The Gold Chronicles: December, 18th 2015 Interview with Jim Rickards

Jim Rickards, The Gold Chronicles December 2015:

 

*The Fed has raised the interest rate by .25%, and it may go down in history as one of the Fed’s greatest blunders
*The Fed always follows the economy, it never leads it
*Janet Yellen’s models include the Philips Curve which has been thoroughly discredited, does not work and has no empirical support
*Labor force participation is at a 40 yr low
*If you lose one $85,000 job in the oil patch in North Dakota and gain three $25,000 part time service jobs the overall effect is net new jobs but a decline in aggregate demand and GDP
*Unemployment is a lagging indicator, it does not tell you where the economy is going it tells you where the economy has been
*World and US trade are collapsing in the absolute sense – total import / export levels are dropping at the same time
*Expecting .50% (50 basis points) increase in rates through summer of 2016
*Fed models are obsolete
*Negative interest rates would destroy the trillion dollar money market industry
*China is back to Yuan devaluation
*Historically when the US economy goes into a recession, it takes 3% cut in interest rates to get the economy out of the recession. The question is then how does the Fed do this when the interest rate is zero or near zero
*The Fed has never accurately forecasted a bubble, or a recession
*This expansion has been going on since 2009, and has been the weakest expansion on record
*The saying goes that expansions cannot die of old age, but they can be murdered by the Fed
*One of the main reasons the Fed is hiking now is to try and preserve what little is left of its credibility
*The other reason the Fed is hiking is to try and “let the air out” of asset bubbles, however these bubbles do not go away slowly but rather abruptly
*The Fed is in a desperate race to get to 3% before the next recession so they can cut
*45% of growth in China’s GDP is from investment and half of that is pure waste and should be written off
*Real growth in China is probably closer to 3%-4%
*Real global growth after subtracting China is closer to sub 1%
*By summer 2016 the markets are going to figure out we are in recession
*If the Fed cuts rates 60 days before the Presidential Election there will be strong political resistance
*We will likely get to Dec 2016 with a total mess and 2017 will have to go back to easing
*Fed tightening monetary policy and increasing rates through June 2016 will create a stronger dollar and a decline in corporate earnings
*Given what’s happened to every other commodity gold has held up surprisingly well
*Gold has bounced off of the $1050 level 8 times in the last few years
*USD Gold price is a comparison of two kinds of money
*Gold and Dollars are both money, neither produce yield unless invested
*At some point the market will realize that this strong dollar policy has been a mistake and demand the Fed weaken the dollar
*Likely to have a stronger dollar for the next 6 months, and the earliest Fed cut would likely be a 2017 event barring some catastrophe
*The coming non US dollar denominated debt collapse is up to $9 Trillion in range before factoring in derivatives

 

 

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