Saturday, July 25, 2020

Jim Rickards -- "The US Dollar Has Already Collapsed"

With all the monetary stimulus now in play, debates are breaking out everywhere as to what this will mean for the future of the US dollar versus other currencies and gold. In this recent discussion on Incrementum on these issues, Jim  Rickards says the US dollar has already collapsed. He adds that the US is currently in a depression and not a recession. So this discussion may be of interest to readers here. Below is an excerpt related to Jim's comment on the dollar. I added the underlines for emphasis.


Jesse Felder:   "At some point almost anything could look better than dollars."

Jim Rickards:     "I'll give you an answer, Jesse, and this will actually prove your point. The inflation is already here and the dollar has already collapsed, but no one knows where to look. And you look at gold; you have to stop thinking about gold as a commodity, and start thinking of it as a form of money. The cross-exchange rate between dollar and gold – the dollar has already collapsed and the inflation is already here. But it's in gold, and gold is the best and longest-horizon leading indicator of just about everything. 

People say that the stock markets look forward and discount to the present value - that's fundamental analysis. I get it, but stock markets usually get it wrong. If you get the forecasts wrong, you're going to get discounting wrong. The stock market did not see the 2008 crash; did not see the 2020 crash; they're not going to see the next crash. They try - I give them credit - they try, but they do a really, really lousy job. But the one cross rate that does a really good job - in fact it looks so far ahead that people don't even pay attention to what it's saying - is gold. So, your inflation and your collapse have already happened, but they've happened in the gold space - that's your metric."

Jesse Felder: "I agree with all of that; I think the only thing that I disagree with is that I don't think the Fed can monetize the debt indefinitely, or infinitely, without it affecting the currency."

Jim Rickards: "I agree with infinitely, but it could be a long time between here and there."

Click here for a visual chart of the dollar index vs. gold since 2001


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