Who Will Bail Out the Central Banks in 2018? (Video)

Jim Rickards spoke at the National Center for Policy Analysis in late April. In this long video, the author of The Death of Money first discusses why central banks are always so wrong in their forecasting and policies. He relates how it took 100 years for science to understand and accept that the planets revolve around the sun in elliptical orbits. In the same way, modern economics is just beginning a similar process of realizing its fundamental models are entirely incorrect.

Rickards moves on to explain why a much larger financial crisis is imminent since modern economic policy is so wrong. He sees a bailout of global central banks in the not-too-distant future, which would lead to massive inflation and eventually $10,000 an ounce price for gold. It’s no wonder he recommends owning physical gold and other hard assets as a way to protect your portfolio.

Highlights from Rickards’ speech:

“Why don’t they [Federal Reserve officials and government economists] see the risks coming? Why are they constantly surprised? Why is it happening it again? How is this even possible? The answer to that is they have the wrong models. They have the wrong intellectual frame for understanding risk. They don’t understand the statistical properties of risk. If you’ve got the wrong model, you’re going to get the wrong result every time…

“We’re at the same place today in capital markets risk management [as astronomy was when Copernicus first proposed that the planets revolved around the sun]. The new models are there. The old models don’t work. But the people who embrace the old models are wedded to them; they’re married to them. They can’t change them up…

“Your savings and retirement are at risk, because you’re relying on a system that doesn’t know what it’s doing. It’s going to take a while to change…

“There is a move afoot to take the Chinese currency, the yuan, and include it in this basket [of currencies in the Special Drawing Rights (SDRs) of the IMF]… This would amount to an anointing. This would anoint the yuan as a big-time, global reserve currency. Along with dollar, sterling, euros, and yen. It makes China a very important part of the club…

“China recently created the Asia Infrastructure Investment Bank, the AIIB. They got most of the important countries to sign up, including a bunch of countries that the United States didn’t want to sign up… This bank is going to have $100 billion in capital, and it will be able to issue bonds. They haven’t said what currency they’re going to issue them in, but my estimate is that they’ll issue them in SDRs… They’re going to do big stuff. They’re going to build railroad, natural gas pipelines, oil pipelines, highways, airports. These are big, multi-billion dollar, multi-year infrastructure projects. Guess what? If you’re Germany, you want those contracts… Those contracts are going to go to German companies, British companies, French companies. They’re not going to go to American companies by and large, because we’re not in that club. That’s why everybody joined…

“China official says they have 1,054 tons of gold. The actual number is 3 or 4,000 – maybe more. Every time I’ve formed an estimate of Chinese gold, when I got better data I was always wrong on the low side. They always had more than I thought… They’re buying it in secret…

“Why don’t we have better information? Why doesn’t China just tell us how much gold they have? Well, if you were out to buy 2,000 tons would you want people to know what you’re doing? Of course not. That’d make the price go up…

“I have gold. I recommend gold to clients. 10%, by the way. Don’t let anyone tell you I said sell everything and buy gold. I never said that. 10% is a good allocation. There are plenty of other things to do with your portfolio… I like gold, because it is physical. You can’t hack it… People think they have money. No, what you have are digital statements. You have digital wealth. The statement you get from your stock broker, the price of a stock exchange, your bank account – everything you have except for land, gold, fine art, and a few other things is digital…

“Gold is going to go to $10,000 an ounce, but not for the reasons I’ve just described… China wants to be in the big club, but the US is holding a black ball: ‘Maybe we’ll let you into our club, maybe we won’t. What kind of behavior can we expect from you?’ So China is over here building their own club [with the AIIB]… China is doing both things at once…

“What is the United States saying is the price of letting China into the club? Putting China into the SDR and giving China more votes in the IMF – that’s what they want. That’s what is in play… The White House is deliberately slow-rolling this so they can get the concessions out of China… They want to peg the yuan to the dollar. They want China to stop fighting the currency wars. They want China to stop promoting their economy and growing their exports by cheapening their currency…

“The gold is plan B. Paper money is plan A. The United States is saying to China [that if] you want to be in the paper money club, that’s fine. Come on in. We’ll give your paper money the seal of approval by including it in the SDR. The fact that you have 7-8,000 tons of gold, that’s great. That’s your admission for getting into the club…

“[This year] Let’s look for China to publicly announce how much gold they have, which will be another lie. Because they have 3 accounts. They have the People’s Bank of China (PBOC), the State Administration of Foreign Exchange (SAFE), and China Investment Corporation. They have 3 buckets to put the gold in. They will move some gold from SAFE to PBOC. They’ll announce that. It will be a lot… But they might have 2-3,000 tons over in SAFE that they don’t disclose…

“All of this is moving toward the diminution, the elimination of the dollar as an important global reserve currency. But this is not something that happens overnight… It took 30 years for sterling to be diminished to a relatively important currency… We’re in the process of destroying the dollar, but it’s something that happens slowly.

“There’s no reason for you to sit around and wait for it to happen. There are things that you can do now…

“[What the power elites] want to happen is this orderly process that I just described. It would play out over years. It would go in stages. It would involve eventually substituting SDRs for dollars. The impact of that would be inflationary. The problem in the world today is there is just too much debt and not enough growth. There is no combination of growth on current conditions and taxes that will pay off the debt, or even make the debt sustainably… But if you can inflate the currency, then it is…

“You don’t have to have 20% inflation in one year. If you do 3% a year for 22 years, you cut the value of the dollar in half. You do it in another 22 years, you cut it in half again. So 44 years, which is the time from when your children are born to when they become adults, the value of the dollar has been reduced by 75%. That’s with 3% inflation. That’s the kind of inflation they think nobody notices…

“That’s what the elites think is going to happen. Here’s what is going to happen. I think we’re going to get a catastrophic financial panic sooner than later… Sometime in the next couple years… They happen every 5, 6, 7 years. It’s been 6 years since the last one. So how close can we be to the next one? The answer is probably pretty close. When that happens, it’s probably going to be a lot worse than 2008. The reason I say that is because the system is bigger…

“1998, Wall Street bails out the hedge funds. 2008, central banks bail out Wall Street. 2018, who’s going to bail out the central banks? There’s only one clean balance sheet left in the world and that’s the IMF. They’re going to come with these SDRs by the trillions… That’s going to be very inflationary.”

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