James Rickards claims that we are going to war with North Korea. That part of the conversation starts at 34:45. It is difficult to completely dismiss James Rickards outright. He has been near the center of a few historic events like the genesis of the petrodollar and the debacle of Long Term Capital Management.
YouTube Video Title:The Central Banks Are Transitioning The World Away From The Dollar:James Rickards
Hi and welcome to the x-22 report spotlight today we have a returning guest James Rickards James is a chief global strategist at the West Shore funds is the editor of strategic intelligence a monthly newsletter and director of the James Rickards project is the author of New York Times bestseller the death of money a national bestseller currency wars new case for gold his latest book road to ruin secret plan for the next financial crisis all these books are available I’ll put the links at the bottom of this video and I am very happy to have James back on the x-22 report spotlight James welcome back to the spotlight thank you Dave great to be with you hey thanks for being here and I wanted to start off with the Fed and what they’ve been saying where they’re going to be unwinding their balance sheet of something like what four and a half trillion dollars is this a possibility where the Fed can actually unwind their balance sheet well it’s a possibility in terms of the mechanics and it is certainly their intention their declared intention whether they can actually pull it off without causing a recession or something worse we managed to be seen I’m doubtful I think that this will actually be end up being a blunder on the feds part but just talk about how they do it Dave because there’s a lot of misunderstanding about this so go back to 2008 to the financial crisis the Fed’s balance sheet at the time was about eight hundred billion dollars relative to their capital it was you know a reasonable amount of leverage you know not really that different from from a lot of other banks as a result of their response to the crisis and qe1 qe2 qe3 all of which were money printing programs by the Fed led by Ben Bernanke who is the chairman at the time the Fed expanded the balance sheet to over four point three trillion dollars which means starting from an 800 billion dollar base they created three and a half trillion dollars of new money out of thin air that’s how they operate and got the bounce sheet up to about four point three trillion dollars now here’s the problem they’re facing they’re getting ready for the next recession they don’t talk about this publicly but that’s what they’re doing and the other thing they did in addition to expanding the balance sheet is you know they cut interest rates to zero so all of a sudden here we are in let’s say early 2013 when Bernanke was still chairman interest rates are zero the balance sheets over four trillion dollars and that was all considered a response to the last question but what are you going to do in the next crisis what are you going to do if there was even a recession a business cycle recession let alone a financial panic how could you cut interest rates when they’re already zero how can you expand the balance sheet when it’s already you know beyond belief it’s four over four trillion dollars and you’re in danger of you know jeopardizing confidence in the US dollar if you go any further well the answer is you can’t you’re not prepared for those eventualities and so the Fed had to begin a program of what they called normalizing getting interest rates back to normal which means raising them and getting the balance sheet back to normal which means reducing it they started this in 2013 with the so-called taper where they were still printing money they just printed a little bit less every month then they got to the end of the taper in November 2014 so they start printing money but they kept the balance sheet where it was so they didn’t expand it they didn’t print new money but they didn’t reduce it either and the way they did this is the way the Fed prints money they just call up dealers and buy up insecurities so it could be you know any of the primary dealers goldman sachs citibank whatever and the Fed has a trading desk called the open market desk and they just call up Goldman Sachs and say hey you know offering me some ten-year notes and Goldman makes him a price and they say okay done and Goldman delivers the bonds and the Fed pays for it with money from thin air the Fed just basically puts the money in goldman sachs bank account at whatever bag and that money comes out of nowhere so that’s how they create money now they can do the same thing in Reverse which is they can sell securities back to the market the dealer pays them with money and that money disappears the same way it was created so that that’s how that monetary policy is normally conducted so the Fed got to the point where it said they had this over four trillion dollar balance sheet now when they said they want to normalize you to reduce it a lot of people took that to mean oh well gee you’re gonna dump all these securities on the market you’re gonna sell these securities it’s gonna sink the bond market etc and that’s not true that’s not how they do it the way they do it is if you hold a Treasury note and it matures the Treasury just sends you the money you don’t have to sell anything so if I bought a five-year note five years ago and I still hold it today and it ensures that the Treasury will just send me the money I don’t have to sell the Treasury note and that was what the Fed plans to do that is what the Fed plans to do which is yep up until this month literally a couple days ago October 1st the Fed had been when they got money on the old bonds and Obama Chur in the Treasury sent them the money they went out and bought a new one so they would receive money but then they would create money by buying new bonds just enough to keep the balance sheet where it was but what if you got the money on the old bonds and did not buy a new one did not go out and roll it over well then and the balance sheet would be reduced as I explained and so that’s what the Fed starting to do effective October 1st so they are reducing their balance sheet a sub now they’re doing it slowly they said their intention was twenty billion dollars a month ten billion of Treasuries ten billion of mortgage-backed securities that they would not roll over now which means that they’re still rolling over most of it they’re still printing money and buying bonds they’re just not buying as many as they used to and the effect is to reduce the balance sheet as the old bonds run off they’re going to increase that amount by the way they’re every quarter they’re going to increase it by another 10 billion until they get up to fifty billion a month which would be six hundred billion dollars a year so these are big numbers but we’re not there yet they’ll get to that level over the course of 2018 so it’s a very passive kind of thing but they don’t sell a single bond they just wait for them to mature they don’t roll over all the money and some of the money disappears and my suppliers reducing the balance sheets to do so that’s how they go about it now here’s where it falls down in terms of the macroeconomic impact for some reason the Fed wanted us to believe that quantitative easing was stimulated that’ll help the but quantitative tightening which is what we’re talking about isn’t going to hurt the economy they they want us to believe it’s asymmetric that printing money is good but not printing money is not bad that makes no sense that’s that’s ridiculous of course this is when you reduce the money supply and you take away a bid in the bond market of course that’s a tightening of financial conditions that they just want you to to pretend otherwise so this is the program they started they want to get the balance sheet down to around you know some number about two two and a half trillion I realize that’s still a big number but it would be down significantly from the four and a half trillion and the other thing they’re trying to do is get interest rates up to about three three and a quarter percent that’s what these recent rate hikes have all been about so and say why is the Fed doing this well they want to they know from history there’s good reason to believe that if the US economy is in a recession you have to cut interest rates 300 basis points or three full percentage points to get the u.s. out of a recession maybe more than that maybe even as much as four percentage points well how do you cut interest rates 300 basis points when you’re only at 100 basis points to begin with well you can’t you can’t do it you can only get back down to zero so what the Fed is trying to do is in addition to raising rates that their fear is that will hit the recession before they get rates up to three percent and that they’ll be the recession will start when rates are you know one and a half maybe two percent and they’ll cut them all the way back down to zero but then they’ll be stuck again they will not have cut them enough to get out of the recession but they can’t cut them any more because they’re at zero well then what do you do well go to QE four then you go back to money printing basically replay the whole Bernanke playbook from 2008 to 2013 well the problem there is how do you do more QE if you haven’t normalized the balance sheet without destroying confidence in the dollar the answer is you can’t so that so reducing the balance sheet and increasing rates are basically you know reloading the weapons basically reloading the toolkit they’re raising rates so they can cut them and they’re reducing the balance sheet so they can expand it in the next recession the problem is the finesse is how can you do that without causing a recession how can you tighten monetary conditions in what is a very weak economy without causing recession you probably can’t I don’t think they’re going to be able to pull this off they think they can they talk about it they explain it to you but in my view we will in fact hit either a normal business cycle recession or a financial panic before the Fed gets back to normal either in rates or balance sheet size and then they’re going to be out of bullets again and then we’ll go to QE four but we’ll be one step closer to really the complete loss of confidence in the dollar no I hear you saying all this and but I’m also picturing Janet Yellen saying that we’re not gonna have a funny another financial crisis in our lifetime so on one side you’re saying that they’re doing this preparing for a recession and she’s out there saying that yeah we’re not gonna have anything coming or you know anything bad is going to be happening anytime soon well first of all let’s separate business cycle recessions from financial panics because they’re two different things business cycle recessions you know come and go we’ve had I think 14 business cycles since the end of World War two they’re pretty you know normal Affairs people very few people can predict them the Fed has never predicted a recession most mainstream economists have never correctly predicted recession I’m not saying the region report cast but it is easier to say that they happen with some regularity because as I said it’s happened 14 times to see in the world war two and all that happens is you know the economy grows and grows and unemployment goes down and then prices start to go up and the feds watches and all this the prices go some more and the figures though we better tighten and then they type more they’re always late in the cycle and they tighten they tighten and sooner or later you know by racing rates sooner than they over tighten they cause the economy to slow down you know housing market declines unemployment goes up inflation goes down and the economy gets weaker then we’re in a recession Vegas oh we better ease and then they cut rates etc etc so all the Fed does the Fed never leaves the economy the Fed always follows the economy they they tighten in the late stages of an expansion and they cut in the late stages of there were a you know an economic correction or recession so that’s a normal business cycle a financial panic is different in financial panic seems to come out of nowhere it’s some unexpected event whether it was you know 2007 the collapse of a couple of Bear Stearns hedge funds or in 1998 you know the Russian default the collapse of long-term capital management or in 1994 the Mexican default the so-called tequila crisis or 1987 it was portfolio insurance and the interaction between the futures market in the cash market and basically a lot of feedback loops to recursive functions between the two markets that took the markets down so the crisis can come out of nowhere can be very unexpected now sometimes they go together in 2007 2008 we had both we had a recession and a panic in 1998 we just had the panic there was no there was no recession in 1998 in fact the stock market went on to hit all-time highs in 2000 in 1987 there was no recession we had the stock market fell 22% in one day one day but there was no recession in 1989 we had a recession but no panic so sometimes they come separately sometimes they go together but they’re both on Janet yellen’s radar screen to come back to your question Dave so so let’s separate them on the business cycle the Fed has never predicted a recession but they know they happen so they say well we’re not predicting well we don’t necessarily even expect one item soon but we’re getting ready for one because we know it’s going to happen and if we don’t you know reload the gun or or you know replenish the the toolkit we’ll be out of tools will be other weapons when the time comes as far as financial panic is concerned that’s that’s a kind of a complex dynamic phenomena or at least I think about it and analyze it using complexity theory and other disciplines behavioral psychology and Bayes theorem and other branches of applied mathematics and history and and other tools that that are not the mainstream toolkit they actually work extremely well I’ve had very good results with them but most economists are not looking at it that way but financial panics do seem to come out of nowhere and you’re always looking for signals now when Janet Yellen said we will not have another financial panic in our lifetimes to me that was the clearest signal that we were getting closer to a financial panic it reminded me my first thought was when Neville Chamberlain it was the prime minister of the UK returned from meeting with Hitler and landed in London and said I have brought us peace for our time meaning there’s not going to be a war and of course there was a war within months so when the elites tell you one thing that they’re sure of it you can be pretty sure the opposite is about to happen so so both things were in play we could have a business cycle recession sooner or later in fact I expect we will and the Fed will not be prepared for it because they haven’t been able to raise rates enough or reduce the balance sheet enough to dig us out of that hole and then we’re just going to be stuck in a continuation it really the second technical recession in the depression that began in 2007 a little bit of a replay of what happened in 1937 after the recession of 1929 to 1933 I’m just not going to be able to get out of it or we could have a financial panic any day we’re primed for one now Mustangs going to happen today or tomorrow but no one should be surprised if it does it certainly will happen sooner than later because they also come around with a you know kind of seven to ten year ten-year time frame like clockwork I mentioned 87 94 98 2008 I mean you don’t have to you don’t need a PhD to expect the next one any minute and again the Fed is not going to be prepared for that so so what I expect is that at a minimum we’ll be heading for a recession based on a weak economy at worst we’ll have a financial panic worse than 2008 but unlike the last several times the Fed will not be able to deal with it because they never normalized from the last time now I wanted to add on to that everything that you just said and I wanted to touch upon the dollar and China and what they just did they took the yuan they priced it in crude oil and they backed it by gold and we see that you know Russia we see Venezuela now made the announcement that they’re gonna be you know trading their oil in you one other country’s most likely are going to join in with this where does the dollar stand where the petro dollar stand as china does this I mean is this the end of the dollar it’s the end it’s the beginning of the end of the petro dollar and in some ways the demise of the dollar is the benchmark global reserve currency so that’s a very big deal and I’ll talk more specifically gave about a couple of the developments you mentioned but I do want to emphasize for the listener that these are our big processes but they play out over time they sound like we all go to bed one night and then we wake up in the morning and there’s no more dollar I mean that’s that’s not going to happen that’s not how these things happen they can crescendo in financial panics at times but they generally tend to play out over long periods of time in my example is how did the US dollar replace pound sterling as the benchmark global reserve currency how did that happen does you go back to 1910 1911 the the pound sterling was the global reserve currency nonpareil hands-down it was the world currency you could get on a steamer in London and go to Bombay at the time or you know anywhere in the world and that pound sterling it was was money good and yet by the end of World War two by 1945 the dollar had displaced it and sterling was sort of in ruins it’s still around I mean there’s sterling it’s still reported to the IMF as a reserve currency it’s just a very small position not a very important one but how did that happen well it actually happened over 30 year period beginning in 1914 and I was – ending in 1944 a 1914 of course was the beginning of World War 1 but recall that the US was not in World War 1 at the time the US didn’t join World War 1 until 1917 technically in 1914 we were still neutral but the UK of course was one of the combatants and the UK needed everything they needed food they needed wool for uniforms they needed weapons ammunition and they got all that stuff from the United States but in those days under the gold standard you had to pay for it with gold and so there was this large gold train beginning in November 2000 SR 1914 London to the United States some of it was done via Canada that mean that were concerns about putting gold on vessels because of submarine warfare but we got the gold as the bottom line so that continued through the 20s and 30s in 1931 sterling devalued against gold in 1933 the US retaliated we devalued the dollar against gold 1936 the UK devalued the Sterling again against gold they suspended gold exports going into World War Two in 1939 and by 1944 you had these competing plans John Maynard Keynes and Harry to effort the UK and Harry Dexter white for the US Treasury and the and and White’s plan I was actually coming to spy so funding for the Soviet Union a little bit but his plan prevailed and that was the end of sterling and from then on we run a dollar gold standard under Bretton Woods my point is the dollar surely replaced sterling as the global reserve currency but it took 30 years I don’t think this new transition is going to take 30 years might not take 30 months but but it’s not going to happen overnight instantaneously it’s a process so you have to watch the process you have to watch the individual acts play out and I’m seeing them everywhere Russia has tripled its gold reserves in the last ten years why would you triple your gold reserves if gold is not a monetary asset doesn’t have a large role to play in the future China has tripled its gold reserves officially I would say unofficially probably more than quadrupled its gold reserves in the last ten years again same question or the Chinese stupid or do they see something that most people don’t well they’re definitely not stupid I spent time in China and know a lot of people there they know what they’re doing so so they clearly see a future you know backed by gold in which your gold is once again a primary monetary asset now the specific point you made Ava bout this oil for you on so let’s unpack that a little bit because it’s not it is a big deal but it’s kind of three or four separate contracts that are strung together with straight through processing to synthetically come up with this but but what China is saying is hey we’re the biggest oil importer in the world we buy more oil than anybody we much oil and the biggest sellers of course are Saudi Arabia Russia and we would like you guys to sell to us and you want we’ll pay you you want and Russia sitting there saying well what are we gonna do with the you want I mean there’s no bond market to speak of there’s no large investable pool if you want assets they can buy there’s not that much they could actually do with the one so China says no problem take the yuan from us for oil and we can convert they want to gold spot on the Shanghai Gold Exchange will have a special facility that this yuyuan that we owe you will just take it and sell it on the on the Shanghai Equal Exchange and get gold and now you own the gold but then people say yeah but we’re not on a gold standard I mean gold the price fluctuates in Euros and yen and dollars its volatile it’s up and down I don’t like all that risk and China says no problem we’ve got the Shanghai gold futures exchange and you can sell your go forward on the futures exchange and hedge your price exposure so you take three separate contracts the oil purchase contract the selling you want spot on the Shanghai gold exchange and then hedging the go forward on the Shanghai gold futures exchanges hanging on futures exchange together it gets an oil seller where they want to be which is they can get hard currency or they can get gold or they can hedge your exposure they don’t have to get you know up to their eyeballs and you want and yet at the same time China gets what it wants which is a you want benchmark price for oil eventually leading to the end of the petrodollar now the petrodollar deal was something was cooked up by Henry Kissinger and William Simon Jerry parse key hummus on FL and some others in in the White House and Treasury in 1974 helmets on fell was Kissinger’s deputy Kissinger was national security advisor at the time sauna fellows deputy national security adviser his nickname was Kissinger’s Kissinger he was the big brain behind Kissinger Kissinger is a pretty big brain I actually met with Hamid sommerfeld’s mothers in the White House in 1974 when we were discussing a plan to invade Saudi Arabia and basically secure the oil take over the oil fields put up a security perimeter and sell the oil at prices that we dick to keep the price of oil low to help the US economy we wouldn’t actually steal the oil or the money we would just dictate the price and then put the money in trust for the Saudis and that was the plan fortunately that plan was not followed through that was not that was not the plan that was implemented although the the purpose in in devising that plan was to hold a gun to the head of the Saudis it was sort of a good cop bad cop over regular carrot-and-stick approach know as Kissinger was saying implicitly we want you the Saudis and OPEC to price of oil and dollars but if you don’t we have a plan possibly to invade the Saudi oil fields and that was leaked and it was in the newspapers and all that it was a threat to say you know do it our way or well you can do it the easy way you can do it the hard way and the easy way is gonna be a lot better for you so the Saudis agreed to that and then how the petrodollar deal actually worked is they sold us or we pay for it in dollars they then took the dollars that we gave them and deposited those dollars in US banks such a Citibank where I later worked from not long after the episode I described until the mid 80s I was international counsel at Citibank so they put them on in citibank citibank would then lend it to you know Argentina or Chile or Mexico or wherever those countries could then use it to buy equipment and goods from the other states which gave us their dollars back which we could then use to buy the oil so the whole thing went in a big circle dollars for oil oil back to dollars into the banks lending to third world countries who bought our manufactured goods and then we took the profits and bought more oil I know work brilliantly and by the way when oil is priced in dollars and everybody needs oil that meant everybody in these dollars because you need the dollars to buy the oil and I put a floor under the dollar and propped it up and you know that had that hit a lot of rough patches and the there was a major crisis of confidence and our in the late 70s but the petrodollar dough hung together and some together all these years but now we’re seeing cracks in the wall we’re now we’re seeing the end of the petrodollar deal so I would say both vectors the massive acquisitions of gold by Russia and China clearly signaling that they want to break out up a dollar a Gemini go back to some kind of maybe modify gold standard we see the pricing of oil and you want to try to create it you want benchmark price for oil to to diminish the importance of dollar pricing and oil make the dollar just another currency and then into the mix let’s throw distributed ledger technology which is the more up-to-date technical name for a blockchain and digital cryptocurrencies now Christine Lagarde gave a very interesting speech this week where she talked about this and you know the Bitcoin groupies they’re like oh you know IMF wants to buy Bitcoin well no that’s not what she said what she said was that they’re very interested in the technology and distributed ledger technology I expect and by the way the dollar and the IMF has their own kind of world money called the SDR or the Special Drawing right the euro the end all these currencies are digital crypto currencies I mean the vast majority of all the transactions are digital you don’t you and I we don’t get paid and with with ours little kid they give you a pay envelope at the end of the week with you know however many $20 bills stuck in it it’s on how you get paid today you get a direct wire direct deposit to your bank account you pay for things with your credit card or debit card you know people used to be embarrassed to use the credit card for a cup of coffee now it’s like hey who cares two bucks swipe my credit card dude done so so all of our money is digital today you might have a few bucks in a while but not many relative to the amount of financial transaction as you do all that message traffic is encrypted I mean they’re not sending that stuff over the internet with your name and address on it without using encryption so dollars and euros and yen our digital crypto currencies now what they don’t have is distributed ledger technology that is that the Ledger’s are centralized in banks or central banks or Fedwire of the Treasury or the european central bank of the target to system etc all those Ledger’s are centralized and what DLT distributed ledger technology allows you to do is to you know basically using encryption to spread that information over you know hundreds of thousands of servers all over the world decentralized now it’s cheaper it could be faster it could be more robust you’re not depending on a certain bank and yet maybe you recorded a server so you blow up the server well who cares there are 10,000 other servers with the same you know chain of information on it that can validate the transaction so and of course it’s cashless and the global leads hate cash because cash can be used to defeat negative interest rates and they suspect it’s used to evade taxes and of course the g20 governments are all going bankrupt in different ways and so they need more tax collections they don’t like anything that enhances people’s ability to evade taxes etc so for all these reasons governments and the IMF like distributed ledger technology it gives them more power versus the banks it gives them more power versus the people because you’ll eliminate cash completely it you know just intermedia is the banking system as i mentioned and so there’s a lot of attractions there but none of this has anything to do with Bitcoin these are state Kryptos multilateral Kryptos IMF Kryptos that’s what they’re aiming for and Janet Yellen I’m sorry Christine Lagarde more or less said that in her speech she used the phrase dollarization 2.0 I took one look at that said no you mean D dollarization 2.0 you just don’t want to come out and say it um and so I would say that this acts as an accelerant in the rise of world money rise of the SDR from the IMF on top of everything else we talked about with Russia and China and gold and and the end of the petrodollar all of which is pointing the same direction which is a ultimately a diminution in the role of the dollar and the role of the dollar payment system and global financial transactions combine that with a potential loss of confidence in the dollar engineered not by Russia China the IMF but by the feds because of their bloated balance sheet zero interest rate policy and their inability to normalize either one and you know it’s a real toxic mix for the dollar now I just wanted to get this straight what I’m hearing right now is that the central banking system is looking to take over maybe the crypto market and replace the dollar as the reserve currency with some type of cryptocurrency well they definitely want to replace the dog with the SDR that’s been in the works since 1969 but what’s new is that it suddenly dawning on people at the IMF that the SDR can not just be a currency but it can be again the word crypto I don’t think applies I would say it can be SDR can be traded and exchanged and used on a distributed ledger which is the so-called blockchain and that empowers it for use in global financial transactions without relying on the Fed of the Treasury or the dollar payment system so it’s just one more way to run run the dollar off the world Ossur off the road but I think I think crypto currencies have a future but not you know Bitcoin neither me throw has other uses in terms of so-called smart contracts apart from all these coins but I don’t think Bitcoin has much of a future but I do think the technology does that the technology platform which would be made better in the future but the digital currencies of the future will be controlled not by the web but by governments so if this does happen and the dollar ceases to exist in some form what are the people here in the u.s. going to use then we’ll still have dollars but it’ll be a local currency like Mexican pesos like if I go to Mexico on vacation and I’ll you know buy some pesos through the airport or the hotel or some place for spending money but otherwise Pacers aren’t good for anything I certainly can’t use them in London so we’ll still have dollars you know you and I go out for drink i’ll pay you’ll pay the bill in dollars but it’ll be a local currency it won’t be the global reserve currency and that’s a big deal because right now the u.s. doesn’t worry about trade deficits or budget deficits or debt to GDP ratios or anything else that everyone else has to worry about because we just print ours and the world accepts them but what if that were not the case what if the world said you know hey US I don’t want dollars I want STRs oh by the way you don’t have any you can only get us DRS in the IMF and they’re not handing them out today so in that world all of a sudden the IMF controls the global money supply the SDR is the benchmark reserve currency maybe it’s a gold back to SDR none of which has anything to do with the dollar so I’m not saying the dollar is going to go away I’m just saying people will lose confidence in it and it will lose its status as the benchmark global reserve currency so is everything being transferred to the central banking system where today we have the Fed which is kind of intertwined with the government but really not part of the government where they’re creating currency now if that is taken away is that actually is that process moving to China or is it moving to some other entity that has nothing to do with the country moving to the IMF which is you know saying that’s tea that has nothing to do with the country you know I mean the the the the Bank of America you know central bank of Mexico they can print money it’s just that they print money that nobody else wants the bag of Zimbabwe you can print money but they print money that nobody else wants so you could get to a point where the Federal Reserve could still print money still conduct open market operations but would people have an appetite for dollars or would they be looking for other currencies now by the way the yuan and the group aren’t any better I mean no one’s gonna want rubles you know it’s an authoritarian regime there’s no rule of law same thing in China they’re communists you don’t have a rule of law so I’m not suggesting that the rupal or the the Chinese you want or any other currency can defeat the dollar I’m saying that that threat will come from the SDR the Special Drawing right which is printed by the IMF it’s controlled by an executive committee now by the way the u.s. today has a big voice in the IMF the US has the largest single voice we have veto power it takes 80 to 85 percent vote to make significant changes or institute significant policies at the IMF such as you know a mess of money printing operation STRs the United States has just over 16% of the vote so since you need 85 percent to get things done if you have 16 percent and we hold out and you can’t get to 85% so the US has infected veto-power but beginning next week and continuing a steps over the next year or so there’s a clear-cut movement that’s been pre announced to increase the voting power of China and the other BRICS if you take the five bricks together you know Brazil Russia India China and South Africa under this new plan and they would is right now they have about fourteen point nine percent of the vote just under 15 percent but once they get any more votes at all even a small amount and they go over 15 percent and acting together they would also have a veto power they’d have the same block the votes at the u.s. s so imagine a world where there’s a financial panic going on and the central banks have not been able to normalize their balance sheet as we talked about at the beginning of the interview and you have to turn to the IMF for liquidity and print trillions of SDR is to bail out the system and that requires a vote in the bricks are sitting there saying huh you want our votes well here’s what we want in other words they can lay down demands that work to the detriment of the dollar in exchange for not exercising their veto power to print a CRS and bail out the developed economies that’s a very powerful place to be and that’s where we’re heading now I wanted to switch gears here and I just wanted to talk about North Korea and you wrote a couple articles about North Korea 1 why are we so concerned with North Korea I mean we’re across the ocean China Russia they border right up against North Korea but it seems like the United States is very concerned with North Korea and about their nuclear technology their missile technology why are we so concerned about what they are doing because they’re very close to the point where they can fire a nuclear-armed ICBM and kill million people in Seattle so I mean in reality do you really think that they would go that far why not they have some unfinished business in South Korea you know the conventional theory of deterrence is that they would never do that because we would nuke them really I mean look these are people who were first of all the leadership doesn’t care about the people they don’t care if a couple North Koreans get killed they had a famine in the nineteen nineties people eating bark off of trees the leadership had bomb-proof compounds that are fully stocked they can go to for an indefinite period of time so if they detected us missiles heading their way they would just go into their bunkers let the whole place get blown up you know wait a couple months come out wave the flag and you know pronounce socialism in other words that there they’re not too terrible the way the Russians were the way the Chinese were the the conventional theory of deterrence doesn’t work on them number one number two they don’t actually have to blow up Seattle they just have to have that capability which then acts as a credible threat to allow them to do other things for example they could invade South Korea and so then South Korea says hey America come help us you know the way you did in 1950 and the u.s. says here would come and North Korea says don’t you dare if you guys go into South Korea I’m gonna fire the missile at Seattle or San Diego now you’re president of United States do you want to trade Seoul for Seattle do you want to trade Busan for Portland probably not that makes the US nuclear umbrella less credible drives a wedge between the u.s. and satellites and South Korea Taiwan Japan and elsewhere Japan probably would have nuclear weapons in a matter of months they’re capable of that and completely destabilized East Asia and drive the u.s. out of the western Pacific is that a good outcome so that this is the way the United States is thinking about it this is why we regarded as an existential threat and this is why we’re going to war with North Korea probably in the next six to eight months to stop North Korea from getting this capability in the first place so you think we’re definitely going to war I mean you think troops on the ground or you think just a war from the air because it’s China and Russia just gonna sit back and watch this yeah a couple things first of all all the above will have this this will not be aimed at just reducing their nuclear weapons capability this will be regime change this will be the end of Kim Jong so you’re talking about this it’ll start out with cyber operations the place to go dark shut down the power grid shut down communications shut down the Internet not but they have a lot but whatever they have they’ll do we use psychological operations to create you know rumors of a coup d’etat underway Special Operations Command will go into you know specifically target the leadership and some of these facilities then will use massive strategic bombing to disable the artillery barrage will be aimed at South Korea and then probably some troops on the ground just to you know secure secure the capital and make sure the regime chain is effective plus a secret weapon you know I launched in Washington last week with a top national security adviser to the Chinese Politburo and I I started discussing secret weapons and first she laughed you know there was that kind of nervous laughter that people use when they actually don’t like the topic and then she got a little more sober and then she said yeah actually ash Carter had said the same thing to her ash Carter’s a former Secretary of Defense so I’m you know when you say secret weapon people kind of roll their eyes but the atomic bomb was a secret weapon until we dropped it and even after we dropped it that we had to do it again because the Japanese still didn’t believe it so my point is do you really think that DARPA and the Defense Department and Raytheon and Los Alamos National Laboratory have been sitting around twiddling their thumbs for the last 10 years no they’ve got weapons that we don’t know about specifically they’re there there’s a thing called kind of a non nuke it’s a it uses nuclear technology to create a subcritical reaction that releases enormous energy without the radiation so it’s it’s kind of a sort of nuclear weapon but not exactly but it would be massively more powerful than the bombs we have today and that could be used to suppress this North Korean artillery attack so I say combination of all the you know cyber psychological kinetic special operations and other you know naval etc salience I mentioned I would throw in some kind of secret weapon that would reduce casualties in South Korea maybe make this whole thing feasible from the u.s. perspective now is China and Russia are they on board with this or are they just gonna sit and watch well if you’re Russia you’d love to see the onstage waste another trillion dollars kill a bunch of Americans to South Koreans emini we just this would be horrendous for the United States and for South Korea so Russia you know you’re just it’s likewise being a spectator you know watch the gladiators kill each other and you just sit there and you know pass the popcorn so Russia has a lot to gain from it in terms of relative power and that’s why Putin thinks about things it’s not this is the I did a financial war game for the Pentagon in 2009 and the way we thought about things was not absolute power but relative power could you end up with more power than you started relative to the other guy even if everybody lost a little but so Russia has the most again just by being on the sidelines now China I agree this seems to threaten the number their interest but the US would talk to China in advance and assure them that their interest should be looked out for now that’s delicate because you know we don’t even trust the South Koreans not to tell the North Koreans so you don’t want to tell China too early what you’re doing because they could tell the North Koreans and help them prepare etcetera having said that you do have to tell them specifically at some point now generally the the war you know that the tempo and the what the French call a logic de guerre or the logic of war that’s already playing out you know in you know the United States invaded Iraq in March 2003 it’s not like they woke up the day before and say oh gee let’s invade Iraq those orders were given a year before I’m a general mattis who was comment on a commander of the 1st Marine Division he got his world orders in 2002 they knew it was coming well as I said those orders have already been given the US military is not going to do this every night they’re getting ready for the war right now and that’s signaling is is out there the markets are oblivious the markets seem to be sleepwalking through it most I think a lot of common the commentators are kind of mushy they think this deterrence works which it doesn’t for the reason I mentioned but the point being we’re clearly that the signals are there we’re clearly heading in that direction but we’ll bring the Chinese into the fold late in the game by the way if your listeners want to see a very specific signal something that when it happens will tell you the war is maybe only a couple weeks away right now I would say we may still be six months away but to know you within a couple of weeks is when you evacuate American civilians from South Korea so one day the State Department will issue an order you know we we order request her strongly urge all Americans to leave South Korea there are 70,000 American civilians in South Korea I’m not counting the military personnel have to stay and fight but when you see the civilian evacuation you’ll know the worst just a couple weeks away but China was trying to care about they don’t want reunification on our terms meaning putting South Korean charge that we would give them some assurance that they would be partners in reunification or reconstitution of a North Korean regime on terms acceptable to them we give them that assurance we tell them that we’re not going to go anywhere near the Yalu River which is the border between North Korea and China so you know you’re not aware you’re a better replay of 1951 when you know 52 and Douglas MacArthur was ready to invade China basically give them all the assurances they need with respect to their interests but tell them we’re going to go ahead anyway because of our interests James Rickards thank you very much for being on the x22 report spotlight once again how can people see all your work well thank you web my website James forage project comm I’ve also started a new company using artificial intelligence and teamed up with IBM to do the predictive analytics I talked about in this program that’s called Mary Glen and me are AGL IM comm so have a look at Mira gloom comm and also very active on Twitter at James Chi Records and my books most recent one the road to ruin games thank you very much again for being on the spotlight I really appreciate it [Music] [Music] you