many archeological sites all over the world.

    Gold is rarely used. It was used only because it was easy to mine with primitive technology and slave labor, i.e. sifting rivers. It is also easy to work with minimal technology.

    For the first few thousand years, the only money in the world was made up of clay tokens. For brief stints of never more than a few decades at a time, gold was used – with one exception. Semitic Punic people, whose “colonies” in the Mediterranean were little more than strip mining operations for gold. This is why they were transient.

    What’s equally hilarious is one of the chief arguments the Romans used for how corrupt the Semitic peoples were was their materialistic infatuation with gold. You claim to be an ardent Nazi, but you’ve internalized the Jew spirit beyond anything you can imagine.

    Keep on dreaming.

    And, since you deleted the entirety of my post, I’m going to make a point of not posting here in the future, and rather than defend you to all of the white nationalists in the US with whom I am friends, I am going to make it clear you should be ignored and left to your echo chamber.

    Cheers, and good luck escaping your hell.

    • I deleted most of your first post because you have not even bothered to face the evidence.

      The credentials on economy matters of the guy in this entry, Rickards, are impressive and what he says in two books goes beyond the Maloney videos embedded above (a course on the difference between real money and currency for economic newbies).

      Read Rickards’ latest book and opine later.

      Also, had you been acquainted with this blog you’d know that I don’t discuss economic matters. I let others do the discussion.

      My wise strategy is simply letting the Fed continue its “easing” until the dollar crashes in this decade.

      It will be all too evident after the decade to know for sure who was wrong.

    • “I’ve only read your first paragraph.” [Admin's note: he's referring to this comment]

      That’s sad, and a bit rude, since I went to the trouble of respectfully engaging you in this discussion.

      Goodbye.

      • Don’t be silly. You have posted these days literally dozens of comments in old entries. Am I obliged to read them all? (And, as I said, a very recent, family tragedy made me change my humor these days.)

  4. Well, it’s nearly two years later and still there has been no monetary collapse.

    By the way, I don’t own any precious metal but I do have an accumulating amount of Bitcoin (BTC). I recommend it as a worthwhile hedge for gold and silver bugs, since not everyone fleeing fiat currency will go into precious metals. Bitcoin has one supreme virtue over everything (in addition to some lesser virtues): it is immune to national currency controls, which we can expect when this or that country’s monetary system experiences a panic. Such panics will tend to become international if the USD weakens, and we can then expect BTC to rise greatly.

    • Bitcoin is another fiat currency. Good luck with it!

      • No, it is not a fiat currency. It is an algorithmic currency, which means that it is created at a rate determined entirely by its common codebase; no person or committee, and no political power, can change the algorithm.

        A practical implication of that fact is that there is only so much of it and any new Bitcoin will only appear at a predictable rate, which halves at fixed intervals until it stops altogether a few decades from now.

        It is instructive to consider it in relation to the properties that make anything, such as Gold or Fiat currency, a money:

        Scarce (like gold, see above)

        Divisible (yes, divisible to to tiny increments)

        Durable (not as much as gold, perhaps, but on the order of decades at least, or unless someone breaks currently unbreakable encryption)

        Fungible (yes)

        Portable (very good)

        Stable (not as good as gold or fiat, up until now, because of the smaller user base)

      • It’s fiat because it’s not stable: it has no “storage” value. Like other fiat currencies its success rests purely on confidence. I bet you will be looking for food in the trash cans after the dollar crashes if you continue saving in bitcoins. Rickards discuss it starting on minute 22:15.

      • It’s fiat because it’s not stable: it has no “storage” value. Like other fiat currencies its success rests purely on confidence.

        Fiat currency has nothing to do with “confidence.”

        From Wikipedia’s page on Fiat Money:

        “Fiat money is a currency established as money by government regulation or law.[1] The term derives from the Latin fiat (“let it be done”, “it shall be”)[2] used in the sense of an order or decree.”

        So, a fiat currency is a currency established by government decree, and government decrees, of course, have the backing of the government’s armed force. That’s it.

        BTC is not established in that way.

        In the video a number of objections to BTC are made and I have listed them below with my responses in italic:

        1. Historically, many commodities, such as shells, beads, and feathers, [and I might add: cigarettes, bottles of scotch, eggs, cellphone minutes] have been used as money, and this is true of any new commodity, “if you have confidence in it.”

        The speakers are using confidence as an inexact catchphrase. Forget catchphrases and slogans. What matters is: How well does the commodity in question fulfill the requirements of money? – durability, portability, divisibility, uniformity/fungibility, scarcity/limited supply. The examples cited are OK on some of those qualities, and poor on others. It isn’t an all-or-nothing issue, but depends on what is available and what the demands of the situation are. In a future survival situation, seeds and ammunition, for example, could be used as money. As I have described elsewhere, BTC does acceptably well on all those measures, and outstandingly well on portabilty. Also, it can be confiscation-proof, unlike gold in a safe deposit box; it superbly fulfills the requirement of “storage,” if you keep you private key secret.

        2. The price of BTC is expressed in dollars and not vice versa.

        Yes, it is usually not used as a unit of account, because dollars are in far greater use. That’s not a big deal, and will change as more people use BTC and as the dollar collapses. On online dark markets, illicit goods are already priced in BTC.

        3. People don’t understand the tax aspects of BTC (capital gains). and are right to be scared of the attitude of the IRS regarding BTC.

        Fuck the IRS. One might be interested in BTC, in part at least, because of its potential to bypass ZOG. Where are your taxes going right now? Largely to feed our enemies, right? Time to wake up and think outside the proverbial box.

        4. There are many digital currencies.

        They will survive or fail according to how well they fulfill the qualities of a money. However, BTC does have strong network effect already established. Anything new has to be a much better money in order to displace BTC: simply being a little better won’t do it. However, some new digital currency might be much better at, say, being totally untraceable (BTC isn’t anonymous, just by itself, without additional steps being taken. But it can be used anonymously.)

        5. BTC is only useful as a unit of exchange. BTC advocates overlook “the historic value of gold as a stand-alone commodity. You can use gold!”

        More sloganeering. Gold was valued because it is scarce, along with the other qualities that make it useful as money. In modern times it has some industrial use, but if that’s all it had going for it, and no bullion value, then its price would drop to a fraction.

        6. Gold is genuinely scarce.

        Just like many other things, including BTC. That is one, but only one, of the qualities of a money.

        7. People think BTC is good because it is a digital currency, but the dollar is a digital currency.

        No, people do not think it is good because it is a “digital” currency. Look again at the list of qualities that make a money. “Digital” isn’t on the list, but a digital currency might be more portable, as is the case with BTC.

        8. It is like Tulipmania.

        No, it is not like Tulipmania, because there is an almost infinite potential supply of tulips, as the Dutch speculators found out. There is only so much BTC and it is created at a known rate, just like gold.

        9. BTC’s rise in price in 2013 was a speculative frenzy.

        Undoubtedly, some of the price rise was due to speculation. The price then slowly declined until mid-2015 and has since been slowly rising. This is no objection to buying or using BTC.

        As I’ve said, Bitcoin is a suitable hedge. I never recommended investing in it to the exclusion of everything else.

        By the way, in addition to the qualities of a money, that I listed above, it is worth considering the uses of a money. Money has three uses:

        Medium of exchange.

        Store of value.

        Unit of account.

        Put anything you might consider to be money through that filter and see how it measures up – basically, it depends on context and length of time.

        Out of dollars, gold and BTC, BTC is the best medium of exchange for international transfers, such as remittances. For online shopping it is less useful than dollars but that is changing as more retailers start accepting it, such as Overstock, Walmart, Amazon, Target. I believe Paypal accepts it. There are Visa debit cards that can be topped up with Bitcoin.

        As a store of value, no-one knows how well it will do long term. It is less price stable than dollars in the short term. It is certain that dollars will go to nothing eventually. BTC might go to zero in the event of some catastrophe, but if the Internet stays up, it will probably survive, and this has nothing to do with “confidence” (see above). If it survives then it almost certainly will go up in value greatly as millions more people start using it and the network affect goes through the roof. I suspect that Bitcoin and gold will be used in conjunction with one another by savvy people. I would not “bet the farm” on Bitcoin going up in price; use it as a hedge, for online commerce and for concealment.

        As a unit of account, I don’t know what will happen. For online purchases, more and more sites will allow you to view the prices in BTC, that much is certain.

      • I’ve only read your first paragraph. Instead of replying it’s much better to wait and see what happens. If the dollar doesn’t crash by 2020 and people still have confidence in paper currency (and your Bitcoin “money”) you win. If people only trust, instead of fiat currencies (and/or Bitcoin), precious metals as real money, I win.

        End of the discussion insofar as this decade is concerned.

        I look forward to read to your comment on January 1st 2021…


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