Whether you love or hate Jim Rickards, he boasts nearly 40 years of experience understanding the inner workings of precious metals, capital markets, global economics, and the deep intricacies of the worldwide political and financial system’s inner workings. You can view him as an alarmist, but his track record speaks for itself. He has correctly predicted everything from Brexit to the election of Donald Trump, the Coronavirus Crash, and even the 2008 financial crisis.
Judging by what he’s written about in his books, perhaps he’s correctly predicted today’s terrifying economics and geopolitics.
Rickards “Currency Wars” Prediction
For instance, in his first book “Currency Wars,” Rickards warned readers of an imminent currency war against hostile actors such as China. He called out best-case scenarios of countries stealing growth from trading partners and worst-case scenarios of inflation, recession, retaliation, and sometimes violence.
Sound familiar?
He noted that currency wars went way deeper than acting as strictly an economic threat. In his view, currency wars were, in reality, an alarming and severe threat tearing at the fabric of American national security.
One thing he undoubtedly got right was calling out and confronting China as our biggest threat roughly a decade before the government did anything about it.
American and Chinese relations have deteriorated in the 11 years since the book’s publication. A bitter trade war started, and now we sit one miscalculation away from a war in Taiwan.
He specifically dove into the threat of clandestine Chinese gold purchases and currency manipulation.
These tactics that Rickards warned about in “Currency Wars” have only grown increasingly aggressive. If people acted sooner based on what Rickards warned about, China might not have the upper hand it has today. It is now an economic and military powerhouse poised to overtake the U.S. and collapse the dollar as the world’s reserve currency.
China has already surpassed the U.S. in terms of GDP based on purchasing power parity (PPP). Although the U.S. is still ahead as the largest GDP in the world nominally, things are changing, and it’s because of China’s tactics that Rickard forewarned.
U.S. and China in 2022
In 2022, as the U.S. continues struggling with inflation, China continues devaluing the yuan to spur economic activity. It’s also looking to take advantage of the war in Ukraine and global sanctions to push the yuan as a reserve currency. 85% of central banks are now intent on holding it.
Additionally, while China eked out GDP growth of 0.4% in Q2 2022, U.S. GDP in the same quarter contracted by -0.9%. That’s the second consecutive quarter that the U.S. GDP has fallen, meeting the technical definition of a recession. Meanwhile, Chinese exports just hit a seven-month high. However, the latest crisis in Taiwan has China continuing to manufacture shutdowns under the guise of COVID and worsening supply chain bottlenecks while adding to inflationary pressures.
As China continues to provoke the movement away from the U.S. dollar, another of Rickards’s warnings is coming true- Chinese clandestine gold purchases and their aim to put a stranglehold on global precious metals.
China has become even more aggressive with its gold purchases and has positioned itself to control the global gold supply. China has been the world’s largest gold miner since 2007 and has produced about 15% of the world’s supply over the last decade. Over half of Chinese gold production is also state-owned. Worse, in addition to becoming the world’s largest miner, it has become the world’s largest gold importer. It almost certainly has more gold than it’s letting on.
Additionally, China is hoarding and creating a dangerous national security crisis with rare earth elements (REEs). REEs are critical for smartphones, LED lights, flat-screen T.V.s, clean energy, E.V.s, national defense, and advanced weaponry. Heavy REEs, like Dysprosium (Dy), are especially important for defense communications systems, precision-guided missiles, and, yes, nuclear weapons. China currently provides more than 85% of the world’s REEs, holds roughly two-thirds of the world’s total supply, and controls 99% of the world’s Dysprosium.
If China wants to, it can manipulate the world’s gold and REE markets and bring our national security and economy to their knees. Rickards called it before anyone, and now China is on pace to overtake the U.S. economy by 2028- several years earlier than anticipated.
Calling Out the Federal Reserve
Rickards also called out the Federal Reserve’s monetary policy in “Currency Wars.” He blasted the central bank’s long-term low-interest rates as “the greatest gamble in the history of finance” and nothing more than “a program of printing money to spur growth.”
No matter how anyone tries to spin the current situation, printing multiple trillions of dollars via reckless spending packages and prolonged 0% interest rates is why inflation remains at a 40+ year high, and consumer confidence is at its lowest in a generation. According to famed economist Mohammed El-Arian, the Fed now has no choice but to ‘break this economy’ via ultra-aggressive rate hikes. It simply was too slow to act and kept interest rates too low for too long.
Again, Rickards called it over a decade before anyone.
Rickards further expanded on this concept in his 2014 book “The Road to Ruin.” He warned readers of the effects of negative interest rates, cashless currency, and the impact of reckless spending under the guise of climate change destroying people’s savings accounts. As we sit here in 2022, the government is printing more money with climate change as the justification, amongst an increased “war on cash” that involves moving to a digital, borderless, and cashless society. Congress, for instance, just passed the ironically named “Inflation Reduction Act.” It is another spending bill with a catchy name that the government uses to print money for pricey climate change initiatives disguised as “fighting inflation.” The University of Pennsylvania’s Wharton Business School called it out and projected that the bill may prolong increased inflation through 2024.
Key Takeaway
The way Jim Rickards can come across sometimes may be over the top and off-putting to many. Sometimes, many of his predictions may seem wacky. But you cannot argue with his track record, especially in recent history. No matter your opinion, respect his perspective and take him seriously because he has seen it all in 40 years of working with global economics.
