Jim Rickards was right about many things in his career. Perhaps because he was on the front lines of history for much of that time.
His latest prediction is for a currency reset. No doubt that sounds ominous, odd, or vague to you now. But don’t forget when the name of Rickards’ book Currency Wars suddenly became everyday language. Back when QE was designed to devalue exchange rates.
If you want further proof of Rickards’ forecast credibility, don’t just look at his predictions about the Brexit referendum and Trump’s election. Consider that shortly after Jim’s book about the new gold bull market was launched, his editor here in Australia quit to set up her own newsletter. Which is all about tipping gold stocks…
So, if you really want to make big money from Rickards’ latest forecasts about gold, subscribe to Shae Russell’s newsletter.
According to Rickards, it’s not too late to do so, even though gold stocks have outperformed the S&P 500 by the most on record, in the same quarter that the S&P 500 had its best surge in decades…
But back to Rickards’ latest prediction — a currency reset. It sounded abstract, as did his previous predictions. Until the World Economic Forum — the crew that set up the annual Davos meetings attended by the rich, powerful, and Greta Thunberg — decided to use ‘reset’ in their new summit name.
Now, we’ve covered the topic of currency resets a few times in past Daily Reckonings.
But there was always the problem of assigning a date — what all subscribers want. What time, on what day, will your prediction come true?
Well, you can pencil in January 2021 now. Because the World Economic Forum, which usually just hosts the Davos meeting, has made the big announcement.
They just finished hosting a twin-summit in Geneva. And the name of that summit was, you guessed it, ‘The Great Reset’.
Are you wondering what such a reset is?
Well, historically, currency resets were the moments when the global monetary system changed. Things like the end of the gold standard, changing from fixed to floating exchange rates, the selection of the US dollar as the global reserve currency, and plenty more examples.
These moments are usually forgotten because they establish a new normal, which quickly feels like the normal. And the subtle effects of the new system become so ordinary so quickly that we take them for granted too. And assume it’s how things always were.
But, within the lifetime of some of our readers, money was backed by gold, currency exchange rates were fixed, and the British pound was a major player in international trade. These days the US dollar is so dominant that former EU Commission President Junker explained, ‘European companies buy European planes in dollars instead of euros.’
The thing is, all international currency systems have an inbuilt bias in them. That bias creates trends and those trends eventually max out. At some point, the problem becomes a crisis as the trend reaches absurd levels. Then the currency system is at breaking point.
This could be when countries demand the gold their trading partner’s currencies are supposedly backed by, after sustained trade imbalances. Or fixed exchange rates come under speculative attack because governments and central banks don’t have the resources to maintain them. Or inflation becomes a problem as fiat money is printed out of style. Currency wars are another example of breakdown.
Whatever the reason, at some point, it makes more sense to ‘reset’ the system. And by reset, they don’t mean what you think. They mean reshape and reform. Create something new, with a new framework, and new rules.
Now Jim Rickards thinks we’re near such a point. With COVID tipping things over the edge.
The question for investors is how the new system will look. What shape it’ll take, what bias will be inbuilt, and what trends that bias will create. The trends you could profit from.
Although, having looked over the WEF microsite about The Great Reset, I’m a little more concerned with protecting your wealth than I am about profiting from the new trend. Because the plan isn’t just to reset ‘financial and monetary systems’. They’re going after just about everything. The environment, social relations, healthcare, leisure, technology, and plenty more.
It’s an attempt to design the future entirely.
Now, if you ask me, any time global leaders have tried to impose their visions on people, it hasn’t gone well for anyone concerned. And those who don’t concern themselves get flattened by the grand plans, like a Ukrainian farmer in the 30s.
The idea that everything we interact with has been designed by empowered people at the top is absurd. Or, as FA Hayek explained it:
‘The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account.’
But the powerful people think they know better. They believe everything that exists was created by politicians. And some people agree with that!
At Geneva, such people decided what they’re going to reset. The question now is how. And at Davos, in January next year, that’ll be on the agenda.
My worry is about the crackdowns that are coming. The Great Reset’s topics of ‘taxation’, ‘civic participation’, ‘internet governance’, and many others sound like the imposition of more control. How will those be reset? What will they be reset to?
Getting some of your money off the grid is a good idea, if you don’t want to be around to find out. But we’ve got to be careful how we write about that sort of thing.
Another option is to bet on The Great Reset plans being a bit of a shemozzle. As all government programs are.
Remember pink batts? Imagine that on a global scale, in all sorts of contexts. Actually, you don’t have to. There are plenty of past examples of failed experiments.
The euro has wreaked havoc on its economies. It engineered booms, busts, and persistent underperformance in different countries’ economies. As did the ERM before that, of course.
How do you profit from debacles like this?
The Kyoto Protocol’s emissions trading system was enough of a mess that it even overshadowed the attempt to replace it.
The IMF had a convicted criminal in charge, until she moved to run the ECB. (The fellow before was even worse.) Together with the EU, this troika immolated Greece’s economy.
Each time politicians and powerbrokers get together to dream up something new and equally harebrained as ever, it goes badly wrong somehow.
But how do you profit from debacles like this? The answer is simple.
Gold and gold stocks boom during the chaos of central planning. And the Great Reset is central planning on a whole new scale.
With so-called ‘green banks’ set up to support climate change initiatives, ‘bad banks’ set up to clean up failing financial systems, and our existing team of central banks to keep government spending afloat…that government spending will of course go to recreating the world in…someone’s image.
If you believe they’ll get it right, there’s no need to buy gold stocks.
| Until next time, |
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| Nick Hubble, |
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