Friday, July 28, 2017

Doug Casey: Trump Will be Blamed When the US Economy Falters

This is a view I see quite often. The premise being that those who are part of the entrenched system who don't like Donald Trump will make sure that the next time the economy falters, Trump will get the blame. 

Some go even further and suggest these same forces will actually try to encourage the economy to falter so they can blame Trump. Here is the link to the video interview on Kitco. Below is the interview summary as shown on


When The Economy Fails, Trump Will Be The One Blamed: Doug Casey - PART 2/3

“[President Donald] Trump is not a Libertarian, he is an authoritarian,” says best-selling author Doug Casey in part two of his interview with Kitco News, critiquing the U.S. president’s track record. “The good news about Trump is that he has some business instincts; so he’s trying to cut expenses, he’s trying to cut regulation, that’s the bright side. On the not-so-bright side, he is playing chicken with Syria and North Korea -- the last thing we can use at this point is nuclear war.” Casey went on to note that ‘praetorian’ agencies including the CIA, members of the financial world, academia and the media all ‘hate’ Trump and are actively working against him. “So how is this going to work out? I don’t know, but when the economy inevitably does collapse, and I still think it will happen this year, he will blamed for it -- so I think it is going to be an ugly situation.” Watch PART 1 here. (show less)

My added comments: The whole landscape has been altered with Trump in office. This makes it much harder to try and project what may happen. On the one hand, if the economy does falter (or worse moves into a full crisis mode) under Trump, the public may very well blame him for it. That could then impact markets and financial system stability in general. 

On the other hand, a dynamic has evolved around Trump such that his supporters (and a very large segment of the total US population) are so distrustful of the "entrenched system" such as the mainstream media etc. that they are likely to place the blame instead on those who they think are trying to subvert him. That could lead to its own set of risks to systemic stability. 

Who the public blames is absolutely very important in any kind of serious faltering of the economy. It will directly impact who the public trusts to try and fix the problems. They are not likely to be interested in listening to those they believe caused the mess.

Looking at this situation today, it appears that we should all really hope that the economy does not falter (and of course that it does not collapse into a new crisis). It is hard to imagine that scenario ending up well for either the pro Trump forces or the anti Trump forces. The most likely result now would be to ramp up even further the finger pointing and distrust on both sides. Jim Rickards told us recently here that what we have now is "tantamount to a civil war." Under economic crisis conditions, I can only imagine how much worse this could get.

If the economy does start to falter, it is legitimate to question whether an already fragile monetary and financial system can hold up under the stress with all this political fighting going on. All I see coming from that is a lose-lose scenario where everyone gets hurt. Perhaps the forces at war seemingly every day politically over all this should at least pause to think about that possibility?

Perhaps a better approach would be to try and set aside political differences and start working together on ideas about how to reform the monetary system if and when the time comes that would be needed. There are good people with good ideas on this. Perhaps we should give them a chance to explain those in a public forum. I would love to see a forum on credible ideas to reform the monetary system that allowed the proposals that exist now (like we have covered here and here) to be presented followed by a panel discussion of experts coming from a variety of points of view on the pros and cons of the various ideas.
Added note: Andrew Maguire & BullionCoin Update: I had the opportunity to sit in on a pre launch webinar today (Friday July 28th) that featured both Andrew Maguire and also the CEO of ABX, Tom Coughlin. While there was not a lot of new information that we have not already reported, there were a few tidbits:

- they described the launch of BullionCoin as "imminent", but prefer not to give an exact day for launch yet

- Andrew Maguire repeated during the discussion that there is significant institutional interest in BullionCoin and also said it is the most exciting new product in the gold and silver space he has seen during his 40 years of working in it. The enthusiasm for BullionCoin was very evident by all the participants in the webinar

- Andrew Maguire talked about BullionCoin in terms of adding tons of additional demand for physical gold and silver monthly once the product is launched

- they stressed that a lot of thought went into designing BullionCoin to create an incentive for everyone who participates in it to win by promoting the use of it as money and to encourage velocity turnover for the coins

- I did not hear anything during the webinar that would cause me to change any information reported in our recent article on this

Andrew Maguire also added these 3 comments to his Twitter feed today:

#1 - implies more details coming soon
#2 - suggests gold is about to move higher
#3 - suggests gold is about to move higher

More information when it becomes available.

Thursday, July 27, 2017

BIS Issues Guidance for Stress Testing OTC Derivatives

One of the systemic risks that has drawn the attention of monetary authorities that we have covered here on the blog is over-the-counter derivatives. This area of investment/speculation has grown very large over time. Much of it also operates in what is sometimes called the "Shadow Banking" arena which is often not very transparent. Because these speculative OTC derivative contracts can lead to a situation where a major so called "too big to fail" entity gets in trouble, monetary authorities like the BIS have recognized the potential systemic risk. 

The Bank for International Settlements(BIS) has taken a leading role in trying to implement various counter measures to systemic risks that it can identify. In this case, they are issuing guidance for doing stress tests on key "central counterparties" (CCP's) who act as clearinghouses for derivatives trading. Below is the  latest press release from BIS on this issue and then a few added comments.


Draft guidance for supervisory stress testing of central counterparties released

28 June 2017

Press release

Draft guidance for authorities on how to design and run supervisory stress tests for central counterparties (CCPs) was released today by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO).
As a result of the Group of 20 (G20) derivatives reforms, and in particular the move towards central clearing of standardised over-the-counter derivative contracts, the role of CCPs in the financial system has gained in importance.
The consultative report, Framework for supervisory stress testing of central counterparties (CCPs), provides a framework for authorities to evaluate the collective response of a set of CCPs to one or more financial stresses. In particular, conducting stress tests of this type could help authorities better understand the impact on the broader economy of a common stress event affecting multiple CCPs, as well as the implications of interdependencies between markets, CCPs, and other entities, such as liquidity providers and custodians.
"Having a common basis for supervisory stress testing will help build confidence that these crucial parts of the financial system have enough resources to withstand shocks," said CPMI Chairman Benoît Cœuré.
"This framework will enable authorities to better understand the magnitude of the interdependencies between CCPs and other entities, and the impact that a stress event affecting various CCPs could have on the wider economy. The framework is also flexible enough to allow authorities to design a stress test that is best suited to their circumstances," said IOSCO Board Chairman Ashley Alder.      
The framework covers six components of a stress-testing exercise: (i) setting the purpose and exercise specifications; (ii) establishing governance arrangements; (iii) developing stress scenarios; (iv) collecting and protecting data; (v) aggregating results and developing analytical metrics; and (vi) determining the use of results and disclosure. The components are intentionally broad and flexible to allow authorities to develop the most suitable approach for their circumstances. Authorities are encouraged, but not required, to use the framework as they deem appropriate.
Comments on the framework proposed in the report should be submitted by Friday, 22 September 2017. A cover note to the consultative report is available at
Note: I added the bold emphasis above

My added comments: Just a couple of points on this. First, as we can see from the text I put in bold type above, the BIS does view OTC derivatives as something that can "impact the broader economy". The say the stress tests are designed to "help build confidence that these crucial parts of the financial system have enough resources to withstand shocks." 

I think that institutions like the IMF and BIS want to have as much information on these risks as they can because it is my understanding that if a risk is known it is much easier to get central banks to take whatever actions may be needed to "ring fence" a problem before it can spill over into the broader financial system.

Secondly, we can see from this press release that there is not any kind of sense of urgency that some kind of derivatives problem that could threaten systemic stability exists right now. This is just the early stage of this program to issue guidance on stress tests and they are just getting early feedback at this time (initial feedback comments not due until September 2017). This suggests that they believe they have plenty of time to work on this project.

Added notes: Andrew Maguire Update - I am advised by a rep for Andrew Maguire that it will likely be next week before I may hear back on the list of questions I sent in related to BullionCoin and the large gold buy order. Also, a White Paper is being finalized on BullionCoin that should be available soon. When that is available, I will post it here. I plan to follow this story through until the launch for BullionCoin. See a further update here.

This article was picked up and published on Talk Markets

Monday, July 24, 2017

BIS Alert - Speech on Boom and Bust Cycles & Interest Rates

I get regular email alerts from the Bank for International Settlements when they issue a new report or speech. Just recently, they sent me this alert about the speech which you can watch below.

The global financial system, the real rate of interest and a long history of boom-bust cycles

Watch the lecture by Professor Hélène Rey, Lord Raj Bagri Professor of Economics, London Business School. It was followed by a panel discussion, chaired by Jens Weidmann (Chairman of the BIS Board of Directors and President, Deutsche Bundesbank), with William Dudley (President, Federal Reserve Bank of New York), Stefan Ingves (Governor, Sveriges Riksbank), and Veerathai Santiprabhob (Governor, Bank of Thailand.)

Published on Jun 26, 2017:

Financial cycles strongly determine real short-term interest rates. Wealth increases rapidly during financial booms, faster than consumption itself. As a consequence, the consumption to wealth ratio declines, as happened in the "Roaring 20s" and the "Exuberant 2000s". In the subsequent busts, savings increase and keep real interest rates low. The related global financial cycle constrains monetary poilcy independence, even for countries with flexible exchange rates, transforming the Mundellian trilemma into a dilemmma. Tackling these issues calls for combinations of monetary and fiscal policy coordination, macroprudential policies, and possibly capital controls. It also means considering the role of the US as a provider of safe assets, and asking whether a multipolar system would be advantageous.

Here is the video of the panel discussion after the speech


Here are my bullet points for this speech:

- there is a history of close ties between cycles of boom and bust and interest rates
- after boom and during a bust - interest rates tend to fall 
- falling interest rates can lead to another new round of credit expansion 
- capital often gets misallocated during these credit expansions
- better policies are needed to deal with these cycles
- the US has historically been the country to deal with the busts 
- in the future more global cooperation is needed since the US may not be able to continue in this role
- global rules of the game are desirable but not feasible at present due to national interests over powering global concerns

This speech pretty much echoes what was said recently by BIS General Manager Caruana which we covered here. Again, we just note that while "new global rules of the game" are often discussed, the reality is that they do not appear to be feasible at this point in time. 

In the panel discussion after the speech, US Fed representative Willam Dudley made it clear the US sees the US as its first priority. He makes the argument that the US helps the global situation by taking actions to stabilize the US economy and that he thinks any spillovers impacting other countries can be managed. He agrees that things like stress testing are useful. 

Stefan Ingves (Swedish Central Bank) says directly "I am not very optimistic" that much global cooperation is possible because each of us as central bankers have mandates to serve their own national interests that they have to answer to before they can worry about "what is globally best for everybody."

At around the 50 minute mark of the panel discussion video, William Dudley is asked if the world can expect the US to step in and bail out the next crisis (if we have one) with swap lines and would the US Congress go along with trillions more dollars of support?  Mr. Dudley answered by saying that swap lines are limited and that they are ONLY used when the Fed thinks they are needed to support the stability of the US economy. He made it crystal clear that the US comes first in their decision making and that he had testified to Congress along those lines.

Here we have a room full of central bankers from around the world. They are talking about the problems and risks to the global monetary system from booms and busts. Nothing in this speech or panel discussion implies that any major changes to the global monetary system are under consideration at this time. It still appears that without some kind of new major global crisis, there is not much momentum for major change and the individual national central banks are mandated to put their own national interests first as we have pointed out here on the blog.
Added note: Andrew Maguire Update - I am advised by a rep for Andrew Maguire that it will likely be next week before I may hear back on the list of questions I sent in related to BullionCoin and the large gold buy order. Also, a White Paper is being finalized on BullionCoin that should be available soon. When that is available, I will post it here. I plan to follow this story through until the launch for BullionCoin.

News note 7-26-17: Two BRICS nations (China & India) involved in border dispute. Hopefully, they work things out. Both nations possess nuclear weapons.

Wednesday, July 19, 2017

News: The New Gold Backed Cryptocurrency (BullionCoin) Mentioned by Andrew Maguire

We have been following the somewhat cryptic comments that London metals trader Andrew Maguire has made about an event coming in the gold market that he suggests will be significant. We submitted a brief written set of questions to his representative to get more details, but have not heard back yet. We believe Mr. Maguire has probably been traveling and perhaps working on activities related to the launch of the new gold backed product he has tweeted about. If he does get time to reply, we will publish his answers to the questions.

Meanwhile, we did a little sleuthing and actually have found quite a bit of information about this new gold backed cryptocurrency. David Gibson of confirmed by email that this is the new product Andrew was talking about. It will be called BullionCoin. Here is quite a bit more detail about it. Below are some key bullet points from the web site on how it will work and then a few added comments.

Simple Summary of How It All Works

The following is a simple overview of the whole BCX and BullionCoin process:
  1. Primary market participants buy physical precious metals at the wholesale contract rates & hold Title of Ownership to it
  2. Those participants then authorise for BullionCoins to be created/minted against their precious metals
  3. Minting / creating BullionCoins is just a process of digitisation of the Title of Ownership to that metal
  4. Primary market participants then sell those digital coins into the secondary (retail) market
  5. That sale, is the selling of the Title of Ownership from the primary market participant to multiple retail investors
  6. The digital coins that those investors now hold, act as an electronic Bearer's Title to the physical gold & silver that's backing it
  7. Coin holders can use them in transactions and trades, in the same way that you use fiat currency
  8. As the coins are electronic Bearer's Titles to the physical precious metals backing them, investors holding those coins can then redeem them at any time in exchange for the equivalent quantity of physical gold & silver that those coins represent
My added comments: Now that we see how this new gold backed cryptocurrency product will work, a question in my mind was if the 250 tons of gold buy orders that Andrew Maguire has talked about recently might tie in to the launch for this new product. I am advised by David Gibson of GoldVu (see email exchanges below) that the two events are likely separate and that as far as he (David Gibson) knows the 250 tons of sovereign gold buy order does not relate to the launch of the new gold backed cryptocurrency - only Andrew can confirm that.

This is an interesting new product. It appears to actually combine block chain technology with a new cryptocurrency coin 100% backed by physical gold and silver. The gold Bullioncoin will be equivalent to one gram of gold while the silver Bullioncoin will be equivalent to 50 grams of silver. (note: 1 troy ounce = 31.1 grams)

Investors or institutions that want to be part of the startup process of providing initial liquidity will be offered an opportunity to earn a yield on the newly minted Bullioncoins produced as they are bought and sold over time. The yield comes from a portion of the transaction fee for buying and selling the coins. I assume block chain will be used to track each coin over its life as it is bought and sold.

According to the web site, the coins can also be convertible to actual physical gold or silver at any time and account holders will be issued a debit card allowing them to also be able to spend the coins around the world like cash. To make a purchase using the debit card, the gold or silver backing the coin is instantly converted into the currency of the country desired at the then current spot price for gold or silver at the time of purchase as I understand it from looking at the web site. Here is the info from the web site on that:

The BullionCoin Debit Card (updated as of 7-27-17)

The majority of users of will perform their transactions via the mobile or online payment applications.

However, as mobile payments still haven't been fully adopted worldwide, you are able to get a BullionCoin debit card and use it worldwide similar to the way you currently use Visa, MasterCard, American Express, etc. 

This will be initially given for free to high value accounts only, due to the cost of issuing the card. There may be a possibility that the cards could eventually be bought by people using BullionCoin, but those costs haven't been confirmed yet.

It's unique in that you can use it for any local currency without having to first pre-sell your precious metals holding before using it. When payments are processed at the point of sale, the exchange rate for local currency vs allocated gold or silver is automatically calculated and the equivalent amount of bullion is debited from your e-wallet account.

No other "physical precious metals" debit cards are directly linked in this way to their bullion account. Other providers need you to first sell your gold and silver, after which you then have to transfer/load the realised cash onto your card.

The BullionCoin card is a genuine revolution in physical bullion card payments.


Finally, how did I confirm that this is the new cryptocurrency product Andrew Maguire has been talking about? I contacted David Gibson and asked him directly. He says the product launch should be in the next 3 or 4 weeks and he also clarified his role in the process. Below are my email exchanges with him. 

This will be an interesting story to continue to follow over time. I expect a lot of interest in this globally based on some new information I have seen but cannot yet discuss. Here is a bit more information from Andrew Maguire's trading web site that is now available online.

My email dated 7-19-17:

Can you confirm if this is the new gold backed cryptocurrency product that Andrew Maguire has mentioned recently in his comments on Twitter? If so, do you know the launch date yet?



Reply from David Gibson dated 7-19-17:

Dear Larry,

BullionCoin is the digital currency that Andrew Maguire is referring to. The launch date hasn't been fixed yet but should be in the next 3-4 weeks. If you need any further help or information, then please do get back to me.

Yours sincerely,
David Gibson
Managing Director 

Reply from David Gibson on his role with BullionCoin & the 250 ton gold buy order -  dated 7-19-17

Hi Larry,
In the first paragraph of your added comments, could you word the second sentence to be:
"I am advised by David Gibson of GoldVu (see email exchange below) that the two events are likely separate and that as far as he knows the 250 tons of sovereign gold buy order likely does not relate to the launch of the new gold backed cryptocurrency - only Andrew can confirm that."
This is because:
1) GoldVu is not BullionCoin, nor are we involved in its design or set up. BullionCoin is by a company called Digital Gold Ltd and we are both members of the ABX (so is Andrew Maguire's company). I am only helping to help them to promote BullionCoin in the same way Andrew is. GoldVu is just currently the leading source of specific information relating to BullionCoin prior to its launch.
2) I don't know whether the 250 tons and BullionCoin are or are not linked. So it's best to avoid absolutes one way or another, which is why I added the word 'likely'.
All the best,

Added notes 7-21-17: A thank you to Silver Doctors for picking up this article. (one note: Silver Doctors chooses their own title for articles like this that they decide to pick up). Articles they run usually get several thousand additional views so I always appreciate it when they pick one up. A thank you to The Daily Coin as well.

Also, they discussed this in an interview with Bill Murphy. Bill Murphy said during the interview that this news (from Andrew Maguire) has gotten as much attention as anything he has seen over many years. There is clearly a lot of interest in it as I can tell from the blog stats here. We will continue to follow it.

7-29-17: A brief update here after listening in to pre launch webinar on BullionCoin

8-3-17 update: I am advised that readers should wait for Andrew Maguire to provide updates on BullionCoin on his twtter feed and that no one else is authorized to do that.

Monday, July 17, 2017

Jim Rickards on Gold - Recent Interviews and Articles

Recently Jim Rickards has had quite a few updated comments on the gold market including his view on where the price is headed towards the end of this year. Below are links to his latest comments on the subject.


First, here is his most recent article on the gold market appearing in The Daily Reckoning:

A Tale of Two Gold Markets  - below is an excerpt

"There is a lot of speculation about the actual motive of the flash crash paper gold short seller. Was this a so-called “fat finger” trade where the trader made a mistake by entering the wrong quantity or pushing the wrong button? That’s possible, but a more nefarious explanation comes to mind. 

Paper gold trades not only as futures and bank forwards, but also as options on futures. The flash crash happened the day before an important expiration date in the options market.

Was a seller of call options at, say, $1,245 per ounce trying to sink the price the day before expiration in order to avoid a $10 per contract loss? That’s entirely possible, even plausible. We’ll probably never know, because enforcement in this area is almost nonexistent."

(My added note: See this Bloomberg article on the "flash crash" Jim mentions)

Next, An in depth interview discussing the 2017 "In Gold We Trust" annual report

Published on Jul 3, 2017
Jim Rickards discussed with Ronald Stöferle and Mark Valek the key topics of the new In Gold We Trust Report 2017.

The key points debated were:
• Introduction – monetary surrealism – and where we stand
• Shadow Gold Price
• White Gray and Black Swans (esp. recession in the US)
• Populism and its true Cause
• De-Dollarization: Good-bye Dollar, Hello Gold (including the interview with Judy Shelton)
• A Coming War with North Korea
• Bitcoin and its Dangers
Finally, we have this.

Physical Gold Fund Update Report - Jim writes the conclusion section (see last page of the report)

"Our models show bonds and gold have it right and stocks are headed for a fall. The stock market correction won't come right away . . . ."

Added notes: Since we are looking at gold here are links to two recent articles by Alasdair Macleod that make an argument that China will implement some kind of new gold backed currency system. I see this speculation quite a bit so these articles provide some of the reasoning behind that view.

Time for a New Gold Standard for Asia

The Logic of a Mondern Gold Standard 

Update on Andrew Maguire - I may be able to provide an update from Andrew Maguire on his recent comments about a gold backed cyptocurrency along with large buy orders for physical gold. He has been traveling in Europe, but may be able to provide me a short written Q&A to publish here on this topic. If that does pan out, I will alert readers.
Added note on Jim Rickards 7-19-17: Looks like Jim has been busy this week. Says he spent two days working in an IMB Lab on this project. This is the reason I seek out Jim for comments on events that may impact systemic stability.

Wednesday, July 12, 2017

The True Gold Standard - A Monetary Reform Plan Without Official Reserve Currencies

A thank you to a blog reader (a former correspondent for Time magazine who prefers to remain anonymous) who alerted me another formal proposal to consider a return to the gold standard. In an earlier article, we featured the work of Dr. Lawrence White who also speaks favorably about returning to the gold standard. In that article, I made this comment:

"There are a variety of ideas on how gold might return to the monetary system, but until I learned of this information from Dr. White I had not run across a formal proposal for how to transition back to an actual gold standard."

The blog reader mentioned above picked up on that comment and sent me an email that encouraged me to look at another proposal for returning to a gold standard. The reader had this to say:

"In your June 23rd post:  "Dr. Lawrence White - Experts and The Gold Standard” you cite a range of proposals “for how to return to a gold standard.”   Let me add to it the following work:  The True Gold Standard - A Monetary Reform Plan without Official Reserve Currencies (Second Edition - Newly Revised and Enlarged). "

I am also advised from the reader that John D. Mueller made some contributions to the book linked just above. Mr. Mueller is The Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center in Washington DC. He was a featured speaker at the Kemp Forum in Washington DC that we covered here earlier this year. The book was authored by Lewis Lehrman and offers his view on why we should return to the gold standard. Mr. Lehrman served in Reagan Administration and was on the US Gold Commission along with US Congressman Ron Paul.

I reached out to John D. Mueller for any comments he might have on the book. He replied with these comments:

"Lewis Lehrman is a remarkable man. Trained as a historian at Yale and Harvard, he became a successful businessman (helping found Rite-Aid drugstores)—in Lew’s telling, after Lew’s graduate fellowship was cut by 25% and Lew’s father remarked that perhaps he should try a field with more economic promise. Lew made and spent a couple of fortunes supporting public-spirited efforts including international monetary reform. One website organized by The Lehrman Institute,, is a treasure trove of articles on sound monetary reform, and includes extended interviews with experts like Lew Lehrman and Dr. Larry White. Lew Lehrman’s occasional op-ed articles are also a crash course in American history: He has probably done more than anyone to explain the importance of Abraham Lincoln. And he has just published an excellent and interesting book on Roosevelt, Churchill and Company.

I can join in heartily recommending the book mentioned to you by your blog reader, The True Gold Standard - A Monetary Reform Plan without Official Reserve Currencies (Second Edition - Newly Revised and Enlarged)

 (My role was limited to providing charts and appendices for the second edition.) In it, Lew Lehrman answers the question, how would one actually implement a workable gold standard? The provision mentioned in the subtitle—that any new system must eliminate official “reserve currencies”—is vital to the success of such a plan. I discussed the reasons in my recent talk at the Jack Kemp Foundation forum on exchange rates and the dollar."    --- John D. Mueller

My added comments: Interestingly, in his presentation at the Kemp Forum earlier this year, John D. Mueller said he felt these were the three main alternatives for the global monetary system in trying to solve its problem (The Triffin Dilemma):

a)  muddle through until the (US) dollar standard's collapse.

b)  turn the IMF into a world central bank issuing paper (SDR) reserves.

c)  turn to a modernized international gold standard.

This is pretty much what we have been saying here on this blog as well. I will add that the Real SDR proposal (Dr. Warren Coats) that we have featured here is somewhat different than option (b) above as I understand it. While it does involve using the SDR as global reserve currency, it would change IMF rules so that the currency was issued under Currency Board rules (based on public demand, not IMF discretion) and also would anchor it to a basket of goods (not to the five currencies in the current SDR basket). I do not believe Dr. Coats supports giving the IMF arbitrary discretion to issue SDR's. Readers can look into this more in depth in this recent blog article. Robert Pringle has another more "out of the box" proposal he calls The Ikon also covered in that article.

At this point in time, it seems as though we are clearly still under option (a) above. This blog watches for any indications that change from option (a) might be underway to option (b) or option (c) or something else. These days some believe that something else might be decentralized cryptocurrencies (not issued by any central bank). Cryptocurrencies seem like the least likely alternative to me for a variety of reasons to lengthy to discuss here, but there are people who think otherwise. We covered what we think is the current status of cryptocurrencies in this recent article. Our goal here is to present readers with what we believe are the most likely scenarios for monetary system change and encourage them to learn as much as they can about them. 

We greatly appreciate all the contributions from the various experts we have featured here on various ideas and proposals for monetary system change. Readers here benefit from their knowledge and generosity. I would like to add a special thank you to John D. Mueller for taking time to offer his thoughts included above. 

Added note:  I received this additional comment by email from John D. Mueller. He kindly granted permission to add it to this article:

"Since option A is inherently doomed, I think we will wind up the only sustainable option, option C, after more or less painfully exhausting the alternatives."

All the best,


John D. Mueller

The Lehrman Institute Fellow in Economics
Director, Economics and Ethics Program
1730 M St. NW, Suite 910

Washington, DC 20036

Dr. Judy Shelton agrees with John D. Mueller in this Twitter comment.

Tuesday, July 11, 2017

News Alert - Jim Rickards on Donald Trump Jr. Email News

I don't try to cover politics on this blog, but I do understand that political events can impact financial markets and even financial system stability in some extreme cases. The news out on the email exchanges involving Donald Trump Jr. is just an additional potential stress factor to monitor in that regard. 

I reached out to Jim Rickards to get his reaction to this news. As always, Jim replied very quickly and offered his take on this news. I view Jim as the best source for things like this because he offers pure analysis based on what he believes is the true situation. Below are the comments he just sent me by email on this. 

"Those who contacted Donald Trump, Jr. said they represented the Russian government and claimed the Russian government supported Trump, but they did not in fact represent the Russian government, and had no basis or authority to make the claim. Trump Jr. took the meeting to explore the negative information on Clinton, which is exactly what anyone associated with any campaign would do. He quickly concluded the meeting was a waste of time, which shows good judgment on his part. End of story.

In the same sense that Donald Trump could not obstruct a crime that never happened, Trump Jr. could not collude with Russians who were not in fact Russians. It's just more fake news and parsed wording for the sake of salacious but insubstantial headlines. There's no there, there.

This will be revealed as a waste of time in due course. Meanwhile the Democrats keep chasing rabbits down rabbit holes while the Republicans keep advancing their agenda through executive orders and regulations.

Unfortunately for all concerned the big things like health care, tax reform, infrastructure spending and the budget are not getting done. Washington is a circus that goes on while the nation languishes."

James Rickards
Editor, Strategic Intelligence


My added comments: Readers here should understand that Jim takes time from a busy schedule to offer his thoughts. It is hard to find good sources on these very political issues so I greatly appreciate his being willing to share his thoughts with us. Jim did not ask me to do this, but I am including a link (just above and here) to his newsletter. It's the least I can do for the time he generously donates to help us out here.

Sunday, July 9, 2017

Robert Pringle - Allan Meltzer Email Exchanges on Monetary System Reform - Part I

Recently I ran this article on the blog that featured a tribute to Allan Meltzer from John Taylor. Mr. Meltzer was a highly respected economist around the world. While working on that article I was alerted by Robert Pringle to a series of email exchanges between himself and Allan Meltzer that are published on his blog (The Money Trap). 

Since their discussion directly relates to what we watch for here (potential monetary system change), I decided to present unedited the full set of their email exchanges below. I think they are a fascinating look at how this topic is discussed by experts. Part II is presented just below Part I (just scroll down below Part I to find it).


A Debate With Allan Meltzer - Part I

Professor Allan Meltzer debates international monetary issues and The Money Trap with Robert Pringle

On 3/14/2014 12:57 PM, Robert Pringle wrote: 
Thinking further about the international monetary system, I now find it difficult to conceive monetary stability being established in one country alone – even if that country is the US. This is to me the main lesson of the crisis and why I have changed my mind. I would welcome your view. 
Allan replied:
Yes, international stability would be a big improvement.  But it isn’t possible without better domestic policy–limits on budget deficits and money growth.  If forced to choose, I would choose limits on deficits.
Notice, please, that Germany chugs along year after year without world currency stability.And Japan has for decades gone its own way, remaining stable while growing very slowly.
On 3/15/2014 9:30 AM, Robert Pringle wrote:
Glad we agree on need for international stability. I feel it is a prior condition of domestic stability in any country. Interestingly, Paul Volcker and Jacques de Larosiere understand this – in the past two weeks both of them have endorsed the thesis of my book in public. Yet few economists do.
I would say Germany and Japan have been among the chief victims of the international monetary anti-system having been repeatedly destabilised by huge swings in exchange rates, political pressure from a profligate US, and inability to impose discipline on deficit countries, leading to accumulation of depreciating dollars.

On 15 Mar 2014, at 16:24, Allan  Meltzer wrote:
You know that I favor an international agreement.  But no agreement can work without fiscal restrictions.  That should be obvious from the ECB, where the countries had an international agreement that failed to enforce fiscal discipline on the participants.  Unlike the gold standard, the ECB treaty did not permit suspension in a crisis.  It may survive, but it has not worked satisfactorily.  The only major question now is how much additional Germany will agree to pay in order to make the system survive.
A common currency works in the US because we have fiscal transfers.  The gold standard worked for a long time because it permitted suspension during troubled times.
No international agreement on currencies can work satisfactorily if there is not a PRIOR fiscal agreement.

On 15 March 2014 at 1:07 PM, Robert Pringle wrote:
Yes, fiscal rules plus – I would add – a credible no  bail-out rule. My argument is that fiscal rules may be easier to impose and adhere to if part of an international agreement to preserve free trade and free capital flows and capture the gains from globalisation. Fixed exchange rates can be again part of the mechanism to enforce fiscal discipline. It is hopeless to try to “coordinate” national policies ex post – there has to be something in place that governments know they will have to defend/stick to ex ante. Countries lack the political capacity/incentive to observe fiscal discipline on their own. We have discussed this before.
Further, the US would get a good deal if it negotiated a deal now. If it waits 20 years, it will be (I expect) in a weaker position. 
On EMU, remember the poor experience many had with floating – there was a strong desire for more stability.
 On 15 Mar 2014, at 19:14, Allan Meltzer wrote:
We agree on many things.  Recall that I have had a proposal for increased exchange rate stability since the mid 1980s.  It depends on markets to enforce the agreement, as the gold standard did.
 The big change from the gold standard, as Bretton Woods demonstrated, is that voters have learned that monetary authorities can increase employment.  I see much evidence that most publics will trade off exchange rate stability for more employment, even if the latter proves to be only temporary.   That is the hard fact that you or I or any proposal has to overcome. In your words “governments lack the capacity.”  I say the voters want governments to put “full employment” ahead of any other objective.   Alas, that remains true even when governments do a poor job of providing full employment.
 My proposal would be voluntary for each government.  The markets could punish them by devaluing if the government expands too much to maintain the exchange rate.  Do you think  governments would choose to restore the exchange rate?  Or do you agree with me that they would welcome devaluation as a way of increasing employment?
 Your proposal ignores the public’s demand for more jobs.  That’s why Bretton Woods failed.  That’s why the ECB failed.  People can see that Sweden, Britain and others outside the fixed exchange rate system can do better at increasing employment than those in France, Italy, et al. inside the system.
 I, too, would like greater international stability.  But I can see that central banks seem determined to respond to very short period data,  Any program emphasizing stability requires them to act according to medium- or long-term objectives.  They are unwilling to do that.  They may assert their independence, but an independent central bank does not finance a large part of the government deficit.
 Everyone who knows anything about data knows that the monthly unemployment rate is a noisy number subject to very large revisions.  Yet, the Federal Reserve responds to it almost slavishly.   Are they stupid?  Or politically driven?
 Should we have this discussion in public?
 The debate continues in Part II….