EDITOR NOTE: We’ve written a lot about inflation, not only the way in which it will sink your purchasing power but how it will also boost gold and silver prices far beyond the levels we’re seeing today. Yes, that will eventually happen, but it’s not the immediate problem. And in that, one of the biggest harbingers of inflationary doom, Jim Rickards, is in agreement with the Fed: we’re facing deflationary conditions. The key to understanding deflation is the concept of money velocity. Heard of it? It’s how your dollar circulates across the economy, changing hands to buy goods. No velocity means no economy. And that’s what we’re seeing now. Rickards goes even further, arguing that the economy may fall into another Great Depression as a result of this lack in velocity. Ironically, to restart the economy, a much higher level of inflation becomes a necessary evil--exactly what the Fed is trying to do now. However, its negative effects may be with us for years. And during this period from deflation to potential depression to high inflation, not every asset will be a loser.
Five time. best-selling financial author James Rickards contends all this money printing to retard the effects of CV19 is not going to produce inflation—just the opposite.
Rickards explains, “Let’s say I go out to dinner and I tip the waitress. The waitress takes a taxi home, and she tips the taxi driver. The taxi driver takes the tip money and puts gas in his car. In that example, my $1 tip had a velocity of three: the waitress tip, the taxi tip and the gasoline. So, my $1 produces a velocity of three. My $1 produces $3 of goods and services. That’s velocity, but what if I stay home, don’t go out and don’t spend any money? In that case, my money has a velocity of zero. $7 trillion times zero is zero. If you don’t have velocity, you don’t have an economy. The $7 trillion is the base money supply, and that could be $8 trillion or $9 trillion . . . and that by itself does not produce inflation. What you need is turnover, and we are not getting that.”
Rickards says, “Initially, the problem right now is deflation and not inflation, but deflation. There is too much debt. Growth is too slow, and the psychology is wrong because people are saving and not spending.”
Rickards new book titled “The New Great Depression” is predicting rough times for the U.S. economy, but not every asset will be a loser. Rickards says, “In August of 2020, gold hit a new all-time high. Silver is not at an all-time high, but it has performed very well. Actually, if you break down asset classes with silver, gold, stocks, bonds, oil, etc., the number one performing asset class was silver, and the number two was gold. Silver was up about 47%, and gold was up about 25% give or take. Gold and silver outperformed stocks and all of the other asset classes, but they are going to go a lot higher and they have to. . . . Gold is going to $15,000 per ounce, and by the way, that is my forecast. . . . Silver will be three figures ($100 or more per ounce.) Deflation is a bigger problem than inflation, and everybody hates inflation, but you need inflation . . . . What you have to do is inflate the debt away. The debt is $22 trillion . . . we will devalue the dollar by 50%, and that is what you have to do.”
Rickards says this will be a process that will take almost two decades, and the U.S. will need 4% inflation to do it. This is why Rickards thinks gold and silver will go much higher in the coming years. Rickards also says the central banks are net buyers of gold and will continue to be. He says everybody should have gold and silver in their portfolios and points out he does not sell any precious metals. Rickards also gives advice on surviving “The New Great Depression” in his latest book.
Join Greg Hunter of USAWatchdog.com as he goes One-on-One with five time, best-selling author James Rickards.
After the Interview:
Rickards thinks if Biden does make it into the White House, his policies will make it much harder for the U.S. to recover than if Trump wins another term. Rickards says, “Biden Administration policies will impose major headwinds on an economy that is already struggling.”
Originally posted on USA Watchdog