Jim Rickards: Most Likely Outcome Is Still A Monetary Collapse

In his latest interview Jim Rickards gives an update on his economic and monetary outlook and compares it with his view two years ago when he was writing his book. In particular, he talks about the scenario that is unfolding currently: a monetary collapse.

In general he recognizes that we are going through a major transition which started in 2007. We are on our way to a new economic and monetary situation. Major transitions are characterized by unstability, or a bubbly environment. That will continue till one of the following scenarios becomes reality:

  1. Chaos, or monetary collapse.
  2. A basket of currencies acting as a world reserve currency.
  3. SDR (special drawing rights) issued by the IMF.
  4. A form of a gold standard.

Mr. Rickards still expects a collapse of the dollar as the most likely outcome. That has not changed since he has written his book.

Long term outlook – Monetary collapse

Mr. Rickards sees that we are heading towards the first of the four scenarios. Although he does not pretend to know the future (which nobody does evidently) he comes to his conclusion by analyzing the evolution. Up until now, based on the decisions and behaviour of policy makers, he believes there is enough evidence to believe that all signs point to a monetary collapse.

Just to clarify things, he adds, “there is nobody who really wants a collapse. The reason why it could happen has more to do with a basket of factors, including [but not limited to] the inherent instability of the monetary system, the inability of policy makers to correctly analyze the situation, wishful thinking, denial, delay, bad monetary science, wrong assessment of risk, etc.”

Is it too late to change direction and avoid a collapse? Mr. Rickards believes it is not; we can still avoid it. The key point, however, is that policy makers are not showing signs of understanding the seriousness of the situation and their policy outcomes. They neither show signs of reversing course and solving the underlying structural issues. Going forward, those are the most important signs to force a reversal of the path we are on.

Mr. Rickards adds to it that chaos is not the end of the analysis. In other words, suppose the world will face a collapse it will undoubtedly result in rather draconian executive orders.  We might end up in a form of a gold standard based on a gold backed SDR. A gold standard or an SDR standard are the two most likely outcomes of a collapse; a combination of both is also a realistic possibility.

Gold – Short term outlook

The long term outlook for gold remains positive. Shorter term, however, increased volatility is likely. Both higher and lower prices are in the cards. It  all depends on policy makers, in particular the US Fed. Between August and September there are two FOMC meetings with a press conference: September and December. Suppose the Fed would “taper” their bond purchases they will not announce it in December because it will be right before the new Chairman will take over. September is the most likely month to announce it.

So the September FOMC meeting will be an important one. Basically there are two possible outcomes. Tightening monetary policy is the first one. Doing so in a weak economy will have deflationary consequences. It will lead to higher interest rates and lower precious metals prices. Accommodative monetary policy, by contrast, would be bullish for gold and will lead to higher prices going to the end of the year.

Listen to the interview.


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  • John_Steinsvold

    An Alternative to Capitalism (since we cannot legislate morality)

    Several decades ago, Margaret Thatcher claimed: “There is no alternative”. She was referring to capitalism. Today, this negative attitude still persists.

    I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to my essay titled: “Home of the Brave?” which was published by the Athenaeum Library of Philosophy:

    http://evans-experientialism.freewebspace.com/steinsvold.htm

    John Steinsvold

    “Insanity is doing the same thing over and over and expecting a different result.”
    ~ Albert Einstein

  • Bruce Stegiel

    From where I sit high in the bleechers I tend to think a basket o’ currencies is most likely outcome. Alongside this basket though, I do also see some unhappy moves by national states creating regional blocs-like the EU or NAU. Alternatively, it may be that the Anglo-Saxon domination of Phynance is coming to an ugly end. Further, I really doubt that the American people have a say in any of this activity.

  • boatman10

    the alternative to capitalism IS what we currently have in America, and the rest of the soon-to-be-reset west+japan.
    the end of fractional reserve banking, fiat money and more realistic lifestyle expectations are the changes needed….and they will be arrived at thru a whole lotta pain.
    but thats the way we humans work.

  • John_Steinsvold

    Perhaps for the first time in history, we, as a
    nation and as a people, have the ability to conduct our internal economic
    affairs without the need to use money. We have the necessary democratic
    government, we have the abundant resources, we have the educational facilities
    and also the technical knowledge to do so. In light of what is happening in our
    economy today, should we not, at least, explore this possibility?