Wednesday, March 12, 2014

Rickards on Dutch TV - Talks about a future possible gold backed SDR

Here is another Rickards TV interview done by a Dutch TV network. This was released today and is one of the better interviews I have seen with Jim Rickards. The interviewer does a great job of challenging Jim with some tough direct questions. The interview begins in English around the 30 second mark.  

Jim is asked if he is a "prophet of doom" and why other collapse forecasts have not happened yet. He is asked to explain why his forecast is different and why he will be proven right over time. He takes on those questions with direct answers. Something you do not always get in these kinds of interviews. 

Jim explains that his projection of collapse of the current monetary system is not as dramatic as it sounds. What he means is the current system is stressed and will reach a point where it cannot be sustained. At that time, the financial authorities will get together and propose a new system where the "rules of the game" are different. A "reset" if you prefer that term.

This interview touches on several important issues and is one I highly recommend for readers here. Near the end of the interview the discussion turns to what a new monetary system might look like after the current one ends. Rickards talks about the fact that when the next big global financial crisis comes, it will be too big for the US FED to handle. He then explains that the IMF will be the only entity left with a clean balance sheet to deal with the crisis. He further mentions that this could lead to a new global reserve currency using the SDR. He even adds that this could be backed in some way by gold.

All of this relates directly to what we are watching here. Because Jim Rickards is highly connected and has extensive experience in these issues, what he says carries an extra level of credibility with many people. In addition, his forecasting over the past several years has been very good. This adds to his credibility. It's why we post most every interview he does on this blog. We don't think there is a better, more credible source for people interested in learning about these issues that is willing to talk publicly.

There is something we can add here though. Some research we are doing indicates the IMF may very well become a major player like Jim Rickards talks about in the next few years. But it may not be exactly like Jim is describing it right now. There is no doubt that the IMF has interest in expanding its reserves and taking on more of a "lender of last resort" role. IMF discussion papers talk about this. They also discuss the idea of using the SDR as a global currency. This is not a new idea as we have posted on this blog. 

What is new though is that there are new technologies today that may come into play. The IMF discussion papers admit that using the SDR itself as a new global currency has logistical problems. The SDR is an "internal currency unit" that is only used at the IMF between member nations. 

They have always known that connecting that "internal currency" to something "external" that can be used like national currencies in the real world has challenges. These challenges are discussed in their discussion paper mentioned above. The paper also discusses a possible alternative.

This is where our research has turned up some new possibilities. There has always been another possible alternative to the SDR. It involves using a new "external currency" that could circulate alongside existing national currencies. This currency could be made global eventually and also asset backed so that it has AAA backing. Remember that the IMF and Central Banks own lots of gold. It is possible to add in other assets as well to the backing.

Today the technology exists to make this a global digital currency as well. Something that could be used in transactions around the world virtually instantly at very low cost. Something that could be used by a farmer in the field who has no bank account on his mobile phone. It could be used by a Central Bank as well. And approved by the current banking system.

Impossible you say? 

We don't think so. Our research indicates something along these lines could show up as early as this year on a pilot project basis. Perhaps by this fall. We'll have more on this later this year. 

For now watch the Jim Rickards interview above and open your mind to the idea that something like we describe here (a new digital "outside" currency) could be out there. We'll continue to keep an eye on it.

addendum: If you questions on this article, please email them here:

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