YouSaid · the spoken record

Jim Rickards

lines on the record: 66
first: 2023-01-13
most recent: 2023-01-13
sittings or episodes: 1
sources: podcast

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“Every bank in the United States. Can you imagine a president getting on TV today and saying my fellow citizens, as of now, all the banks are closed, all of them. We'll get back to you when they reopen. That's what he did in 1933. And then they went through like a phony stress testing and reopened them a week later, and that worked okay. But his other problem was deflation. And the way FDR broke the back of deflation, and we had very good growth in 33, 34, 35, he devalued the dollar against gold. And he raised the price of gold 75% from $20 an ounce to $35 an ounce. And it wasn't to enrich holders of gold. In fact, he confiscated all the gold first and then devalued the dollar. So it was like an inside trade. He had all the gold. So he took the profits for the United States Treasury instead of U.S. citizens. But that aside, he didn't do it to reward holders of gold. He did it to break the back of a deflationary psychology. What he wanted and what he got, if the price of gold”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“To death of deflation. And if they are, I'm going to save my money. I'm not going to spend it. First of all, the money will be more valuable, as I described. It also means there's a really bad economic outcome on the horizon, which is exactly when you would want to spend less, save more, you know, build up cash reserves. So the idea of lowering interest rates into negative territory is, hey, you better go out and spend it because you're going to lose it if you keep it in the bank. But people do the opposite. They hoard it. It actually is worth more in real terms, as I described. So you get the opposite of what they think. But again, the economists lack common sense. So negative interest rates don't work. QE doesn't work. Nothing works. You can't get out of deflation. There's only one way out. And this was shown. By the way, everything I'm describing actually took place between 1929 and 1933 during the worst stage of the Great Depression. And FDR, one of his first jobs, I mean, FDR was sworn in the first thing he did, like on the first day or the second day. By executive order, he closed everything.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“Will be in a severe recession. Stocks will be down 30. So the idea that you're going to have a Goldilocks ending or soft landing is not true. The Fed will pivot, but they'll pivot too late. The damage will be done and the damage to the economy, as I say, will be severe. Getting back to deflation, they can lower rates to zero and they will, but then they're stuck. There's no evidence that negative interest rates are more easing if you want to call it that. Europe, Switzerland, Japan, other countries have all tried negative interest rates. They don't work. In fact, this is a good example of how PhD economists lack understanding of the economy and common sense. So their theory is if I cut rates from two to zero, that's stimulative. Well, it isn't really, but they can pretend that. So if I take them negative, it's more stimulative. But everyday citizens in the United States, they look at that and they go, wait a second, why does the central bank have negative interest rates? They must be scared.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“In the Fed, the money doesn't get loaned out, it doesn't get spent, it doesn't increase velocity, it doesn't create jobs, the money doesn't go anywhere, it just sits on the Fed's balance sheet. So you can do it. They did do it. They increased their excess reserves to $9 trillion back in the pandemic back in 2020, but didn't do any good. The other thing they can do is take interest rates to zero, and they will. This is the famous pivot. Wall Street correctly anticipates the pivot in the ways that the Fed does not, but where Wall Street gets it wrong is they think the pivot's a good thing in the sense of, oh, the Fed's going to overtighten and inflation's going to come down, and they're going to realize it, and pivot to interest rate cuts. And so that's a soft landing and buy tech stocks. That's kind of how Wall Street thinks about a very kind of one, not even two-dimensional. The reality is the Fed is blundering. They are raising rates. Inflation is going to come down. They are going to have to cut rates. They'll be the last to know, but they'll be cutting rates for a very bad reason, which is...”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“And they don't want that. That's one reason. But the real reason, the more powerful reason, this is what keeps them up at night. They can't stop it. See, with inflation, the Fed has always been confident. You get inflation. Okay, they don't want it, but it happens. But when it does, we can crush it with high interest rates. And that's what Volcker did. And that's what JPAL is doing right now. But when you get deflation, they don't have any tools. Now, they'll do QE. The QE is a joke. I mean, how does QE is like a mirage or a psychological game they play with people? How does QE actually work? Well, the way it works is it's money printing of a kind. So the Fed buys bonds from dealers, from the primary dealers by Treasury notes or bills, et cetera. They call out, they get an offer, they say, Don, the Goldman or City, whoever it is, sends the Treasury notes to the Fed. And the Fed pays for it with cash that comes out of thin air. What do the banks do with the cash? They give it back to the Fed as excess reserves. So that money doesn't go anywhere. You're inflating two sets of balance sheets, the bank.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“Well, I can tell you what the response will be. I can also tell you right now it won't work. Deflation is a central banker's worst nightmare. And there are several reasons for this. The obvious one is that it increases the real value of debt. Deflation is funny. If you have cash, people hate cash because there's no yield. In deflation, cash can be your best performing asset because even though the nominal return is quite low, the real return can be quite high. If you have deflation of 2% and your money just stays constant, your money's worth 2% more because that's what deflation prices go down so your money goes further. So it's worth more. In a world of 2% deflation, the real return on your cash is plus two, even if the bank's pay you zero because it's worth 2% more. It helps creditors, but it hurts debtors. But who's the world's biggest debtor? It's the United States government. So they don't want the real value of the U.S. debt, $31 trillion, would go up in a deflationary environment.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“When he sees it. And the point is, the terminal rate is defined as that rate which brings inflation down on its own without further rate increases. You can get there and sit tight and the inflation will come down. That's true. It works that way, but we're probably already there. Inflation has already turned around, but Powell doesn't believe it. Doesn't want to blink. So they're going to throw the economy into very bad recessions. So get ready for the deflation coming soon.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“Maybe 25 basis points in March. There were three more rate hikes from here from today, but they're going to go too far. They've already done enough. They're already at the terminal rate. They just don't know it. They'll be the last ones to know the economy in a recession. Then here comes first disinflation and deflation. Disinflation is still a kind of inflation, but it's coming down. And it behaves more like deflation than inflation in terms of expectation. inflation goes from eight to seven to six to four, you know, zeroing in on two, which is the Fed's target. It's still inflation, but when it's coming down like that, it's much more of a deflationary dynamic. So we have inflation now. We'll have deflation, disinflation, and deflation sooner than people expect, a very severe recession, because the Fed is raising rates too high, too fast. They've blown past the terminal rate. The terminal rate is not. Jip Hal doesn't know what the terminal rate is, but it's kind of like Potter Stewart. He'll know.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“Is going too far. It's not a big analytical challenge to say the fist committee mistake because that's all they ever do. They've made nothing but mistakes since 1913. But they're going to crush the economy. They are going to get rid of the inflation. It's going to come down more quickly than people expect. They will have to pivot.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“At least not yet is coming from the demand side. The demand side is still very subdued, and that's because the Fed is determined to get ahead of it, unlike what happened with, I mentioned Arthur Burns and J. William Miller. JPAL learned the lessons of Paul Volcker. He's raising rates very rapidly. But here's the problem. The Fed can't do anything about the supply side. They don't drill for oil. They don't build cars. They don't plant crops. They don't drive trucks. They don't do anything to alleviate the bottlenecks on the supply side. The only thing they can do is raise interest rates so high that it destroys demand and basically crushes the economy. But ask yourself, if the inflation is coming from the supply side and you can only control it from the demand side, how much demand destruction do you have to do to actually affect the supply side? The answer is a lot. You basically got to throw this economy into a very severe recession. So the inflation is here today. Again, it's at the store, at the gas pump. You see it everywhere. But the Fed is...”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“The oil price didn't go away. And then we had two grossly incompetent chairs of the Fed, Arthur Burns and Jean William Miller. They put the pedal of the metal with money supply. Then the inflation took off, but then it morphed over to the demand side, as I described earlier. And by the late 70s, the 60 778, I started my career. I was working as a lawyer at Citibank. And it was funny, your boss would just give you a raise just because they say, hey, here's another $20,000 or whatever. You didn't even have to ask. Inflation was so out of control. They were just handing out raises so people could keep up so they wouldn't quit their jobs. And then finally, Volker came along and crushed the whole thing with 20% interest rates. So that was started from the supply side, went to a mild recession. That was a severe recession in 74, but morphed over to the demand side and then finally had to be crushed by the Fed. So here we are today. We have the inflation from the supply side. That's very clear. There's no evidence that the inflation”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“The Arab oil embargo in 1973 and 1974, the price of oil went up by a factor of four from $3 a barrel to $12 a barrel. Those prices sound pretty low by today's standards. But when you multiply by four, it was a big shock back then. We had gas lines. So that inflation kicked in, although there's a funny twist to that, which I'll come back to, which was at the time people remember Gerald Ford and Alan Greenspan, who was on the Council of Economic Advisors at the time. They came up with this campaign. They had little buttons that said win W-I-N. And that's super whip inflation now. That was the whip inflation now campaign. Well, they whipped it. Okay, we had a severe recession in 1974. I remember I graduated from college in 73. I kept going to school because I guess it was easier than getting a job, but I was in graduate school at the time. But all my friends got out and they went to Wall Street and they were like, yeah, I'm on Wall Street. And of course, six months later, I came in New York, they were all fired because of this recession. There's a stock market crash. But then the inflation came back because”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“Russia, so if they can't export it or we sanction it, then Boeing's assembly line slowed down, et cetera, and costs go up. So the inflation is coming from the supply side. That's very clear. The other place inflation could come from is the demand side, from consumers. And this is much more psychological. You're thinking about buying a new refrigerator, and this is like New Russia, no one works, but I want to get a new one. But if you think the price is going to go up, you might say, hey, I'm going to go out and get it right now, because if I wait six months, the price is going to be higher. And why would I do that? And of course, that's called demand pull inflation. You're pulling demand forward to beat the price. And of course, it's self-fulfilling. If enough people do that, then sure enough, shortages appear and prices go up. But these are very different dynamics. The supply-side dynamics and the demand side dynamic. Now in the 70s, interesting kind of test case, we saw both. It started out from the supply side. There was the Arab-Israeli War in 1973. That turned”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“Hum heating prices, a lot of other prices for business services. I mean, I may be a writer, but I put gas in my car and I go to the supermarket just like everyone else so I see it firsthand. So people don't really need to be told about inflation. But what is not well understood are the sources of inflation. And broadly speaking, there are two places inflation can come from. One is the supply side. There's a name for it. It's called cost push inflation. So costs go up and they get pushed onto the market pushed onto consumer and the prices of goods on the shelf go higher. And that's certainly what we're experiencing. The inflation we have right now is coming from the supply side, whether it's energy, shortages, higher energy prices, the war in Ukraine has made things a lot worse with the sanctions on Russia. Russia produces a large percentage of the world's aluminum and titanium. Well, guess what? Aircraft are made from aluminum and titanium. Boeing gets about 35% of their titanium.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“Be glad to do that. And before I kind of get into that very explicitly, the question is, well, okay, inflation, deflation, great conversation. Let's do it. But what does that have to do with the book about supply chain breakdown? And the answer is it has a lot to do with it. Right about this time, about a year ago, when the supply chain breakdown was in all the headlines, you know, you have junior cheesecake in New York couldn't make cheesecake because 83% of the ingredients were cream cheese. And it was a cream cheese shortage. And it got more serious when it was baby formula in April and all that. But when I was planning the book with my editor, she said, well, Jim, yeah, we got all this great outline on the supply chain. But we have to talk about inflation because this supply chain breakdown is causing a lot of the inflation. I said, absolutely. Of course, I thought of that myself. But I said, I'll do that. I'm also going to write a chapter on deflation because that could become a very quickly behind the inflation. And everyone knows the inflation is here. I see it at the grocery store.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT
“You are listening to the investors podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected.”
2023-01-13 · We Study Billionaires · TIP514: Permanent Supply Chain Disruptions That Will Sink the Economy w/ Jim Rickards · IDENTIFIED FROM THE TRANSCRIPT