STEVE MEYERS:
My name is Steve Meyers.
And I want to thank you for taking part in this
exclusive Money
Morning interview with Jim Rickards,
the Financial Threat and Asymmetric Warfare Advisor for both the Pentagon and
CIA.
Recently, all 16 branches of our Intelligence
Community have come together to release a shocking report.
These agencies, that include the CIA, FBI, Army, and
Navy, they've already begun to estimate the impact of the fall of the dollar as
the global reserve currency.
And our reign as the world's leading super power
being annihilated in a way equivalent to the end of the British Empire,
post-World War II.
And the end game could be a nightmarish scenario,
where the world falls into an extended period of global anarchy.
Jim Rickards fears he and his colleagues' warnings
are being ignored by our political leaders and the Federal Reserve, and we're
on the verge of entering the darkest economic period in our nation's history.
One that will
ignite a 25-year Great Depression.
Today, we're
going to examine everything he's uncovered because the bedlam could begin
within the next six months.
Which is why
every American should hear his warnings before it's too late.
Jim Rickards,
thank you for joining us.
JIM RICKARDS:
It's my
pleasure, Steve. Glad to be with you.
STEVE MEYERS:
In the early
'80s, you were a member of the team that helped negotiate an end to the Iran
hostage crisis.
In the late
'90s, when it was discovered that the Wall Street firm Long-Term Capital
Management was about to cause a total collapse of the financial markets, the
Federal Reserve had to turn to you in order to stop this catastrophe from
plunging America into a recession.
And then,
after 9/11, you were tasked by the CIA with investigating potential insider
trading that took place prior to the terrorist attacks.
JIM RICKARDS:
That's exactly
right.
The problem
was the CIA didn't have any capital markets expertise.
And why should
they?
Prior to the
beginning of globalization, capital markets weren't really part of the battle
space.
So the CIA
engaged in some outreach, they recruited certain people, myself included, to
bring the Wall Street expertise to the agency.
This Led to Project Prophecy
So, what the
CIA said was, well, if there's going to be another spectacular attack…
Using price
signals to determine the actions of participants in the market, whether it be
terrorists, or strategic rivals of the United States…
Could you spot
it?
Could you get
the information, and actually break up the plot, and save American lives?
STEVE MEYERS:
This system
you built with Project Prophecy actually predicted a terrorist attack that was
thwarted in 2006.
JIM RICKARDS:
On August 7,
2006, I got an email from my partner.
She said,
"Jim, we've got a bright signal on American Airlines.
It looks like
a possible terrorist attack."
We documented
that.
I was up at
2:00 in the morning in my study, watching CNN, and all of a sudden MI-5 and New
Scotland Yard emerged to break up this terrorist attack.
They were
arresting suspects and removing files.
So this showed
that the system worked.
However, it's
not just good for predicting terrorist attacks, but also strategic attacks by
rivals and enemies of the United States.
STEVE MEYERS:
For years now,
you've been helping the Pentagon and CIA prepare for a rise in asymmetric
warfare and financial threats, because today there are immense fears we'll be
struck by – as you've described it before – a financial Pearl Harbor.
JIM RICKARDS:
There's now
concern in different branches of the U.S. government…
Historically
in Washington, the Treasury and the Fed take care of the dollar.
The Pentagon
and the Intelligence Community take care of other threats, but what happens
when the dollar IS the threat?
Americans
generally know that:
The Fed has increased the
money supply by $3.1 trillion.
We have $17.5 trillion of
debt.
We have $127 trillion of
unfunded liabilities.
What are
those?
Medicare,
Medicaid, Social Security, student loans, Fannie Mae, Freddie Mac, FHA.
You go through
the whole list and it goes on and on and on.
There's no way
to pay it.
Debt can no longer be used to artificially
grow our economy.
During the
boom years of the 1950s and 1960s, every dollar of debt that was created, we
got $2.41 worth of economic growth.
So that was
pretty good bang for the buck.
But by the
"stagflation" of the late 1970s that relationship had actually
collapsed.
So now for a
dollar of debt in the late 1970s, we were only getting $.41 in growth, so,
obviously, that's a huge drop-off.
You know what that number is today? Today,
we only get $.03 in growth for every $1 of debt.
So we're
piling on the debt, but we're getting less and less growth.
As the trend
goes from $2.41 to $.41 to $.03…
It's soon
going to go negative.
This is a signal of a complex system about
to collapse.
STEVE MEYERS:
This really
speaks to what you wrote about in your new book, The Death of Money, the title strongly alludes to this, the hourglass is now empty.
You warn we're
about to fall into a 25-year Great Depression…
That the stock
market could plunge overnight 70%.
JIM RICKARDS:
(Interrupts)
You know, when
I use the phrase 25-year depression, it sounds a little extreme, but
historically it's not.
We had a 30-year
depression in the United States from about 1870 to 1900. Economists actually
call it the Long Depression.
That was
before the Great Depression. The Great Depression lasted from 1929 to 1940, so
that was quite long.
The U.S. is in a Depression
Today
STEVE MEYERS:
A lot of folks
might disagree with you that we're currently in a depression.
That word
brings to mind images of the 1930s and soup kitchens.
JIM RICKARDS:
Well, we have
soup kitchens today…
They're just
at Whole Foods and your local supermarket, because 50 million Americans are on
food stamps.
It's not that
we don't have distress.
We have
enormous distress, but it's being hidden in different ways.
The unemployment rate today is actually
23% when you calculate it the right way.
STEVE MEYERS:
And you point
the finger right at the Fed, Congress, and the White House.
JIM RICKARDS:
(Interrupts)
I was in a
meeting in the Treasury and I said:
"The Fed
and the Treasury are the greatest threats to national security, not Al-
Qaeda."
Right here in
this building with this group…
You people are
destroying the dollar and it's just a matter of time before it collapses.
And I
testified before the United States Senate about this.
I warned the
Senate, maybe we can't stop earthquakes on the San Andreas Fault…
But nobody thinks
it's a good idea to send the Army Corps of Engineers out there to make the San
Andreas Fault bigger.
But by money
printing, credit creation, and reckless monetary policy by the Fed, we're
making the San Andreas Fault bigger every day.
And when you
make a complex system bigger - the risk doesn't go up a little bit - it goes up
exponentially. So the risk is unimaginable at this time.
The collapse
hasn't happened yet, but the forces are building up and it's just about to
snap.
Editor's Note: Because the revelations
in Jim Rickard's book are so important to the everyday lives of Americans, Money Morning is sending free copies of The Death of Money to people who
want to get this intelligence in their hands.
Click here to have The Death of Money rushed to you.
STEVE MEYERS:
Jim, your
take, and that of many in the Intelligence Community…
Is much
different than what we're hearing out of Capitol Hill.
Which is why
the allegations you make in this book are causing quite a controversy in
Washington.
JIM RICKARDS:
I was at a
recent conclave in the Rocky Mountains with a couple central bankers, one from
the Federal Reserve and one from the Bank of England.
They'll say
things privately that they won't say publicly.
And I was
handed a copy of Janet Yellen's playbook.
The Fed is
trying to kind of use propaganda…
Lie to us
about economic prospects, talk about green shoots, use happy talk to try to get
us to spend our money.
The Fed
doesn't know what they're doing.
Don't ever
think that they know what they're doing.
You can print
all the money you want, but if people are not borrowing it, if they're not
spending it, then your economy is collapsing, even with money printing.
So you can
understand it this way…
Let's say I go
out to dinner and I tip the waiter.
And the waiter
takes my tip and he takes a taxicab home.
And the taxi
driver takes the fare and puts some gas in her taxicab.
Well, in that
example, my dollar had the velocity of three.
$1 supported
$3 of goods and services: the tip, the taxi ride, and the gasoline.
But, what if I
don't feel great? I stay home, and watch television.
I don't spend
any money.
Well, that
money now has a velocity of zero.
I leave my
money in the bank, but I don't spend it.
Let's look at
what's actually happening with the velocity of money.
It's plunging…
It's going down very rapidly.
But compare
this decline of velocity today to what we saw leading up the Great Depression.
Now, in the
depths of the Great Depression velocity was even lower…
But…
If you compare what's going on today to
what happened in the late 1920s just prior to the Great Depression, there's a
very striking resemblance.
So, it doesn't
matter how much money the Fed prints.
Think of it as
an airplane that's coming in for a nosedive.
It's crashing…
crashing… getting closer to the ground.
The Fed is
trying to grab the joystick and pull the plane up out of the nosedive and get
it back in the air...
But,
unfortunately, it's not working, we're heading for a crash.
STEVE MEYERS:
We've just
covered a lot of these startling numbers, these signals of this coming Great
Depression.
Let me see if
I can quickly put it all together.
Nobody denies
that we have a debt crisis in this country, but you're saying we can no longer
grow our debt without causing our economy to aggressively slow down.
We're barely
above water now.
So that's
signal number one.
Signal number
two is this dangerous slowdown in our velocity of money.
It's already
plummeting to levels not witnessed since the Great Depression in the 1930s.
Are there any
other signals the Intelligence Community is monitoring that suggest this
collapse is right around the corner?
Editor's Note: Jim Rickards
reveals the early warning signs the U.S. Intelligence Community is tracking in
advance of this coming 25-year Great Depression in his book, The Death of Money.
Money Morning believes this
is a must-read for every American. So you can have a copy rushed to you for
free.
Click here to claim your free copy of The Death of Money.
JIM RICKARDS:
There are,
Steve.
There are a
lot of signals out there and they're very, very troubling.
One of the
ones I'm watching closely, and I know people in the Intelligence Community
focus on also, because it covers so much ground, is called the Misery Index.
The Misery
Index = Real Inflation Rate + Real Unemployment Rate
If you look at
the Misery Index today compared to the period of stagflation in the late 1970s
and early '80s that Americans remember so well…
It's actually
worse.
This can lead
to social instability…
Take this back
to the Great Depression... The Misery Index in the Great Depression was 27.
Today it's
32.89.
Believe it or
not, it's worse today than it was during the Great Depression.
What happens
as a depression worsens?
Businesses
can't pay their debts. The bad losses fall on the banks. The banks ultimately
fail.
That's
happened before.
The Fed has
had to bail out the banks.
But what happens
when the Fed, itself, is in jeopardy?
STEVE MEYERS:
Based on these
signals you've been tracking, the Federal Reserve is going to fail?
JIM RICKARDS:
The Federal
Reserve actually, in some ways, already has failed.
I spoke to a
member of the Board of Governors of the Federal Reserve and I said, "I
think the Fed is insolvent."
This Governor
first resisted and said, "No, we're not."
But, I pressed
her a little bit harder and she said, "Well, maybe."
And, then, I
just looked at her and she said, "Well, we are, but it doesn't
matter."
In other
words, here's a Governor of the Federal Reserve admitting to me, privately,
that the Federal Reserve is insolvent, but said, it doesn't matter, because
central banks don't need capital.
Well, I'm
going to suggest that central banks do need capital.
Look at this
chart.
What it shows
you is that the Fed has increased its capital they currently have about $56
billion.
That sounds
good.
You say,
"gee, $56 billion is a lot of money, that's a pretty good capital
base."
But That's Not the Whole
Story
You have to
compare the capital to the balance sheet.
How much in
the way of assets and liabilities is that amount of capital supporting.
When you look
at that it's a much scarier picture, because the actual liabilities, or debt,
if you will, on the Fed's books is $4.3 trillion.
So you've got
$4.3 trillion sitting on this little skinny capital base of $56 billion…
That's very
unstable.
Prior to 2008,
the Fed's leverage was about 22 to 1.
Meaning they
had $22 in debt on their books for every $1 of capital.
Today, that
leverage is 77 to 1.
So, yes, the
capital has increased, but the debt and the liability has increased much more.
STEVE MEYERS:
Your warnings
haven't gone completely ignored.
In the budget
he presented this year, Senator Rand Paul cited your work and how we've driven
our economy to the edge of a Roman Empire-like collapse.
In fact, we
have footage of Senator Paul instructing Americans to listen to your warnings.
SENATOR RAND PAUL:
Jim Rickards notes the Fed is insolvent on a mark-to-market
basis.
The Fed has wiped out its capital on a mark-to-market basis.
Of course, the Fed carries these notes on its balance sheet at
cost and does not mark them down to market.
But if they did, they would be broke.
JIM RICKARDS:
First of all,
I give Senator Rand Paul credit.
He's one of
the few people who understand the dangers here.
But, the
problem is not limited to the Fed.
It's infecting
the private banking system as well.
There's about
$60 trillion of debt on the balance sheets of our banking system.
For a long
time, debt and the banks grew at about two times the rate of growth in the
economy.
But lately,
this has exploded.
Today it's up
to 30 to 1.
In other words, for every dollar of
economic growth, there's $30 of credit being created by the banking system.
The Whole Thing is Unstable
I can give you
a very good example of this and this actually comes from physics.
If you had,
let's say, a 35-pound block of uranium shaped like a cube, it would actually be
fairly harmless.
It's what we
call sub-critical. It's radioactive, but it's kind of tame.
But now
imagine you engineer it.
You take that
35-pound block.
You take one
piece and shape it into something about the size of a grapefruit.
Take another
piece, shape it into something like a bat.
Put the ball
and the bat in a tube and fire them together with high explosives.
That sets off
a nuclear detonation.
That destroys
a city.
The way it's
been shaped and configured is what takes it from what we call sub-critical to
super-critical.
STEVE MEYERS:
Jim, are you
seeing any signs that our stock market has reached a super-critical state?
JIM RICKARDS:
Well,
unfortunately, yes.
We're seeing a
lot of signs of this.
One of the
signs that's really fundamental, and really important, is the ratio of stock
market capitalization to GDP.
Because,
remember, the value of all the stocks in the stock market, that's supposed to
represent the fundamental economy.
It's not
supposed to be off in a world of its own.
But if you
look at what's been happening to that ratio recently, it's going sky-high.
It's 203%.
Just prior to
the recession…
That number
was 183%.
Go back to the
famous tech bubble, the dot com implosion of 2000.
At that time,
it was 204%.
And if you
want the scariest news of all…
Just prior to
the Great Depression that number was 87%.
In other
words…
The stock market capitalization, as a percentage of
GDP, is twice as high as it was just prior to the Great Depression.
So, that's a
really good metric for saying, "Hey, is the stock market heading for a
crash?"
All the data
says, "Yes, we are."
But there's
another metric, another warning sign, if you will, that's even more
frightening, which is the Gross Notional Value of Derivatives.
There are a
certain number of shares of IBM that are outstanding, but we know what that
number is.
But there's no
limit on the derivatives.
I can write
options and futures on IBM stock all day long and all the other stocks on the
stock market.
And that's
what's been going on.
Now, the Gross
Notional Value of Derivatives in the world today is over $700 trillion. Not
billion.
$700 trillion.
That's ten times
the global GDP.
This collapse
is unavoidable.
So, we ask
ourselves, how bad can this be?
Well, what
happened in 2007, 2008 when the markets collapsed…
We all
remember the value of stocks going down…
Real estate
going down, housing going down…
All that lost
wealth was $60 trillion.
The problem is now the system is bigger,
so I would expect the lost wealth this time to be $100 Trillion – possibly
a lot more.
We're in this
critical state, getting close to the super-critical state where the system
implodes.
But it takes a
catalyst, it takes a flashpoint.
There are a
number of potential flashpoints I've investigated.
Editor's Note: Jim Rickards'
book, The
Death of Money, provides specific guidance
that can protect your wealth from this coming collapse.
Click here to claim your free copy of The Death of Money.
STEVE MEYERS:
Jim, in a few
moments I want to discuss the steps Americans need to take with their
investments and personal finances to prepare for everything you and your
colleagues are predicting.
But now let's
quickly focus on some of these major flashpoints.
JIM RICKARDS:
One of the key
flashpoints we're looking at is foreign ownership of U.S. government debt.
Now, this is a
very important thing to understand.
We all know
that the Treasury has issued over $17 trillion worth of debt, the question is
who buys it?
A lot of U.S.
debt is owned by foreigners. Who owns it?
China, Russia,
other countries…
Countries that
are not necessarily our friends.
But they can
dump it when they want to.
Well, guess
what, that's actually what's been going on.
Recently, foreign holdings of U.S.
government debt have been plummeting.
But it gets
even more interesting than that.
We talked
earlier about the project I did for the CIA…
Project Prophecy.
And we said,
you can see not only market action, but rivals, enemies, terrorists and others,
operating in financial markets.
So, we all
know that Russia invaded Crimea in the spring of 2014.
Let's say
you're Putin. You know you're going to invade Crimea. You can expect U.S.
financial sanctions.
So what do you
do?
You basically
mitigate the impact of the sanctions, start dumping treasuries in advance so
that when you make your move and the Treasury tries to come against you, you've
insulated yourself.
So go back and look at October 2013,
here's Russia dumping Treasuries month after month.
That was a
clear signal that they were getting ready to do something…
To engage in
financial warfare against the United States.
But guess what? It's worse than that.
We know the
Russians and Chinese are working together.
So is it any
surprise that when the Russians started dumping…
The Chinese
started dumping also?
STEVE MEYERS:
Does the
Intelligence Community have the ability to defend our country in the event that
this escalates even further?
JIM RICKARDS:
Believe it or
not, there's an intelligence unit inside the Treasury.
And they
actually have a war room.
That tells you
that financial warfare is here and it's real.
So if the
Russians are dumping…
The Chinese
are dumping…
Who is going
to buy all this debt?
Well, a
mystery buyer has shown up.
Recently,
Belgium has bought enormous amounts…
In the
hundreds of billions of dollars of U.S. government securities.
STEVE MEYERS:
So Belgium
started loading up on treasuries, coincidentally at the exact same time Russia
and China began dumping theirs?
JIM RICKARDS:
(Interrupts)
It's not the
Belgians.
These amounts
are bigger than the Belgian current account surplus.
These are not
Belgian dentists who are buying these things.
Belgium is a Front
You know,
could it be the Fed itself?
That's the
point.
Maybe the
public doesn't know who the mystery buyer is, but the national security
community does.
Now, the
Treasury, operating through this war room, and the Fed – the mystery buyer in
Belgium…
For now, they
have managed to prop up the treasury market.
It hasn't
collapsed yet.
But they're
not going to be able to keep pulling these rabbits out of a hat, there's a
limit.
This should be
very scary, because if the Fed is tapped out – we talked earlier about how the
Fed is leveraged 77 to 1.
So the Fed is
at the limit of what they can do.
The foreigners
are now dumping treasuries and if no one buys it, guess what, interest rates go
up.
That'll sink
the stock market, that'll sink the housing market.
Higher
interest rates mean the debt gets higher, so interest rates go up some more.
So you start a death spiral and there's no
way out of it.
STEVE MEYERS:
An attack on
our treasury market is obviously a very serious flashpoint that could ignite
this Great Depression you predict in your book.
Let's talk
about another flashpoint.
JIM RICKARDS:
What I call
flashpoint number two has to do with the petrodollar.
STEVE MEYERS:
Can you
explain what you mean by the petrodollar?
JIM RICKARDS:
It's basically
a system whereby oil exports are priced in dollars.
Oil doesn't
have to be priced in dollars.
It could be
priced in euros, Japanese yen, Swiss francs, gold.
It could be
priced in a lot of things.
But, in fact,
the whole global oil market is priced in dollars.
I was actually very close to the birth of
the petrodollar system.
My first visit
to the White House on official business was in 1974, with a small group, about
five of us.
We met with
Helmut Sonnenfeldt, who was the Deputy National Security Advisor at the time.
He was the
number two to Henry Kissinger.
And, this was
at a time you have to remember…
At the
beginning of the '70s oil was $2 a barrel.
At the end of
the '70s, oil was $12 a barrel.
This Was an Oil Shock
The price of
oil was skyrocketing.
Inflation was
getting out of control.
There were gas
lines.
You know, a
certain generation of Americans remembers this very well.
We were in the
White House talking about what to do about this.
One of the
scenarios we discussed was the U.S. military would invade Saudi Arabia.
We would
secure the oil fields and create a military perimeter around them.
We would pump
the oil and set it at a price that was favorable to us.
Now, we would
give the money to the Saudis.
We didn't want
to steal their money.
We didn't want
to steal their oil.
We just wanted
to set the price.
Now,
fortunately, that plan was not carried out.
But it shows
you how desperate things were at the time.
But what did
happen?
Why did we not
invade Saudi Arabia?
Well, the
answer is Kissinger and the Saudis worked out a deal.
And the Saudis
said, "Okay, we'll price oil in dollars, so that secures the role of the
dollar as the global reserve currency."
But there was
a quid pro quo.
We agreed to
guarantee the continuation of the House of Saud, the royal family of Saudi
Arabia.
And by
extension, the national security of Saudi Arabia.
Because
they're a relatively weak military power.
And it's a bad
neighborhood - a lot of enemies in the region starting with Iran and others.
So the
question would be, obviously, did this petrodollar deal work?
And it
ABSOLUTELY did work.
Once it kicked
in, the dollar roared.
This was the
period – sometimes people call it the king dollar period, the strong dollar
period.
This was after
Volcker and Reagan in the 1980s.
But this only
continued up to a certain period of time…
Up until
around 2000.
And since
then, the dollar has been in a decline.
STEVE MEYERS:
So what could cause the fall of the
petrodollar?
JIM RICKARDS:
Well, we're seeing
it in real time.
Think of the
petrodollar, or the dollar as the global reserve currency…
Think of it as
a three-legged stool.
So, here's the
stool and it's got three legs.
As long as the
legs are standing, the foundation is firm and the dollar will remain as a
global reserve currency.
But, one by
one, those legs are being pulled out.
What are the
legs?
Well, the
first one is Saudi Arabia.
That was where
the petrodollar deal began.
Our side of
the deal was we would guarantee the national security of Saudi Arabia.
But lately –
going back to December of 2013…
President Obama stabbed the Saudis in the
back by anointing Iran as the regional-hegemonic power.
You know, the
President has been withdrawing American power from around the world and his
view is, well, we'll leave a friendly cop on the beat.
Every sort of
bad neighborhood around the world will have a cop on the beat.
The President
has decided that Iran is going to be the cop on the beat in the Middle East.
They're going
to be the heavyweight regional power.
Where does
that leave Saudi Arabia? Out in the cold.
So now Saudi
Arabia is saying…
"Wait a
second, you've undermined our national security, you've reneged on your side of
the petrodollar deal, why should we hold up our end?
Maybe we'll
start pricing oil in gold or euros or maybe Chinese yuan."
Because now,
increasingly, Saudi Arabia is selling more and more oil to China.
So, the first
leg of the stool has been pulled out.
The Saudis are
going to back away from the petrodollar, because we are no longer guaranteeing
their security - we're playing footsie with Iran.
The second leg of the stool is Russia.
Now, Russia is
not a member of OPEC, but they are the world's largest oil exporter, one of the
world's largest energy exporters, actually bigger than Saudi Arabia.
So even though
they're not a member of OPEC, they also price oil in dollars.
So, they've
signed onto the petrodollar deal in their own way.
But, we're now
engaged in financial warfare, Russia is ready to fight back.
And this is
not classified information.
This is being
said publicly.
Andrei Kostin,
President and Chairman of Russia's VTB Bank, it's one of the largest banks in
Russia, he recently said…
"It's
time to change the entire international financial system that considers the
dollar the key reserve currency. The world has changed."
A member of
the Russian Parliament, he said…
"The
dollar is evil.
We will sell
rubles to consumers that rely on gas and later we'll exchange the rubles for
gold.
If they don't
like this, let them not do it.
Let them
freeze to death."
So, two of the
legs of the stool, Saudi Arabia and Russia, have already been pulled out.
The third leg
is China.
And that is
coming out too.
STEVE MEYERS:
As far as
Russia and China's role in taking down the petrodollar…
This recent
$400 billion energy alliance they signed, is that the purpose of it?
JIM RICKARDS:
Sure.
Russia is the
world's largest energy exporter, China is the fastest growing economy in the
world, they need energy.
So this is a
natural partnership between the two. But the dollar is out in the cold.
And, China is
actually putting these yuan bilateral trade agreements in place all over the
world.
They're doing
them one-by-one.
But once
there's enough trade and enough volume in a certain currency, it can become a
reserve currency.
These are all
straws in the wind, leading to the collapse of the dollar as the global reserve
currency.
STEVE MEYERS:
Jim, in your
book, you investigate how nations are now using gold as a financial weapon.
Is this one of
the most dangerous flashpoints?
JIM RICKARDS:
It's
absolutely one of the most dangerous flashpoints and, here's why…
A lot of
people look at the dollar and say, "Look, you may not like the dollar, you
may worry about the dollar, but you've got nowhere else to go."
But there is
another place to go, which is gold.
You don't have
to buy treasuries, you can buy gold.
And countries
are actually doing that.
So this is
basically a global rebalancing of gold reserves.
This is one of
the things that the Intelligence Community is watching most closely.
And China is
our number one case.
Here's why:
China has acquired more than 3,000 tons in the past four years.
Now they lie
about this.
They
officially say they have 1,054 tons.
The reason is,
China is using their own military and their own intelligence assets to acquire
some of this gold in stealth.
I recently ran into a senior officer of
one of the major secure logistics firms in the world.
Secure
logistics that means these are people who operate vaults and armored cars.
So they handle
the physical metal.
They're not
central banks.
They're not
government agencies.
These are
Brinks and G4S and ViaMat.
These are the
big players in this field.
One of these
officials said he recently brought gold into China at the head of an armored
column of the People's Liberation Army.
In other
words, he was in an armored car and they had Armored personnel vehicles
bringing gold into China.
I guarantee
that did not show up in the official Hong Kong import figures.
Now, why is
China doing this?
A lot of
people speculate that they want to launch their own gold-backed reserve
currency, to take the Chinese yuan, back it with gold, make it a global reserve
currency.
That's
extremely unlikely.
That's not what China is doing.
What they are
trying to do is hedge against the collapse of the dollar.
China can't
prevent that from happening.
What they can
do is build up the gold reserves.
This is known
to the Intelligence Community.
This is NOT
publicly revealed.
What if it were publicly revealed?
Here's what
global gold reserves would look like if the amount that China owns were
actually suddenly revealed.
This is a dagger aimed at the heart of the
dollar.
Editor's Note: Jim Rickards'
book, The Death of Money, will help you prepare for the frightening American
economic collapse many in the U.S. Intelligence Community fear is at our
doorstep.
Click here to claim your free copy of The Death of Money.
STEVE MEYERS:
Jim, so far
all of these flashpoints have involved China.
Isn't this an
economic suicide mission to attack America?
JIM RICKARDS:
There's something
else here, another flashpoint that could meltdown the global financial system.
What if the
U.S. doesn't bring the entire pyramid crashing down, what if it's China?
Well, it could
very well be.
They have a
highly leveraged banking system.
But the
banking system is just the beginning.
There's also
something called a shadow banking system.
This is now a
$7.5 trillion industry and it's up 4,067% since 2005.
STEVE MEYERS:
This term
shadow banking, it's starting to get play in the press.
How would you
explain it?
JIM RICKARDS:
If you put
your money in the bank in China, they – it's just like the United States.
They pay you
nothing, zero maybe, one quarter of one percent, something pathetically small.
But, they're
offering these wealth management products that pay five, six, seven percent.
Well, what are
they?
Well, they're
actually – they take the money and they buy mortgages on worthless assets,
inflated assets and bubble assets that are going to crash.
Before the
crash in the United States, before 2008, new construction, as a percentage of
GDP growth, that was about 16%.
16% is a
pretty big slice.
But, look at
China.
In each of the
last three years, construction has been 50% of GDP growth.
They're
building white elephants, they're building trophy projects, they're building
ghost cities.
I've been to
China - I was with the Communist Party officials and provincial officials, they
were trying to get me to bring some businesses there.
I went to one
place near Nanjing.
They weren't
building seven buildings, they were building seven cities.
Every city had
a whole cluster of skyscrapers, luxury hotels, athletic facilities, housing
facilities, high-end shopping, metro stops, highway access…
And an airport
to service all seven of these cities.
This
construction was going on as far as the eye can see.
It was all
empty.
All of it.
Now, here's
the point.
In the U.S.
before the crash, it took about 4.3 years of income to buy the typical house .
In China, it
takes 18 years of income.
If they're
building apartments, co-ops and condos, and people can't afford them, you know
their prices are going to collapse.
One of the
senior banking officials in China said, "This is a Ponzi scheme."
Those are his
words, not my words.
I happen to
agree.
But, we all know what happens to Ponzi
schemes, eventually you run out of suckers and they collapse.
Once you have
enough collapses, there's going to be a run on the banks.
The bankers
are going to say sorry, we can't pay you, it's not our problem.
Well, that's
not going to be good enough.
Riots are
going to break out.
What does it
mean when the world's second largest economy hits the brakes?
That's going
to be disastrous to global growth; it's going to pull the rug out from under
the sky-high valuations we're seeing in the U.S. stock market.
This is a set-up for an entire collapse of
the global economy.
STEVE MEYERS:
Jim, there's
one more flashpoint I'd like to talk about.
It has to do
with a premeditated plan you believe exists inside the IMF, and it involves
high-ranking U.S. officials…
To replace the
dollar as the world's reserve currency.
JIM RICKARDS:
It's not just
my belief.
This is
actually documented.
It's a
ten-year plan to replace the dollar as the global reserve currency.
The IMF
released a report this year, it was called – and get this title – "The
Dollar Reigns Supreme By Default."
And here's a
direct quote…
"The
aggressive use of unconventional monetary policies by the Federal Reserve, the
U.S. central bank, has increased the supply of dollars and created rifts in the
financial system. The dollar status should be in peril."
Reserves are
nothing more than a savings account for a country.
That's the amount
of money they've saved.
But, the
problem is, when you have it you have to decide what to do with it.
You can't just
stick it under a mattress, so to speak.
A lot of
people think that the dollar will prevail because there are no good
alternatives.
That's not
true.
The dollar is declining sharply, as a
percentage of total global currency reserves.
Imagine if
that continued.
The euro comes
up.
Swiss franc
comes up.
Some of the
other currencies come up.
That's one
outcome.
But, there's
another outcome, that's probably coming a lot sooner.
We have a
financial panic in the world.
If a central
bank has to re-liquefy the world, where is that money going to come from?
It can't come
from the Fed, they're leveraged 77-to-1.
There's only
one clean balance sheet left in the world… the IMF's.
The IMF,
believe it or not, is only leveraged 3-to-1.
When the next
crisis comes, it's going to be bigger than the Fed.
The only
source of liquidity in the world is going to be the IMF.
Think of it
this way.
The Federal
Reserve has a printing press, they can print dollars.
The European
central bank has a printing press, they can print euros.
The IMF, the
International Monetary Fund, has a printing press too.
They can print
something called the Special Drawing Right, or the SDR for short.
These SDRs can
come along as a new reserve currency.
The reason
they came up with the name Special Drawing Right is because if they called it
"world money" that would sound a little spooky and scary.
But that's
exactly what it is.
Here's the
point.
This may be a
ten-year plan.
We're not
going to make it ten years.
This collapse
will happen a lot sooner than that.
So they're
going to have to dust off this playbook and run out these SDRs and print
trillions of them to prop up the system.
Now, if the
Fed bailed out private credit in 2008…
And the IMF
now bails out the Fed in the next financial panic…
Who runs the
IMF? Who's really in charge?
Well, it's a
nice crowd.
We've got
kings, dictators, communists…
They're
unelected, unaccountable.
And this is
the next flashpoint, really, the IMF taking over the world monetary system and
becoming the central bank of the world…
Printing
"world money" called the SDR.
STEVE MEYERS:
Jim, these
flashpoints…
The attacks on
our treasury market and petrodollar…
China's
stealth gold run…
China's
inevitable collapse…
Even this
alarming inside job to take down our dollar that's escalating at the IMF…
You've only
scratched the surface of what you reveal in your book.
However, the
most important message I took away from The Death Of Money is:
Regardless of
which flashpoint unleashes the 25-year Great Depression, folks need to
understand it's coming, and coming quick.
JIM RICKARDS:
Steve, that's
exactly right.
There is a
mission in this book and it's urgent and it's important.
We're talking
about:
A prolonged
depression…
Massive deflation
Massive unemployment
Rampant bank collapses
A 70% best case scenario
stock market drop
This could all
start within the next six months.
Look at it
this way.
Americans
right now are standing at the very bottom of a tall mountain… Mt. Everest, Mt.
Kilimanjaro.
About halfway
up the mountain, there's a catastrophic avalanche barreling down towards us.
Determining
the one snowflake…
The one
flashpoint that's going to speed this chaos up shouldn't be our focus.
Recognizing
the severity of the situation and moving to safety should be.
So, mission
one is helping people hold on to what they've got.
That's going
to be more than half the battle ahead.
STEVE MEYERS:
Jim, as you
know, Money
Morning believes so much in your
book…
As well as
your mission to warn the public…
That we'd like
to send free copies of The
Death of Money: The Coming Collapse of the International Monetary System, to everyone who is watching this interview.
Now, it's on
bookshelves, it's being sold for about $28.
But, I want to
point this out.
The version we're
sending folks is different than the one being sold in stores.
JIM RICKARDS:
(Interrupts)
And the reason
why is simple.
What we're
talking about today is not light reading material.
The book
investigates everything thoroughly, except for one part.
It's what our
government calls – and to be clear, this is what they call it – "the Day After Plan".
This describes
what America and our government will be like when our economy collapses.
Now, I have an
unpublished chapter that does outline this situation, it's called The Day After Plan Declassified.
I didn't put
it in the book that was originally released, because it is controversial.
The picture I
paint is far from pretty.
But I am going
to include this chapter here…
Because folks
watching this interview are more prepared to see this intelligence and these
scenarios.
STEVE MEYERS:
You also took
another step with this version of the book…
You created a
six-part video series you're calling, The Death of Money Digital Debriefing.
JIM RICKARDS:
Here's why I
put that together.
It's
impossible for anyone, me or anyone else in my line of work, to give you an
exact day and time this collapse will begin.
We just know
it's coming and coming soon.
However, there
are crystal clear warning signs that will appear in our economy and in our
markets.
This is
certain.
So, across
this video series I walk folks through the seven major signs.
I give you the
exact signals to watch for.
I share the
charts.
The
announcements you'll hear from certain world governments and the Federal
Reserve.
I examine,
even further, the flashpoints that could ignite this nuclear meltdown in our
economy.
I explore the
secret bubbles nobody is talking about.
I share more
findings from the Intelligence Community about Russian, Chinese, and Iranian
activities against America.
This is very
important…
Across this
video series I help folks analyze their investment portfolios.
I show them
how to adjust their allocations accordingly for numerous scenarios that could
unfold, because this is a fluid situation – it's volatile.
So, I review
how much of your portfolio should be in certain sectors of the stock market,
precious metals, income opportunities…
Where folks
should be looking overseas to invest. It's a point-by-point examination of each
of these areas.
STEVE MEYERS:
Jim, we'd like
to rush copies of your book, the unpublished chapter, and this six -art digital
debriefing out to everyone watching.
It's part of a
bold initiative you're taking on, what you're calling:
You helped
lead a CIA mission called "Project Prophecy."
The goal was
to identify the signals in the financial markets and economy that threatened
our country.
With this
re-launch of Project Prophecy here, you're applying this same methodology to
helping everyday folks build this unbreakable wall around their wealth.
Let's talk
about what you've created.
Editor's Note: Jim Rickards
has prepared a comprehensive package that will give you the real story and real
solutions for these troubling times ahead.
Click here to claim your free copy of The Project Prophecy 2.0 Action Plan.
JIM RICKARDS:
Steve, I
realize much of what I've revealed today is a shock to the system.
America is
facing one of its darkest periods.
There's no
escaping that.
And some of
the measures folks are going to need to take to protect themselves may be
outside of their comfort zones.
So, I'm going
to take a hands-on approach here.
My book, the
unpublished chapter, and digital debriefing will give them the big picture.
But, folks
also need to know the exact investments to target and the ones to avoid.
They need to
rethink how they handle their personal finances.
To help them
I've prepared a set of intelligence briefings.
The first is
called, The
Project Prophecy Wealth Defense Blueprint: The Four Directives.
And, with each
directive, I have specific investments targeted.
STEVE MEYERS:
Let's examine
each of them.
JIM RICKARDS:
Directive #1:
Seek Shelter From the Dollar's Fall
The next time
the dollar falls – it won't be the first time.
The dollar
almost collapsed completely in the late 1970s.
Between 1977
and 1981, a five-year period, cumulative inflation was 50%.
If you had
insurance, annuities, any kind of fixed income, retirement income, savings in
the bank, you lost half your wealth in a very short period of time.
What we're
talking about now could be a 70 or 80% collapse, maybe even more.
The best way
to handle the dollar's fall – and this is what I focus on in the briefing – is
to invest in the euro.
What people
have to understand is the euro is not an economic project.
It's a
political project.
And if the
political will is there, directed from Germany, the euro is going to hang
together.
We have a
chart actually showing the euro's rise against the dollar.
So just
imagine all the talk about the collapse of the euro and yet the euro is actually
getting stronger.
And, by the
way, everyone knows that the United States has 8,000 tons of gold.
Well, Europe
has 10,000 tons of gold.
Europe is the
largest gold holder in the world.
So, they
actually have the gold to back up the euro.
Now, you don't
have to open a foreign bank account to invest in the euro.
In this Project Prophecy Wealth Defense
Blueprint, I'm recommending a
specific fund that rises twofold as the dollar falls against the euro.
This is a very
strong defense play because you are getting twice the return from both the
dollar's fall and the euro's rise.
STEVE MEYERS:
So walk us
through this second directive in this briefing.
JIM RICKARDS:
Directive #2:
Always Have an Insurance Plan For a Market
Collapse
The stock
market is going to fall 70%.
Now, does that
mean you shouldn't hold stocks?
Folks should
make that decision for themselves.
But, there are
ways to use the market itself as a safety net.
I'm
recommending we target the sector that will experience the most severe
consequences of this collapse, the financial sector.
The companies
that are holding all these stock derivatives.
These are
going to fall harder and faster than anything else.
So, I examine
a specific fund in this briefing that is heavily weighted against the financial
sector.
It rises 3%
for every 1% the financial sector pulls back.
So, a 25% pull
back, that's a 75% return from this fund.
If it falls
70%, now you're looking at a 210% return.
What this fund
allows you to do is use a small amount of capital to multiply your protection
against a market crash.
It's excellent
insurance.
STEVE MEYERS:
So, take us
through the third directive.
JIM RICKARDS:
Directive #3:
Invest in What People Can't Live Without
When America
experiences this worst case scenario we are predicting in the Intelligence
Community, people won't stop needing food.
They won't
stop using energy.
They won't
stop using essential goods and services.
This is where
folks should be looking now.
So in the
briefing I'm recommending water investments, because you can't live without
water.
And we're
already seeing water investments begin to take off.
This sector
has been surging since 2009. It's up about 200%.
I'm targeting
a water processing company that operates 47,000 miles of water pipelines across
16 states and 1500 communities.
Now, this is a
sleeping giant income play.
This water
processor's dividend has grown every year.
It's up 55%
already.
And, income is
something we can't live without either.
And, besides
water, the briefing also focuses on a company that provides emergency medical
supplies, because that's also a necessity.
STEVE MEYERS:
Jim, you have
one more directive in this briefing.
JIM RICKARDS:
Yes, Warren
Buffet's secret weapon.
Directive #4:
Target Companies Who Control Hard Assets
You know
Warren Buffet has this reputation as the avuncular oracle of Omaha, the stock
market investor's best friend.
But, I say
when it comes to billionaires, don't listen to what they say, watch what they
do.
Warren
Buffet's recent acquisitions have been very revealing.
A few years
ago he bought the Burlington Northern Santa Fe Railroad.
He bought the
whole railroad.
He actually
took it private.
But what is a
railroad?
A railroad is
nothing but hard assets.
They have
right-of-ways, mining rights adjacent to the right-of-ways, rail rolling stock,
yards, switches, signals; it's all hard assets.
How does a
railroad make money?
It moves hard
assets in the form of freight, coal, wheat, corn, steel, cattle, etc.
So a railroad
is the ultimate hard asset play. It's hard assets making money moving hard
assets.
What was
Warren Buffet's next big acquisition? He bought oil and natural gas resources,
another hard asset.
And by the way,
he can move his oil on his own railroad.
He doesn't
need the Keystone Pipeline.
When you line
up 100 tanker cars on a railroad, that's a pipeline on wheels.
So Warren
Buffet is a guy who's dumping paper money, getting hard assets in the form of
railroads, oil, natural gas.
If it's good
enough for Warren Buffet, it's good enough for everyday Americans.
This is the
most important of the directives, so I have the top six companies who have
built these hard asset escape plans into their business models.
STEVE MEYERS:
The second intelligence briefing you've
created is called: The Project Prophecy Watch List: 30 Stocks That Will Soon Collapse.
Take us
through this.
JIM RICKARDS:
Steve, during
the original Project Prophecy for the CIA we built a tracking system, a watch
list of the 400 stocks most likely to signal a coming attack on America.
But, in the
years that followed, we kept modifying its capabilities so it could identify
the companies that were in danger of collapsing.
This
intelligence briefing reveals the 30 stocks that are now at the top of that
list.
Now, when
folks see these stocks, it may shock them.
These aren't
micro caps or small caps, because they don't have the capability to do
widespread damage.
These are 30
of the most widely held stocks in the retirement accounts and 401ks of everyday
Americans.
Most are large
blue chip.
That means
everybody watching today is probably holding one, two, or more of them.
And they are
vulnerable to complete annihilation.
Now, inside
this list of 30 I've singled out the 10 that are currently at a red alert
status.
This means if
you were holding them today you need to not be holding them tomorrow, because
the clock is running out on them.
They're
already at risk of failure before the worst of what's coming appears.
STEVE MEYERS:
Now, let's talk about the final
intelligence you've created: The Project Prophecy Hard Assets and Personal Finance
Playbook.
JIM RICKARDS:
I'm advocating
people – if they aren't already and they have the means to do so – to start
exploring adding hard assets to their overall portfolio.
This
intelligence briefing covers them all, from land, including farmland, to
certain antiquities and art that holds value, as well as physical currencies
and precious metals.
STEVE MEYERS:
I'd like to
focus on one precious metal in particular, gold.
Now, in the
book, you reveal how China has successfully manipulated gold's price to keep it
low, while they stockpile it in their reserves.
But you're
bullish on it moving forward.
However, you
do write that people may be taking a dangerous approach to gold investing.
JIM RICKARDS:
It has become
fashionable in recent years to invest in gold ETFs.
The GLD ticker
is the headliner.
The logic on
the surface makes sense, you can secure gold without having to acquire it
physically and store it.
You can even,
theoretically – at least, they tell you – you can cash in your ETF shares for
physical gold if you so choose in the future.
This is the
problem – that's not true.
The everyday
American does not have that ability.
Here's how to
think about the gold market.
Imagine it's a
pyramid, but it's inverted.
The point is
down at the bottom and wide base is at the top.
There's a
little tiny bit of physical gold at the bottom.
On top you
have all these forms of paper gold.
What are they?
Gold leasing
Unallocated gold forwards
Gold futures
Gold options
Gold ETFs
These are all
what I call paper gold. They give you contractual rights but there's no
assurance you'll ever get your hands on physical gold.
Now, what's
happening is this whole pyramid is getting larger and larger, but the amount of
physical gold, the floating supply, is disappearing.
When gold
moves from the GLD warehouse to the Chinese warehouses in Shanghai, which it
is…
It's been
moving from west to east in very large quantities…
Once it goes
to Shanghai it's no longer a part of the floating supply. That gold is never
going to see the light of day, at least not for several hundred years.
So, the total
supply may be unchanged, but the floating supply is dropping.
That means this
little brick at the bottom of the pyramid is getting smaller and smaller.
One of two things has to happen: either
that paper pyramid has to shrink, or the whole thing is going to become wobbly
and tip over.
So, if you
have GLD, you only have shares and you will only ever have shares.
You cannot get
your hands on the gold.
So, with this
intelligence briefing, I tell folks to stay away from gold ETFs.
Instead, I
talk about three specific precious metal coins they'll want to look into
immediately.
STEVE MEYERS:
Now, let's
examine how folks can fortify their personal finances from these dangerous
times that are fast approaching.
JIM RICKARDS:
This is very
important, because if you protect yourself with your investments, yet don't
take the same measures with your personal finances, you'll experience the same
outcome and it won't be a good one.
The bank you
choose to keep your money in is now a critical decision, because that bank may
not be around next year or the year after, as everything escalates.
So, I talk
about the safest banks and credit unions, these will not collapse.
You should
make sure your money is in one of them.
I show folks
which CDs and conservative income opportunities are most shielded from risk.
I talk about
the ten safest cities for the future.
These are the
ones with the strongest local economies.
They have
industries that will continue providing jobs, their crime rates are low now,
and they have the best chance of staying that way, even in the darkest times.
Retirees
should be looking near these areas.
Plus, I also
examine which careers will be the safest, because real unemployment and
underemployment is already an epidemic, but it's going to get much worse.
STEVE MEYERS:
Jim Rickards,
what you revealed today in this interview is nothing short of a wake-up call.
Thank you for joining us.
JIM RICKARDS:
It's my
pleasure, Steve.
STEVE MEYERS:
Today, Jim
Rickards stepped forward to warn you about a coming catastrophe the
Intelligence Community fears is at our doorstep.
But, as you
saw, he's also working to help everyday folks across the country prepare for
it.
And we at Money Morning want to do our part as well.
That's why
we'd like to send you a free copy of everything Jim has prepared.
What he's
calling the Project
Prophecy 2.0 Action Plan.
It includes:
The New York Times best-selling
book, The
Death of Money: The Collapse of the International Monetary System
The controversial
unpublished chapter, The
Day After Plan Declassified
The six-part video series, The Death of Money Digital
Debriefing
The Project Prophecy Wealth
Defense Blueprint
The Project Prophecy Watch
List
The Project Prophecy Hard
Assets and Personal Finance Playbook
You can click here to claim this Project Prophecy 2.0 Action Plan
for free.
And I strongly
suggest you do so.
Because if Jim
and his colleagues at the Pentagon, the CIA, and across the entire Intelligence
Community are right…
There isn't
much time left to protect yourself.
If you'd
prefer to claim your copy by phone...
Simply call
1.866.460.9039 or 1.443.353.4384 (for international callers) from 9 am to 5 pm
(Eastern Time) – and be sure to mention Priority Code PMMRQB58.
I want to
thank you for joining us today.
I'm Steve
Meyers.
Stay safe.
August 2014
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