Real time market

Countries Creating Shadow Gold Standard to Prepare for Economic Collapse – Rickards

Countries Creating Shadow Gold Standard to Prepare for Economic Collapse – Rickards

Release Date:  Friday, April 8, 2016

Gold and Silver Prices
Gold prices ended the week higher as the Federal Reserve remains cautious about future interest rate hikes.

“April 8 Gold eased on Friday as strength in equities prompted investors to cash in some of the previous day's gains, but remained on track for its biggest weekly rise in five as the Federal Reserve stayed cautious on U.S. rate hikes… Fed Chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the U.S. economy is still on track to warrant further interest rate hikes. But U.S. interest rate futures still see a less than 20 percent chance of a rate hike in June… Waning expectations for further rate hikes this year helped gold to its best quarter in nearly 30 years in the three months to March.” (“Gold slips as equities recover, still set for weekly gain,” Reuters, 4/8/16.)

Gold ended the week up $16.50, closing at $1,239.40. Silver prices closed at $15.46, up $0.31.

Countries Creating Shadow Gold Standard to Prepare for Economic Collapse – Rickards
Speaking to MarketWatch, author and financial analyst Jim Rickards explained that a number of central banks are acquiring gold to prepare for a global monetary reset.

“Author James Rickards maintains that gold remains the real underpinning of the international monetary system. Governments may disparage it, he says, yet many of them have held on to gold — and China and Russia have been acquiring more…

“’The crisis in 2008 was centered around “too big to fail” banks. Since 2008, those same banks have grown larger, control a larger percentage of all banking assets in the U.S., and have much larger derivatives books. This makes the risk of collapse and the potential size of the collapse much greater than anything seen since the Great Depression, perhaps longer. Meanwhile, little of the policy support used in 2008-2009 has been withdrawn. This means that the risk of collapse is greater and the means to truncate collapse are used up and not available…

“’The U.S. will default on this debt by inflation (it’s the American way)… Countries around the world are acquiring gold at an accelerated rate in order to diversify their reserve positions. This trend, combined with the huge reserves held by the U.S., Eurozone and the IMF amount to a shadow gold standard…

“’China, like Russia, is acquiring gold so that they have a comparable ratio to the U.S. and Europe. This ratio will be critical when the monetary system collapses since it will form the basis for any monetary reset and the new ‘rules of the game.’ In any monetary reset, countries will come together and sit around the table. One can think of that meeting as a poker game. When you sit down at the poker table, you want a big pile of chips. Gold functions like a pile of poker chips in this context. This doesn’t mean that the world automatically goes to a gold standard. It does mean that one’s voice at the table is going to be a function of the size of its gold hoard… These major gold powers are already preparing for this outcome.’”  (“Gold is the pile of poker chips in the next global crisis,” MarketWatch, 4/5/16.)

In a separate interview with Fox Business, Mr. Rickards offered another critical reason why investors should own physical gold:

“’There are new reasons to have gold, which I talk about in the book, 21st century reasons. [Russian President] Vladimir Putin has a 6,000-member cyber brigade working night and day to erase digital wealth... The thing about gold, you can’t hack it, you can’t erase it, you can’t delete it. It’s tangible,’ Rickards said….” (“Investing in Gold: You Can't Hack it, Erase it or Delete it,” Fox Business, 4/5/16.)

U.S. Economy Headed Towards Tragedy – JPMorgan
The Blaze reported on JPMorgan CEO Jamie Dimon’s report to investors which warn the U.S. economy is headed towards a national tragedy.

“In about a decade, the U.S. will have no choice but to take action to address a ‘tragedy that we can see coming,’ according to JPMorgan CEO Jamie Dimon. In his annual letter to the company, Dimon laid out his ‘key concerns’ about the future of the U.S. economy and the “serious issues” that need to be fixed:

“The long-term fiscal and tax issues (driven mostly by healthcare and Social Security costs, as well as complex and poorly designed corporate and individual taxes), immigration, education (especially in inner city schools) and the need for good, longterm infrastructure plans.”

“Dimon, who said he is not looking at the issue in a ‘partisan way,’ argued that only ‘early action would be relatively painless… I do not believe that these issues will cause a crisis in the next five to 10 years, and, unfortunately, this may lull us into a false sense of security. But after 10 years, it will become clear that action will need to be taken… The problem is not that the US economy won’t be able to take care of its citizens — it is that taking away benefits, creating intergenerational warfare and scapegoating will make for very difficult and bad politics.’ He reiterated, ‘This is a tragedy we can see coming….’” (“JPMorgan CEO Warns of Economic ‘Tragedy We Can See Coming’ in About 10 Years,” The Blaze, 4/7/16.)

Follow the Central Banks and Buy Gold – Forbes
Forbes contributor Tim Treadgold told readers they should follow the example of central banks and buy gold.

“If you really want to know which way the gold price is likely to move over the next few years look no further than the recent activity of the world’s central banks; they’re buying. Using a dry-as-dust banker as an investment guide might not seem like a bright idea but there is plenty of evidence to support a ‘follow the central bankers’ theory when it comes to gold…

“Governments have their reasons for buying gold. Private investors are driven by different forces and the one which has shifted gold back to center stage in Europe, and increasingly in other parts of the world, is the effect of negative interest rates. With many banks now charging a fee on deposits rather than paying interest the appeal of gold continues to grow, even as the threat of a rising U.S. dollar threatens to hit the gold price.

“For my money the key factor in the gold market, and the one that investment banks tend to overlook, is the role of central banks which is similar to the role of major property owners in the property market. If a big investor in any market is a net buyer then the trend is more likely to be up than down and in gold there is no bigger force than the world’s central banks.” (“Central Banks Follow Warren Buffett's Advice When it Comes To Gold; Buying When Others Are Fearful,” Forbes, 5/1/16.)

Negative Interest Rates Threaten World Economy - MarketWatch
Satyajit Das, a former banker and author of The Age of Stagnation, penned a commentary warning investors of the dangers of negative interest rates to the global economy.

 “Several of the world’s central banks have crossed the Rubicon, commencing a high-risk experiment with negative interest rates. The intent is clear: reduce debt … and transfer wealth from savers to borrowers. This is ultimately an admission of defeat, as traditional means of bringing excessive debt under control have failed…

“Negative yields mean that if an investor places a deposit with a bank, at maturity the investor receives an amount less than the original investment. In effect, the depositor pays to place money with the bank... Negative real rates entail return on the amount invested but loss of purchasing power because inflation rates are greater than the return. Negative nominal rates involve a guaranteed loss of capital invested…

“Most economies with negative rates are caught in a credit trap. Credit demand is weak and credit supply is constrained. Policy measures such as negative rate and additional QE are increasingly ineffective.

“Negative rates come with other complications. Negative rates change the role of default or bankruptcy in debt markets…  As shown in Japan, it creates zombie companies and industries by distorting the cost of capital and finance encouraging malinvestment…

“In effect, negative rates delay essential restructuring to remove the detritus of previous crises. It restricts the supply of credit to the wider economy, affecting economic activity. Misallocation of capital deepens the malaise, and an ultimate resolution to this global problem becomes even more costly and difficult. (“Negative interest rates put the global economy on a razor’s edge,” MarketWatch, 3/29/16.)