Ray Dalio on Monetary History and Where We Are Now

Recently we featured an article by hedge fund manager Ray Dalio that took a deep dive into how the purchasing power of fiat currencies compares over time versus goods and services, stocks, debt, and gold. I got quite a bit of positive feedback that his information was helpful. This article by Ray Dalio was the most recent article in a series that takes an even deeper dive into history and looks at the rise and fall of nations, monetary systems and currencies. It also talks in depth about how history tends to move in both short term and long term cycles. 

Ray Dalio says he feels we are near the end of a long term debt cycle and also possibly the monetary system we have known for most our lives. Since that is exactly what we watch for here on this blog, below I have linked to the entire series of three articles with an excerpt from each article to provide a feel for the issues discussed. I will add this post to our market place of ideas for monetary system reform. While Mr. Dalio does not offer a specific proposal for reform or for a new monetary system, he does discuss many of the factors that historically have led to this kind of major change. Given his career and resume, I felt his articles deserve to be added to the marketplace so that readers can easily find them there if desired in the future. Any underlines below I added for emphasis.

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The Changing World Order - Chapter 1 - The Big Picture in a Tiny Nutshell

Where We Are Now

"As previously explained, the last major period of destroying and restructuring happened in 1930-45, which led to the new period of building and the new world order that began in 1945 with the creation a new global monetary system (built in 1944 in Bretton Woods, New Hampshire)and a new American-dominated system of world governance (located the United Nations in New York and the World Bank and the International Monetary Fund in Washington, DC).  The new American world order was the natural consequence of the US being the richest country (it then had 80% of the world’s gold stock and gold was then money), the dominant economic power (it then accounted for about half of world production), and the strongest military power (it then had a monopoly on nuclear weapons and the strongest conventional forces).


It is now 75 years later, and we are classically near the end of a long-term debt cycle when there are large debts and classic monetary policies don’t work well for the world’s reserve currency central banks.  This is happening as we are simultaneously in a deep economic and debt contraction that is producing income and balance sheet holes for people, companies, nonprofit organizations, and governments, while politically fragmented central governments are trying to fill in these holes by giving out a lot of money that they are borrowing.  Central banks are helping them do that by monetizing government debt.  All this is happening at the same time that there are big wealth and values gaps and there is a rising world power that is competing with the leading world power in trade, technology development, capital markets, and geopolitics.  And on top of all this, we have a pandemic to contend with.


At the same time, we have great human capital and thinking technologies that can help us see how to best deal with these challenges and do the inevitable restructurings well.  If we can all deal with each other well, we will  . . . ."

Please click here to read the full article

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The Changing World Order - Chapter 2 - Money, Credit, Debt, and Economic Activity

"Because what most people and their countries want the most is wealth and power, and because money and credit are the biggest single influence on how wealth and power rise and decline, if you don’t understand how money and credit work, you can’t understand the biggest driver of politics within and between countries so you can’t understand how the world order works.  And if you don’t understand how the world order works, you can’t understand what’s coming at you. 

For example, if you don’t understand how the Roaring ’20s led to a debt bubble and a big wealth gap, and how the bursting of that debt bubble led to the 1930-33 depression, and how the depression and wealth gap led to conflicts over wealth all around the world, you can’t understand the forces that led to Franklin D. Roosevelt being elected president. You also wouldn’t understand why, soon after his inauguration in 1933, he announced a new plan in which the central government and the Federal Reserve would together provide a lot of money and credit, a change that was similar to things happening in other countries at the same time and similar to what is happening now.  Without understanding money and credit, you wouldn’t understand why these things changed the world order nor would you understand what happened next (i.e., the war, how it was won and lost, and why the new world order was created as it was in 1945), and you won’t be able to understand what is happening now or imagine the future.  However, by seeing many of these cases and understanding the mechanics behind them, you will be able to better understand what is happening now and what is likely to happen in the future."

Please click here to read the full article

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Finally, here is the link to our previous article featuring his article comparing the purchasing power of fiat currencies versus debt, stocks, goods and services, and gold over time.

Ray Dalio Authors Article on Gold and Currencies

"As previously explained, there is a real economy and there is a financial economy, which are intertwined but different.  The real economy and the financial economy each has its own supply and demand dynamics.  In this section we will focus more on the supply and demand dynamics of the financial economy to explore what determines the value of money."

Printing and Devaluing Money is the Easiest Way out of a Debt Crisis

"While people tend to think that a currency is pretty much a permanent thing and believe that "cash" is the safe asset to hold, that's not true because all currencies devalue or die and when they do cash and bonds (which are promises to receive currency) are devalued or wiped out. That is because printing a lot of currency and devaluing debt is the most expedient way of reducing or wiping out debt burdens."

. . . . 

"Since 2000, we have seen a more gradual and orderly loss of total return in currencies when measured in gold, consistent with the broad fall in real rates across countries during those decades."

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My added comments: The only comment I can add here is that Ray Dalio in these articles talks about many issues that we have covered here on this blog for years and also emphasizes that understanding these issues is very important for each of us. This is also what we have said here for many years.

Added note: Ray Dalio has followed up the three articles linked above with another one that talks about The Big Cycles Over the Last 500 Years that you can find here. He also added this new article on his thoughts about the most recent turmoil in the US.

Is This It - Part II?

Not long ago we ran a post asking if we might be seeing the start of events big enough to impact the stability of our present system and then lead to major systemic changes. Now we can say that the events taking place are most certainly significant enough to have the potential to shake the stability of our present system. 

You don't need me to inform you of that since it is now on mainstream media every day now. Below I will attempt to offer some observations as to how to try and deal with what are now clearly historic events. I will again use a Q&A format.

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Q: Is this a legitimate non man made crisis or is it something that has been engineered to shake the foundations of our present system and lead us into major changes over the coming months?

A: This is a question I am getting and seeing discussed a lot now of course. I wish I could provide a highly credible and informed answer. I have gotten some input from a variety of experts and also read a variety of viewpoints everywhere I can in order to try and assess this. The honest answer for now is I just do not know if this is an engineered event or simply an act of nature that no one could see coming. Some believe this is exactly what is being presented to the public, a non man made legitimate public health crisis that requires all the drastic measures being taken to combat the disease. Others are skeptical. 

Most everyone accepts that the virus is real, is very contagious, and poses a severe health threat to the segments of the population most vulnerable due to weaker immune systems. The skepticism tends to surround whether this virus was a natural event or something man made to produce the global reaction we are seeing right now and to get the public into a mind set for accepting "a new normal" and major changes from the world we have known. There are a variety of culprits pointed to by those who are skeptical, but I prefer not to delve into that since I have no credible evidence to support any particular entity as being behind this as an engineered event. I do keep an open mind and will simply monitor how all this unfolds and what the end results are. I think that will provide a better guide as to how and why all this has emerged literally out of nowhere in just a few months time.

Q: What valid observations can we make about the public reaction to all this so far? 

A: I think the following bullet point observations are valid in regards to public reaction to his situation thus far.

- there is a very clear "fear" reaction going on with people who were living normal lives just a few days ago now terrified as to what their future may be - both from a health standpoint and from a personal financial standpoint.

- the elevation of this crisis to "war time status" as many leaders are now calling it is impacting the public such that people who would have challenged the government restricting their freedom of movement, freedom of assembly, etc. are now quietly accepting such restrictions with no signs of significant protest. This may be just  a sense of people wanting to do their share to pitch in and try to help contain the virus. But an interesting question is how long will this public reaction last if this situation drags on for months? Only time will answer that for us.

-suddenly almost no one cares how much it costs to try and combat this problem. People who would normally be upset about spending trillions of dollars, expanding government debt, and creating whatever money is needed for monetization are OK with that now. It would be political suicide to vote any other way in the current environment.

- so far the majority of the public reaction has been to promote a rare sense of unity of purpose (at least for this crisis) between groups that have been fighting each other like cats and dogs. Again, it will be interesting to see how long that lasts. For now, most people are accepting that their leaders are working on their behalf to combat the crisis and there is much more bi partisan political atmosphere than we have seen for some time.

- it's been interesting to see what items people are "panic buying" in response to this situation. It's not surprising to see things like milk, eggs, canned goods, paper products, and deep cleaning products disappear. What has surprised me a bit is how things like batteries and drinking water quickly disappeared and how fresh meats and produce have been relatively available. Nothing about this situation in our area has suggested that our utilities (water, electricity, etc) will be impacted and yet people bought lots of items that you would buy if you thought those things were going to be impacted. I am not sure what that suggests, but perhaps that deep down people are not confident this will be over quickly or that the damage to the system will be confined just to their health or short term financial problems. Maybe it's just wanting to err on the side of caution.

Q: A year from now, will our system and the world be changed in a major way?

A: This is a key question for sure. It's still too early to say from my point of view. The political leaders in the US are saying to expect this to last anywhere from a few more weeks to a few more months. They are saying that once the crisis is over, things will quickly return to "normal". I would assume normal means that long term we have not seen major changes to either our system or our way of life. 

But only time will truly answer this question. Leaders have to say that and would be viewed as creating panic in the public if they don't say that. In 3-4 months, we will probably have a better idea how to answer this question. By then, either things will be returning back to "normal" or it will be obvious the financial system is failing or will likely fail soon. The only advice we can offer here is what we have said here for years now. Try to stay informed, try to find credible information, and try to have a backup plan in mind in case the system fails. It may be that obtaining credible information is the most important thing you can do. It's certainly our most important objective here.

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Added note: If we come across credible information we feel may be helpful on either the healthcare front or the economic front, we will share it here. We will tend to be very slow to post anything here, especially on the healthcare front, unless we feel the information source is highly credible and we can verify the information presented to us. 

There is an enormous amount of misinformation and disinformation out there and we have no desire to contribute to that here. Obviously, political operatives on both sides will be trying to use this situation to gain political advantage so we have that to try and sort through as well. But I think that kind of behavior is actually pretty transparent and easy for most people to see through.

Is There a Project underway to Develop an "e-SDR"? - Followup Article

In a previous article, we examined a report issued in the fall of 2018 by the OMFIF and IBM. That report summarized where things stood at that time in regards to the potential for central banks to adopt either Central Bank Digital Currencies (CBDC's) or some form of Distributed Ledger Technology (DLT) or both.

On page 22 of that report we noted an interesting segment that talked about the idea of some day creating a global reserve asset which they called an "e-SDR". Here is wording from page 22 of that report (I added underlines for emphasis below):

"Digital tokens as reserves The impact on monetary policy would further depend on whether the digital tokens in question have the status of reserves. As one respondent put it, "If these tokens are considered as reserves, and the blockchain system is a new medium for recording transactions, then there should be no impact on monetary policy, and the existing tools may continue to be used.’ Around 80% of survey respondents shared this opinion. In today’s system, the International Monetary Fund’s aspiration for its special drawing right to become a global reserve currency has been held back by conflicting geopolitical interests and priorities of the reserve-issuing central banks of the US, euro area, China, Japan and UK. 

CBDCs can circumvent such hurdles by enabling the private sector to work directly with the central banks to create a digital SDR to use as a unit of account and store of value. Such an e-SDR would be the quintessential reserve asset, because it would be fully backed by the reserve currencies in the IMF- determined ratio. The supply of e-SDRs would in turn be dependent on market demand. This would require the creation of a sufficiently large e-SDR-denominated money market."

Because there is much world wide interest in the idea of the potential for the SDR to become either a competing global reserve asset or even replace the US dollar as the primary global reserve currency, this article will attempt to take a little deeper dive into this idea and some related questions that arise. The goal is to understand as best we can what is actually being talked about here and whether or not the IMF would be involved in this or not. Below we will examine it.

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The first interesting thing to note about the segment quoted above in the OMFIF/IBM report is that it appears to be very similar language to what is used in this article on the World Economic Forum web site which first appeared on Project Syndicate ("From Dollar to e-SDR"). Here is a quote from the relevant part of this article:


"A key hurdle for the SDR has always been the geopolitical interests and priorities of the reserve-issuing central banks (not just the US, but also the eurozone, China, Japan, and the United Kingdom). But the advent of cryptocurrencies may offer another way: the private sector can work directly with central banks to create a digital SDR to use as a unit of account and store of value.

Such an “e-SDR” would, in a sense, be the quintessential reserve asset, because it would be fully backed by reserve currencies, in the IMF-determined ratio. The supply of e-SDRs would be completely dependent on market demand.

Of course, to enable a gradual shift from the US dollar to an e-SDR as the dominant international reserve currency, a sufficiently large e-SDR-denominated money market would need to be created. To that end, a politically neutral body, owned by the private sector or central banks, should be established to issue the asset. Participating central banks and asset managers would then have to swap their reserve-currency holdings for e-SDRs."

The article quoted above is co-authored by Andrew Sheng and Xiao Geng. Clearly, not only we do see similar language to the OMFIF/IBM report, we see some parts that are almost identical word for word as underlined above. 

What does all this mean? Let's use a Q&A type of format to ask and attempt to answer some questions that might arise from what we see above.

Q: Is there a project underway to develop an "e-SDR" along the lines mentioned in the OMFIF/IBM report?

A: I do not believe this means that there is currently a project underway to create an "e-SDR" currency as talked about in the articles above. I think what we see is that this concept or potential proposal is discussed and thought about around the world. We have two independent sources talking about it above. The OMFIF/IBM report worked with 21 central banks from around the world. So clearly, this concept is out there as a discussion point and could become an actual proposal or project in the future.

Q: Is the IMF involved in this in any way?

A: I do not have information that would confirm that the IMF is currently pursuing the creation of an "e-SDR" as described above or even that the IMF is attempting to promote the use of so called "private SDR's" in any significant way at this time. This topic can quickly get confusing. Please note that we already have the official SDR (O-SDR) currently used by IMF members that is issued by the IMF. I do not believe that either of the articles quoted above are talking about that version of the SDR. We can infer this because both articles say:

"the private sector can work directly with central banks to create a digital SDR to use as a unit of account and store of value."

The private sector would not be working with central banks to "create a digital SDR" that is the official SDR used at the IMF. Only the IMF can issue those and under certain rules. To change those rules requires a vote of IMF members. The US also has veto power over any such votes taken at the IMF. I believe a new major crisis would have to unfold for the IMF members to push for an emergency increase in the SDR allocation as the political will to do this does not exist at this time.


Also, the existing official SDR (O-SDR) is already digital. 

So what kind of "e-SDR" are they talking about here? That is not clearly explained. We do know that there are privately issued SDR's (called M-SDR's by the IMF in this note which explains O-SDR's and M-SDR's). I am not sure if the "e-SDR's" talked about above are intended to be "M-SDR's" or some kind of new cryptocurrency token based on the currency basket makeup of the actual official SDR and are just called an "e-SDR" to help the private sector markets get used to the concept of the SDR as a currency unit.

However, I will again infer that this is a hypothetical concept to propose some kind of currency asset that would be based on the currency basket makeup of the official SDR regardless of whether they are called "M-SDR's" or not. The way it is worded above, it sounds like private banks might work with central banks (note that it does not say work with the IMF) to create an "e-SDR" token that central banks could classify as reserves on their balance sheet. The mention of using blockchain technology along with this "e-SDR" also suggests they are talking about a new version of an SDR that is different from anything that exists currently.

It's confusing because we have O-SDR's (not what these articles are talking about), M-SDR's (maybe what these articles are talking about) and a now new term "e-SDR's" used in the articles quoted above (appears to be a token using blockchain which may or may not be a type of M-SDR in the eyes of the IMF). 

Regardless of whether my guess is correct and regardless of what you call these, it appears to me that the IMF would not be involved in this process based on anything quoted above. In addition to that, I have gotten input from more than one high credibility source that the IMF is not currently involved in a project like this with the SDR or with privately issued SDR's.


Q: Why would anyone propose the creation of new SDR's that does not involve the IMF?

A: I think the article by Andrew Sheng and Xiao Geng linked above from WEF web site provides us the answer to this question. I will just quote it below with my added underline for emphasis:

"Of course, to enable a gradual shift from the US dollar to an e-SDR as the dominant international reserve currency, a sufficiently large e-SDR-denominated money market would need to be created. To that end, a politically neutral body, owned by the private sector or central banks, should be established to issue the asset. Participating central banks and asset managers would then have to swap their reserve-currency holdings for e-SDRs.

Once the private sector comes to view the e-SDR as a less volatile unit of account than individual component currencies, asset managers, traders, and investors could begin to price their goods and services, and value their assets and liabilities, accordingly. For example, the Chinese government’s massive Belt and Road Initiative could be conducted in e-SDRs. In the longer term, an international financial center, such as London or Hong Kong, could spearhead experimentation with e-SDRs using blockchain technology, with special swap facilities being created to make the asset more liquid."

I believe that this probably means that the IMF is not currently interested in a project like this for themselves, but would probably be fine with outside entities pursuing it as described just above. Again, keep in mind that the IMF requires member approval to change its rules for the official SDR. This approach allows a project like this to be real world tested without needing that kind of IMF membership approval. But it would still require the approval of any central bank involved and perhaps even some governmental regulatory approval in the various national jurisdictions. 

Q: Do you think private sector entities and central banks are pursuing the creation of private "e-SDR's" if the IMF is not directly involved?

A: I would not have any way to know that for sure. Input I get from some experts suggests to me that this is not a project currently in progress and still just a concept for discussion. Any effort along these lines is going to attract a lot of public attention. Anything that is perceived to be a threat to the status of the US dollar as global reserve currency will get noticed for sure by US authorities. Whether this would get to that point is beyond my ability to predict at this time. The report referenced in the 2nd article linked above (see the Palais-Royal Initiative on pages 13-14) illustrates that the idea for promotion of private sector use of a version of the SDR has been around a long time. It is dated 2-8-2011. As best I can tell, any projects underway at central banks related to this are still very early stage with lots of unanswered questions still being studied. 

Recently, I discussed this article mentioned above with a friend I view as an expert on these issues who was in town in my part of the world for a monetary policy discussion conference. He mentioned that I should emphasize this statement found in the article:

"Of course, to enable a gradual shift from the US dollar to an e-SDR as the dominant international reserve currency, a sufficiently large e-SDR-denominated money market would need to be created. To that end, a politically neutral body, owned by the private sector or central banks, should be established to issue the asset. Participating central banks and asset managers would then have to swap their reserve-currency holdings for e-SDRs."

My friend asked me if I thought the part underlined above was feasible given the current political environment we see today. My reply was that it does not seem likely in the current environment, but in some kind of new major crisis like Jim Rickards predicts, perhaps the door might open to explore things like this. Readers can research this and form their own conclusions. But we did agree this is an important issue for people to learn about in case some kind of change like this does emerge in the future. 

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Summary: This blog article attempts to help clarify a topic that can be confusing and also potentially controversial politically. Both articles cited above say "a key hurdle for the SDR has always been the geopolitical interests and priorities of the reserve issuing central banks" (not just the US, but also the EU, Japan, etc). 

This is why I believe it is important to make the effort to understand this topic properly. There are many articles and predictions that talk about the SDR eventually replacing the US dollar as the global reserve currency. But most do not attempt to dig into what all these terms being used actually mean and what is actually being talked about in the various proposals. 

For example, what version of the SDR is being talked about when any such proposals are made? Official SDR's (O-SDR's), private SDR's (M-SDR's), or some new version of an SDR token based on cryptocurrency and/or blockchain technology (e-SDR's)? And are the latter issued by the IMF or by the private sector working with national central banks?

So, we try to do that here in regards to potential proposals related to the SDR with the help of some excellent input from a variety of highly credible experts. To properly assess a proposal, it's critical to correctly understand exactly what is being proposed and the basic terms being used in the proposal.

Added note: Here is an article in Reuters dated in 2015 that contains the following quote related to the term "e-SDR":

"Yao Yudong, head of the People Bank of China’s Research Institute of Finance and Banking, said in a column in the state-backed Shanghai Securities News that the eSDR - the electronic version of the IMF’s Special Drawing Rights (SDR) - would help address flaws in the current global monetary system."

In the context of this statement, it seems as though Yao Yudong was talking about the official SDR (O-SDR), but it's always hard to be sure. As many experts have told me, the existing official SDR is already "digital" so I think it adds confusion when anyone talks about an "e-SDR" or "digital version of the SDR" that sounds as if it is something new. Unless they are actually talking about something new. If so, they should explain how it differs from what exists now.

Again, it is very important that people define what they mean when using these terms in our view here.

Jim Rickards Discusses His New Book - "Aftermath"

Readers here know that I have followed Jim Rickards for many years because of his extensive understanding of the issues we cover here and because he has talked about the potential for major monetary system change. That is what this blog was created to watch for.

Jim has written a series of best selling books on these issues and in July 2019 will be releasing the latest one titled "Aftermath".  Jim kindly agreed to do a brief Q&A on the upcoming book which is just below. After that a brief summary will follow.

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Q: Should readers read your earlier books (Currency Wars, Death of Money, The New Case for Gold, and The Road to Ruin) before they read the new book "Aftermath"?

A: I'm grateful to all of the readers of my books, but there's no need to read them in any particular order. The books are a chronicle of the post-2009 period. There's a lot of economic and monetary history, but they track developments through Bernanke, Yellen and now Jay Powell. There's a cumulative element so reading Aftermath will incorporate many of the points touched upon in the earlier volumes, albeit in shorter form. Hopefully, someone reading Aftermath first will be encouraged to read the earlier books and complete the entire quartet.

Q: What were some main themes you wanted to cover in "Aftermath"?

A: Many of the trends identified in my earlier books have moved much closer to a critical threshold (point of collapse) and so deserved deeper analysis. These include passive investing, robo-investing, Chinese debt, gold accumulation by Russia and China and the role of crypto-currencies in a global monetary reset. Other new themes are the rise of Trump (not covered in the earlier books) and the exact dimensions of life in the aftermath of a new crisis. Currency Wars and The Death of Money warned that a crisis was coming. The Road to Ruin put you in the middle of a crisis and showed the official response function, (which I called "Ice Nine"). Aftermath takes you to the post-crisis environment as a way to show you what you can do now to survive it.

Q: For many years you have consistently forecast that we will some day another major crisis worse than the 2008-2009 crisis and that this could lead to major changes in the global monetary system. While working on "Aftermath", have you seen anything that would cause you to change that forecast?

A: No. All of the trends not only confirm a coming crisis, but suggest it may be worse than I expected. Reaction functions not only include closed banks and exchanges and frozen accounts, but also social unrest possibly requiring martial law. There are also serious infrastructure threats that could involve a collapsed power grid or internet. On top of that, cyber threats are real and cyber wars have already begun. We cover all of these developments in Aftermath.

Q: Do you plan any more books to follow "Aftermath" or will this one complete the series?

A: I expect to write more books, but there's nothing underway right now. After writing five books in eight years, I may just step back and develop new themes or topics. The international monetary quartet (Currency Wars, The Death of Money, The Road to Ruin and Aftermath) is done and stands on its own. I'm not sure how much more there is to say on the topic. It's all there in the books.


Q: Modern Monetary Theory is something new that has gotten a lot of attention lately. Do you discuss that theory in this new book? Do you think MMT will have a significant impact on our monetary future?

A: I have a full chapter on Modern Monetary Theory in Aftermath. It's called Free Money (Chapter 5). The best way to understand Modern Monetary Theory is to quote Gertrude Stein: "There's no there there."

Q: Is there anything else you would like readers to know about "Aftermath" or any other topic we discuss here from time to time?

A: Aftermath took longer to write than I expected when I started. That was partly due to other obligations and partly due to an injury I suffered in the summer of 2018 that required some time off for recovery. That said, I'm actually pleased with the publication date, July 23, 2019. That happens to be the exact 75th anniversary of Bretton Woods (July 23, 1944), which is appropriate because the book discusses the need for a new Bretton Woods. Also, it will come out in the middle of the 2020 election season. The book is not overtly political but it does discuss many subjects that will be a big part of the election debate including Modern Monetary Theory, debt and deficits, economic growth and the role of the Fed. Anyone interested in the presidential election cycle will be better informed if they read Aftermath.

Thank you for taking time from a busy schedule to offer these comments as we await the launch of "Aftermath" this coming July. It follows a line of best sellers and I have no doubt that will continue with "Aftermath".

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Summary: Jim Rickards has the ability to delve into complex topics in a way that most of us without an academic background in macro economics can easily understand. In the interview above Jim provides us with some interesting tidbits. His new book will include a full chapter on Modern Monetary Theory which is timely since that will surely be debated in the upcoming election cycle. Also, Jim just provided us with an update to his long standing forecast that changes that will impact our present monetary system are coming. Jim often says that forecasts can change over time as new data is received. In this case, he not only says his forecast for a new crisis leading to major change is still in play, he adds that the latest trends suggest to him that the crisis he predicts may be worse than he expected.

Anyone who has read any of Jim's books I think would confirm that they cover a lot ground and that you will learn some fascinating history. I have no doubt that the same will be true for "Aftermath". Readers can find "Aftermath" here.


Added note 5-13-19: With the US-China trade dispute flaring back up, readers may find this recent article by Jim of interest. --  "The Trade War is Back"

Two Interesting Interviews Coming Up in May on the Blog

I am pleased to announce that in May we will have two brief but excellent interviews coming up on the blog. In early May, Dr. Warren Coats (retired from the IMF) provides some insight on his recent proposal regarding some changes he thinks the Federal Reserve should make. If adopted, his proposal would certainly be monetary system change like we watch for here. Dr. Coats also provided some interesting comments on how he views capital gains taxes. This article will introduce readers to what may be a new concept for many (Currency Boards). Dr. Coats has extensive experience with Currency Boards in his years at the IMF working to construct monetary systems.

Later in mid May, I will post a Q&A style interview with Jim Rickards about his new book "Aftermath" which is coming out in July 2019. In this interview Jim provides an overview of what he talks about in the new book. He also updates us on his prediction that we will see a new financial crisis leading to major monetary system change based on the latest trends he sees. Since that is the kind of change we watch for here, this is a welcome and timely update from Jim.

Jim Rickards: War With North Korea is the Likely Scenario

This may be one of the most important articles ever published on this blog. As always, time will tell us the answer. Jim Rickards has now gone on record in a public interview with a forecast suggesting not only that war with North Korea is the most likely scenario ahead of us, but also that this event may well be the "snowflake that triggers the avalanche" Jim has talked about for many years now. 

Jim has been very kind to reply to email questions that I may ask him. In this case, because this prediction (and its possible ramifications) is so serious, I reached out to him for some direct input. Jim has given permission to publish his email comments here. Below I have pasted in our email exchanges over time so you can get a feel of how Jim responds to events and how he will also update and modify his analysis over time as new information becomes available. After that I will add a few comments.
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First email exchange on 8-8-17 on North Korea:

my email on 8-8-17:

1- your best guess at the % chance the US goes to war with N. Korea (up to and including the use of tactical nuclear weapons)

2- your best guess as to the timing if you think the odds are high in regards to question #1 - before year end 2017?

Asking this just for personal info if you have time.

thank you,

Larry

Jim's reply on 8-8-17:

"90% chance of war.

Time frame: November 2017 to February 2018"

James Rickards

Later, Jim did this interview with the Daily Mail while in England and also posted this important note in his Twitter feed stating this was the first time in 10 years that he had put forward an actual event and time frame that may well lead to the major crisis he has been predicting for some time. Jim later posted this on his Twitter feed and then a little later posted this.

Because this analysis and forecast is so sobering, I held off featuring it here until I could reach out to Jim one more time to get his latest take. I did that very recently and, as always, Jim kindly replied and provided his best updated analysis along with permission to publish it here. Here are those email comments:

Jim on 9-20-17:

"My analysis on North Korea hasn't changed since I gave the Daily Mail interview, and Trump's UN speech Tuesday confirms my view."

All the best,

Jim

and later on 9-20-17 he provided this updated analysis when I asked permission to publish his earlier comments made in August posted above:

"The odds apply to the entire time frame, not any particular month.

I'd probably lower the odds to 85% (still high, but off slightly) due to complications arising from South Korea. We need them to help us go to war, but they are more in an appeasement camp right now. That may take time to work out either in the sense of bringing them around or going ahead without them. And I'd move the timeline out one month. November seems early from where we sit."

James Rickards

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My added comments: I struggled internally as to whether to publish this article or not. Obviously, the topic is very serious and will become even more serious if Jim's current analysis does play out like he expects. I have had enough contact with Jim to believe that he as much as anyone hopes this forecast will not pan out and war can be avoided. But I believe he sincerely feels this is the most accurate analysis he can give based on the information available at this time. 

Readers should understand that Jim has a strong track record of accurate predictions on major events. He correctly predicted the Brexit vote, the Trump election result, and also provided me an incredibly accurate forecast on what the US dollar would do this year back in March which I did publish here to put on the record. In addition, Jim has very solid and credible contacts which just add to his ability to forecast these kinds of events. When I added it all up, I felt I must publish this information as a kind of reader alert since the goal of this blog is to watch for events that can lead to major monetary system change. Jim says this could be such an event and I respect his judgement in that regard. 

I feel sure Jim hopes he will miss this one and I certainly do as well. But not to alert readers on something this important when the information is available would be a failure on my part to do what I have told readers here I would do. Namely, to watch for anything that could lead to major changes in the present system that could impact our daily lives. This is clearly such an event. I hope readers will follow the news on this closely and think about what to do if the worst case scenario (a war involving the use of nuclear weapons) did happen to unfold.

Added notes: In this recent interview Jim goes into some more detail on the comments posted above, but does not change his overall analysis. His comments in the interview both confirm the above and provide a bit more detail.

This news breaks tonight  (9-21-17) on North Korea and CNBC runs this on 9-22-17.

9-23-17 - Trump issues direct threat  - war of words continues to escalate

9-25-17 - North Korea says US "declared war" on NK

9-26-17 - Janet Yellen confirms Jims prediction that the Fed was tightening into weakness 

In this recent interview (skip to the 14 minute mark to the start of the interview), Jim covers some interesing history related to the so called petro dollar system that shows the kind of contacts he hasworked with over the years and also near the end talks a bit about why he thinks the US will deal with North Korea in a different way this time.