Monday, December 12, 2016

Jim Rickards - Trump Will Face New Major Crisis During His Term

In line with his previous forecasts on this, Jim Rickards has produced a new article in which he predicts that the crisis he expects will likely come during the Donald Trump term of office. The article does not give a specific time frame but does make it clear that he thinks Trump will have to deal with it. 

As we have noted here, we have no idea how he would respond to such a crisis. Jim says he will turn to the IMF. We will watch and see what actually does happen. Below are some excerpts from the article.


As earthquake doesn’t care if you’re progressive or populist. It destroys your house all the same. Likewise a financial crisis is indifferent to a politician’s policy mix. Systemic crises proceed according to their own dynamic based on the array of agents in a system, and systemic scale.

"The tempo of recent crises in 1994, 1998, and 2008 says a crisis is likely soon. A new global financial panic will be one legacy of the Trump administration. It won’t be Trump’s fault, merely his misfortune.
The equilibrium and value-at-risk models used by banks will not foresee the new panic. Those models are junk science relying as they do on notions of efficient markets, normally distributed risk, continuous liquidity, and a future that resembles the past. None of those hypotheses match reality."
. . . . .
"Financial panics are dynamically and mathematically identical to a variety of natural phenomena such as earthquakes and avalanches. As snow accumulates on a mountainside, seasoned observers can spot avalanche danger. Soon one snowflake alights in such a way as to perturb others that begin to slide, form a chute, create momentum, and rip loose the entire snowpack. Timing is uncertain, yet the avalanche is inevitable.
What snowflake could precipitate the next financial panic? Deutsche Bank is an obvious candidate. Less obvious is a failure to deliver physical gold by a London bullion bank. That would expose the hyper-leveraged “paper gold” market for what it is. A natural disaster on the scale of Fukushima would do as well."
. . . . .
"In the next crisis, liquidity will come from the IMF, which has the only clean balance sheet remaining. The IMF will print the equivalent of $10 trillion in world money called special drawing rights. China and Russia will acquiesce in this liquidity injection provided it hastens the demise of the dollar as the benchmark global reserve currency.
Can Trump avoid this fate? Possibly.    . . . . ."
. . . . .
"Sooner than later a new treasury secretary and Fed chair will retrace the 2008 footsteps of Hank Paulson and Ben Bernanke to tell President Trump the system is having a heart attack. They will have no remedy except to suggest a call to Madame Lagarde."

Added notes: Zero hedge provides another possible "snowflake that could precipitate the next financial panic" - a US dollar shortage abroad (see article here). The BIS also has dollar concerns as this Fortune article reports. At some point the US dollar must pull back quite a bit one way or another. When this happens, it will be time to keep a close watch on many major markets.
Also, as you can see here, it did not take long for alternative media writers to jump on this article as evidence that Trump is being setup to be a scapegoat for the next crisis. As we noted earlier here in our recent Crisis Watch update, this is a theory now making the rounds in alternative media articles. It should be noted that the Jim Rickards article does not suggest Trump is being setup as a scapegoat for a crisis. He simply predicts Trump will be in office when one takes place.

Also, today we get this news of further bank hacking within the SWIFT system. Just another systemic risk we must endure these days.

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