This is an excerpt from a presentation by Jim Rickards recorded at a Sovereign Man seminar in Chile.
What will the monetary system look like once a collapse occurs, which Rickards expects in the coming 3 to 5 year time frame. In his view, which he describes in great detail in his book “Currency Wars”, there are four possibilities:
- multiple reserve currencies
- special drawing rights (SDR’s)
A world of multiple reserve currencies (the combined solution): a lot of people think it is possible, but Rickards thinks this is completely unstable. It won’t end the currency wars, it will exacerbate it. Instead of one central bank behaving badly you have five, six or seven.
The SDR solution: this is a complicated topic though I will make it really simple. The Fed has a printing press; they can print dollars. The ECB has a printing press; they can print euros. The IMF has a printing press; they can print SDR’s. The Fed will be out of bullets, but the IMF will not be; you will see the world flooded with SDR’s.
The gold standard: what kind of hard prices for gold could you get? I am using global monetary aggregates (US, ECB and China), global M2 with 100% backing. You get $44,000 an ounce. I am not predicting $44,000 an ounce. I do not think you need to use M2 and I do not think you need 100% backing. But even M1 at 40% backing is $7,000 an ounce. It is not a headline number. It is based on math.