WWL>Topics>>4-17-14 12:10pm Garland: on the international monetary system

4-17-14 12:10pm Garland: on the international monetary system

Apr 17, 2014|

Garland talks with economist/author Jim Rickards about whether we're nearing the collapse of the international monetary system.

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Automatically Generated Transcript (may not be 100% accurate)

We don't blow a lot of shows and think tank on money. Monday -- and some. Worldwide economist calling -- talking about -- whether or not open -- restrictions abroad working while we might. Be implementing with Russia and new and how -- going in the Ukraine. And and in doing miss this constant reading and everything from the economy and it would times magazine and I did this book that I found fascinating it's called the death of money in the coming collapse. Of me and from monitors says some -- recruits. And a broad in the you leave that use. Portfolio manager at the bush group. In the book -- your own and national economic and financial workouts with the department of dependence. And the US intelligence community. Even served Tuesday facilitators. Of pursuit of repugnant to war games conducted by the Pentagon. James thank you for all calling and welcome to show it. Before we get into the Boca I'm curious. First ever presidential war games conducted by the Pentagon. Can can tell us what an economist -- money manager does. When it comes to war game to have gotten. Sure I'd be glad to talk about that you know my my new book the death of money. Has this whole chapter of the -- world where we're going back to my first book. Currency wars in the first two chapters that talked about the financial -- game. It was conducted in -- 2009. In the top secret weapons laboratory outside of Washington. It was sponsored by the Pentagon. And it was the first ever financial world game now of course and I -- into war games for decades. But this is one where you can not use any kinetic weapons and nothing that was shooter explodes and no bombs or submarines or airplanes and missiles. The only weapons permit it worse stocks bonds currencies derivatives foreign exchange. Other financial instruments on the because this has never been done before I was invited him. As a financial experts see the Pentagon didn't need any help from Mahan in -- award is that they did need help in terms of understanding capital markets we actually had before we could play the game. We had the sort of write the rules are outlined how would perceive I closed playing risk or adults of you know -- board game risk. I would get to a version of that but so we spent months really -- preliminary speakers you know he -- you -- that many people in this time and effort you and I. Do it rightly came up here in Europe we got a Russian team we -- -- China attainment of the US team of course you expect that. But we -- -- -- that was in the country was banks and hedge funds. Question is their major players in them. The financial markets -- play is over two days I was in several moves so whether it's -- described in or two charges current two hours. When I got home have to be aware of Africa orders -- said -- my wife. Good news and bad the -- is as much in one. Bad news is that play China. So that at stake and I can give you some sense of -- played out -- One of the things we did myself and -- We cooked up a conspiracy and we get this without telling as to who we really wanted to give the Pentagon. The monies were given something different. The whole idea of war games seek to -- surprise visit -- out of the box thinking to prepare people to -- the unexpected. Two weeks cooked up a plan where China and Russia would. Political resources but the -- Swiss people have a London bank it would issue new currency backed by gold. And there are after Russian natural resource exports in Chinese manufactured goods exports. And goods exports would only be priced in this is currency they would turn their back on the dollar and obviously as a way of undermining the dollar and by extension undermining the national security. The United States -- this is mentally stressed this is some kind of thing that happens overnight but we're glad to get people thinking about it. And it's fair to say that we were actually left that and ridiculed by some of the other people there when -- called Harvard. Professor types I mean there was a large group has over a hundred people in the in the war room. There were -- I think tank people university professors uniform military. Is -- trees start general -- keeping an eye on the whole thing people from the intelligence community people from the Pentagon. -- State Department treasury -- whose eclectic group of you know wall streeters think tankers and government officials. But there's the general reaction to what we were doing this and this is ridiculous. That you know the goal is to the world system. Why are you wasting our time with this assess what we did anyway. And has some interesting results but since then since 2009. Russia has actually increased it's gold reserves by 70%. China has increased it's gold reserves by several 100% -- and those exact number because they do it. By stealth in the news you know Covert military intelligence efforts to acquire the goals and noticeably done a bit. There's enough data available mining output Hong -- imports of resources to. Estimate to a child has done so the world has actually played out. Exactly the way we won the Pentagon 2009. Even though the -- has cuddle after us at the time. Earlier pursuing. We've got to take our first break and come back. -- me wrong but. Though overall message. I got premier -- it is the US dollar. As a worldwide main currency. Is gonna come to when and sooner or later and -- wanna ask you about that boom we come back and and again. The title of the book that though the money of the coming collapse with the international monitors system. We've we hear a lot. Of this -- Titles of the stud book. And and never seemed succumbed Sonoma as cute -- board in this -- in this information. Do you think that that makes this the predictions. Or. Description. Of something that we'll come to. Governor bill brigades celebrity area more than five to reassembling them would come in right. Return got a book -- book called the death the money becoming collapse of the -- -- from monetary system by teaching recruits. Who Georges out James I think it was from your blog our bread quote. If you're gonna talk about go with the reader a lot of time just jump right in to -- people pictures some sort of conduct. And again. If while understandable. Just overall. It's got a warning that the US dollar is the main currency in the world is gonna come come to India and Britain. One lawyer and other. Talked to me of the gold thing and in the book titled. What should people take -- is more seriously. Than they have all the books in this same. -- Garland a talk about in my book is the death of money in the -- titled the coming collapse of the international monetary system when I say that. Yes I was very provocative as scary but the fact is the international monetary system. Actually has collapsed three times in the past 100 years it collapsed in 1914. It collapsed in 1939. And it collapsed again in 1971. And that was about -- forty years ago so. That's capitalism is collapses -- congress every thirty or forty years now that doesn't mean that it's got to come like clockwork tomorrow morning -- things happen and -- that. You know 3040 years is about useful life of the national monetary system in that fact alone. We're probably at the end of life and getting ready for class and other collapsed that was a lot more to the analysis that I've talked about in the book it. That's just starting places for the reader to understand this and understand that these things have happened before now when it happens. It's not the end of the world that doesn't mean we all of those living case in the canned -- what it means is that the major financial and economic powers come together that they have a roundtable. And they rewrite what they called the rules of the game. And the rules of the game is -- my phrase that phrase has been around a hundred years and it's what condom policy which used to refer to. The -- into the international monetary system so I expect it will happen again -- -- to the reader. That's the money is first to explain. The critical state dynamics that are there that are leading up to this crisis has not that you know we're gonna make some policy mistakes and hero the mistakes have already been made. The bad decisions of our demand is so -- in the pot is weighing whether the stuff like that causes the gavel so to speak to -- more importantly. Take this story forward and say it will will be in new. System look like in this current system collapses. And the powers have to sit down once again as they have three times in the past hundred years and rewrite the rules the gamble that look like. And then go back to square one help investors understand today what they can do to survive novel in the class but also preserve wealth in this system. And can construct a portfolio that's -- that that's that's kind of the big picture. As to the specifics of the collapse. The main thing that's going on as a policy makers and by I mean. If finance ministers are -- secretary central bankers they're working off of paradigms in models which are just citizens characteristic ways of understanding reality they're models are completely wrong. -- is typical. Stochastic general equilibrium models. As if the economy were clock and it you know once violent winds down it winds up again resent it boom there goes. And if things get out of equilibrium which they would -- clearly have. He just apply policy. -- back to equilibrium margin up again and it and it's so good. That is not in fact how the world works that is not a capital markets and has helped financial economies. Work Vanessa economies go in accordance with complexity theory they're complex dynamic critical states and systems. And they operated according to a completely different dynamic in which the scale of the system that with the size of the system. As an indicator of the magnitude of collapse and they do collapse. Periodically election do you scale them voluntarily if you if you have a system that's. Getting close to the point -- collapse you can dial it down yourself that would -- if you don't if you keep going and making it bigger and bigger which is what we're doing. The collapse comes anyway and it's exponentially greater and it kind of overwhelm what we're doing so. That the the point is. I'd be wanting to regulators understood correctly. And we're applying the right policy but they don't understand it. They're applying the wrong policy aspect of the situation worse and so you can see the test becoming but it. It's so explain in the book the book actually. Garland he evacuate the point a lot of people out there with titles of books in the very apocalyptic sounding in. This -- -- in the chicken little -- that I worked very hard to. Avoid I might read some of the same conclusions but I've given in the books 350 pages on it has 300 footnotes. It has thirty pages of sources which are higher level academic sources it's not written by a textbook and academic book treatment or. Every -- readers but it has that back up to its if you created. And it's something you wanna know more about it is something you disagree with. They discuss the end notes -- need to find sources in and -- -- on our market reach conclusions but. And trying to inform readers as to the depression is coming give the reasons why and give impractical and they can do about it. Windows you'd talk about the potential bypassing the dollar and you talked about aside from an actual monetary punts on incorporates. Gulf Cooperation Council Shanghai Cooperation Organization. I don't know what those are -- or the -- and how out of the -- Wouldn't that multilateral groups that do not include these states and so the bricks it's just an acronym that stands for Brazil. Russia India China and South Africa. A group of them for important emerging market economies which together are almost 1% of global GDP is not a small group. They're doing a lot of things and don't know right now as the fight going on. Between the bricks on the one hand and the United States on the other around the voting rights in the IMF the -- International Monetary Fund. The IMF voting -- setup after world war two and have been changed a few times along the way. But right now the bricks are under way that they don't have enough votes relatives of the size of the economy for example China's. 10% approximately global GDP. But they have less than -- they have about 5% of the votes in the international monetary -- theory. You know it's kind of one dollar one they're entitled to more votes or other countries like Belgium and Netherlands. That have large vote -- that -- disproportionately large relative to the congress' plan on the table. To move the votes away from Belgium and Netherlands and places like two -- China results. The United States is blocking -- -- we're standing in the way things are trying to exert leverage over China. So what the bricks has done since fine. If you don't trees destroyed if you don't give us boats were entitled to we will go more on the way. We will setup our own sort of brick monetary fund our own reserve. When there are wrong payments network and ultimately the -- currency in terms of back on the dollars so. That's one of many political straws in the win their other ones out there a bit like Saudi Arabia for 45 years. They've enforcement of the Petro dollar deal this is sort of like under Kissinger in the mid 1970s. And it says that the United States in effect guarantees. The -- -- in the national security of Saudi Arabia in exchange for which they require that will be priced in dollars. That was the reason oil has to be priced in dollars a could be priced in euros or Japanese yen Google a lot of other things. But is priced in dollars -- of this means everything that we -- everybody needs oil. Well off oil's price in dollars in Munis oil and you have to get dollars to buys the the sources of currencies dollars whether they like it or not that's an important tour. Under the dollar will weakest -- Saudi Arabia in the back President Obama in December. A northern Iran as the regional hegemonic power green lighted Iran nuclear ambitions. Saudi Arabia took this is is that in the back of the civil. If you're not guaranteeing our national security anymore you're closing up to a grand why should we support the dollar. -- -- around the world with the China buying gold look at what's question Crimea. You look at Saudi Arabia backing away from the dollar. You look at the bricks getting our act together no one of these things is dispositive but taken as a whole -- signal the end of the dollars to -- reserve currency. What is gold so important. Goes important it's it's never been an important now hasn't been talked about forty years -- grant it and if you start a lot of in that I can economists. Say that the slapping you mentioned goals but the fact is that goes so unimportant. Was the United States -- 8000 tons. Why is that the eighteen members of the European zone have 101000. Why is China buying all the gold they can -- the -- recently returned. From a visit to Switzerland and less so as the -- did not concede any banks. Electricity people who were able to secure logistics and gold refiners that the people who actually handled this woman element met with the head of precious metals for the lord is one of our partners in the world. He says that he's on his factory. 24 hours that they triple shifts to produce all the goals he can't China's buying all the gold the fuselage to sell them. He makes about twenty times a week. He says China buys deficits -- ten times a week let's 500 times. A year coming from a single refinery. He says themselves so that the year advance China wants more but it won't sell to them because that got my regular. Customers you know which Rolex Watches and other people want gold. It says to take care of and so -- so many more. That's one of many refiners China has is acquiring. Thousands of tons of gold here's the thing. They're only about 35000. Tons of official gold in the world. So there's 3035000. Times all the official government gold in the world. And China's buying thousands of times which they are this is -- documented in -- and I -- elevenths. About -- a definite money. Then this is enormous amount relative to two world markets so why are they doing that -- stupid. What do they have something we've done well this suggests the Chinese are not stupid. They know something we go which is this class is coming and we're just trying to position themselves to their political in the time comes. All right we're talking with the -- records we're gonna take a break for the news -- come and -- next few few more minutes with mr. recruits. Talking about his book the death of money. Coming collapse of the international monetary system. Double bill bigots ebony AM 053 yeah. Welcome back drug grown Robin oblivion the think tank worth thinking about book it's called the death of money. The coming collapse of the year international monetary system -- records these authors with this. James who and when you -- that title when you reduce subtitled you bring wall in -- world. But what you're saying is is definitely. Told situation that that occurs but is it just moving towards a different type of currency it. Correct but the problem Garland is that there are when these things happens at the end of the world that there are a lot of winners and losers. And you don't want to be one of the losers -- me a good example this in 1922 torn country. There was hyperinflation and Germany in the Weimar republic Ella people are familiar with this episode of heard the stories of people with needing a wheelbarrow -- money to violent present that's true. But it's not the only time it happened it happened in ninety organized China's happened in Zimbabwe that happens is some frequency now. When that happened. Now who would lose as flatly wrong with a fixed incomes if you had insurance and annuities to pension. Savings and the kind of fixed income you've got wiped out. But there -- a lot of winners if you had a factory it's still country if you had gold it's still cold it doesn't matter what the currency does. Those -- that it's retain their values no matter what so as a result of that the middle -- slight -- industrialist prospered. Many of them because they had these products is that they would -- up they're bankrupt competition. And they got together as a class and -- than Hitler would be -- pond and made in chancellor this -- -- it happens from there. But now look what's going on today just take examples of Warren Buffett I think is a good example. -- about the Gaza is kind of you know avuncular apparently. Stock investor on the that everyone admires. But look what he's actually done a couple years ago he went out bought the Burlington northern Santa favorite despite some stock you bought the whole thing took a private. What is the real room it is nothing but hard assets its. Right away -- anyway it's real -- stockyards. Which has signaled buildings to center customer I would make money. It was part of that -- -- of corn wheat Cole's steel etc. so room vote. It's hard assets that make money moving -- assistant field to a Honda supplied. They're more about the net -- oil and natural gas reserves by the way he's gonna move those on the Sandra could you put under tanker cars together. It's a pipeline -- he has needs Keystone Pipeline -- -- -- So it's more about the dumping paper money as fast as we can. Getting harder -- as such Israel -- oil and natural gas. Sensing the Chinese dumping paper money buying goals assesses the -- so if the Chinese in Warren Buffett are doing it. Again where the rest dismissing -- percent real money in the bank you need to have some of the sort of aspects if you haven't you'll survive the crisis if you don't. He'll be worked out so yes. It just happens is in his system. But a lot of people get wiped out along the way -- champion of the world but it can be the end of your network. Strange question but to that and -- had bill of former secretary depend on that. And he was talking about -- -- there concern of these EMP. Explosions electrical. Magnetic poles and even politically talking about it raw and has moved a lot of cargo ships all -- coast. And he said we have them here in the Gulf of Mexico and -- their biggest concern. Is this scud missile launch from. One of those who counseled some of which we wouldn't be able to Trace. We've had no wide -- which cargo ship that came from. Goes up in the there are high enough to worry explodes when explodes -- knocked out electricity. You know mentioned dangers promus cyber financial attack and in your book. Chapter in the war god space you say quote. You have financial. Euros from -- Indian opener toward 2012. And thirteen. Illustrates on nations that could not stand up to the United States militarily. Could prove a tough match with the battle PO we're in the -- -- it's financial or electronic. Are you talking about that same type thing. I am and so whether it's the -- call it symmetric warfare. Look there's not a military and the best in the world that the US can't be we -- think -- navy. Suppress in the air force disrupt management controls we can beat anyone in the world. Militarily but when you lose the battlefield over to. Cyber chemical biological weapons of mass destruction financial warfare it's a much more level playing field that's exactly talking about by the way. That AT&T electric electromagnetic pulse weapons it -- you describe Garland. That is a real threat -- say it happened I attacked well your money would -- were discussion in it is -- did you mean by the couple books in your pocket but basically. Your credit charger direct deposit your -- hands. Paying your bills on line all the things are all digital electronics that would all be worked out. But if you have land it's still land if you have gold its Google can't -- circled. Usually it's it's it's a physical so this is one of the reasons I recommend these -- to -- because they cannot be worked out. If by cyber warfare or kinds of electronic weapons. Art ballistic -- care got a couple caller one who talked to. -- with a -- W Obey 170 AM mortal five to reopen. You know what -- -- is that means right now you can -- bird tickets to jazz threat. Brigham Apollo gold team's 60 wins W I and else. Or 2609. Boards 67. If your caller number eight. You win a double rubio and that is compared tickets to generous thoughts. Are welcome back in congratulations. To our winner applied to Olivier. Well prepared tickets jazz -- -- -- 170 bucks. -- forget to go to our governor of -- review FaceBook -- -- notably when we randomly select and lucky winners midnight Thursday. April 24. General content from moved supplies happy testing from all of us here at -- -- fascinating book called the death of money becoming collapse of the international monetary system. And we have -- with the exchange record streamed to bureau month. Let's bring one of our listeners than I've got 2000 question it's really her own widget. Excellent. Good afternoon Garland a -- I -- you. I'm very good James. -- IV in the actually -- -- the yen the topics that you cover and and the new discussion today and obviously in your book. Our home which is. Fundamentally. The source. Power control in the distribution of wealth within a nation and internationally. Com. -- game. Concept. The American people do not understand it so desperate need to understand. Is that. The organization that creates the money supply. Is the control our. In the nation. And in the United States the -- on supply is the Federal Reserve which is it private bank -- tell people. I'll pull a dollar denominations look at the top assistant was there though it is like to note that there it is not know the United States government. Therefore undermine. Statement that probably. The Federal Reserve is what is the candidate that really control the United States. Com. They can create the -- applauded for creating 8200 billion dollars on. Now for a number of years public that is very much what you went through four excellent. International occurrences that are affecting the dollar. Com the massive. Creation of money probably not but by a reserve bank and not another key element. Our own. As that structure. It is not only that they can create the -- supply in the private organization. And that they so they really control Cotchery but it. System would all of that now it wasn't for the fact that. The air Sunni nations. It's especially of course sort Arabia. Mom. Absorb those dollars. And recycled those dollars back into bonds and buying debts they check that -- they're oil. Four paper. All alone. Like that they have the date. The guaranteed that United States keep them power -- so -- -- Doubles a lot of information I appreciate very much and what do you think to this work into your book. Yes all these things are discussed that book personal callers write about and the things that reserve which is essential -- to be onstage. Is privately. It's tightly regulated by the government. And the president disappoints the board of governors of the government has there and and have that technically it's a part of him back -- -- by the bank some by commercial banks. That you control lines supply and that is a very powerful. Tool in terms of its influence on on the world economy. But on emerging markets. So. Say yes I agree with that premise is that -- is I agree with that is actually the case. But this has penciled in the world so this maliciously over the Summers summer 2013. In May the chairman of the Federal Reserve at the time member or not he just service. Send out loud that he might do with nickel tapering which means reducing -- a person's offense still printing money with the printing it slightly. Slower pace than they were questioner what they had things started and they didn't starts tapering till December. But the mere fact he mentioned it in -- day. It's sent emerging markets into a tailspin because people have borrowed dollars and you borrowed dollars short dollars. Converted to currencies in Brazil and South Africa and India around the world. -- those local currencies bought those local stocks and bonds. Levers of the problem making it very fat returns. Well Lebanese think interest rates again globulin again out of that trade that is gonna -- province where it simply dumping emerging market currencies dumps the emerging markets stock. So the currency got back -- -- has -- -- -- -- to the sidelines -- that caused the collapse of emerging markets are here you are. Some Princeton professors they kept it in Washington just sort of settle I would think about doing -- And then emerging markets all over the world crash. So it's a very good example let the IMF calls spillover effects contagion. The power of the and as the one of the province's secession doesn't even understand. How the system worked side that we have. Central bankers members Monetary Policy Committee the Bank of England members the federal open market and you it's a step economists treasury officials I've met with a lot of the government officials and central bankers. That I talked about the book and they will tell you privately they want says publicly or privately. Both say they're making up as they go along it is completely unprecedented it's basically a global experiment in central banking and we're beginning takes. So maybe they'll get right but I doubt because they've got the wrong models weren't thinking about to probably get which is one of the reasons I advise investors to. Do things -- -- symmetrical because central banker can. I can't mess with gold became president he can digitize it is just physical gold. Hum. The death of money the coming collapse of the international monitors system. James records James or -- people get the book as usual Amazon.com. Well that's available on line from Amazon or Barnes & Noble also available in bookstores it's hardback. He can go do my. Our web site James records project dot com James records project dot com records is RNC -- And RDS there's information about how to buy the book is more information about. The book itself to me if if the minister's interest it has said the very active Twitter feed had changed she records. That's open series not joined Twitter to follow it to -- changing directors. And human commentary -- several people -- -- follow along by the book and out to enjoy it. Jim fascinating book I appreciated power you have -- break day thank you. Come right back bill brigades opening it applied the -- All right don't go away in Toledo come out of that you can should Louisiana -- along for simple possession of marijuana. Absolutely and up where it needs more they blow up here and -- praise and that -- Where the top risen in the world we need to keep -- then people the end and she is gonna have some degree idea is supported diesel enrollment over. Time to talk east are true reads. -- gonna have some ships -- talk about my favorite. -- and much more.