Our economy is a debt based economy, money is created by more and more debt. The question that arises is the question if our economy is sustainable? We have seen bail-outs and bail-ins to save countries, banks and other companies. In 2008 the world economy almost came to a standstill. “The new case for gold’’ by James Rickards is his latest book. James Rickards is a famous investment banker who worked for Long Term Capital Management ( a hedge fund) that went insolvent after the Russian government failed to pay their national debt in 1998.
James Rickards makes the case for Gold. He sees a future where the central banks go bust and where the IMF might be the only one that has a clean balance sheet to bail-out the central banks. Banks could be shut down which could limit the amount of cash that can be withdrawn daily during a crisis. Depositors can be forced to bail-in banks (e.g. Cyprus), with a risk that depositors with more than 100.000 euro lose their savings or they become shareholders in their own bank. In case of crisis many things are possible. Recently it was announced that the 500 euro bill will not be printed anymore, since criminals use these bills. While most payments are digital anyway, many people are hesitant to go 100 procent digital. It is likely that criminals are going to use the 200 dollar bill if the 500 dollar bill gets taken out of circulation in 2018.
The question is if this is the beginning to becoming a completely digital economy. The trust of people to be in a 100 procent digital economy is not their yet. James Richards looks with suspicion on this situation, he says that your bankaccount can be hacked, shut-down, or be forced to pay for your countries debt or for the debt of your bank. Besides that he is really afraid for high inflation. If the FED goes on at the current pace with its inflation target, James Rickards expects your money to decrease in value by half in one generation. Thus people should protect themselves by buying gold. Not the digital gold, but real physical gold. The production of gold can’t increase as fast as digital money, the demand for gold will increase in case of crisis and the dollar will decrease in value due to Ben Bernankies helicopter money. Yanet Yellen is happy to join Ben in the helicopter. James Rickards doesn’t advise people to go all in on gold, but he advises them to put 10 percent of their portfolio in gold. In his book James Rickards explains why gold is the must have and why it is other than other metals. Another good read from James Rickards is the book “currency wars.’’
This book is also about the world economy and about the challenges of Chimerca (in Niall Ferguson his words). James Rickards is a great public speaker and his view on gold is a must read. JEROEN SPANGENBERG