James Rickards - The Collapse Of Our Global Economy: The Banking Crisis Is Only Just Getting Started

Full transcript: James Rickards on London Real

2:22 Brian Rose: This is London Real. I am Brian Rose. My guest today is Jim Rickards, the American lawyer and investment banker turned economist, thought leader and author.

2:42 You have over 35 years of experience working in capital markets on Wall Street, in senior positions at Citibank and the hedge fund Long-Term Capital Management, as well as being an advisor to the CIA and the Pentagon, as a highly sought-after financial expert. You’ve been a contributor to publications like the Financial Times and the Washington Post, while you are also the editor of the financial newsletter Strategic Intelligence. You have topped the New York Times bestseller list many times with titles including The Death of Money and Currency Wars, while your most recent book, Sold Out, looks at the broken supply chain, surging inflation and the catastrophic consequences for the global economy.

3:20 Recently you have said that you believe that the Federal Reserve’s new emergency lending program is the biggest bailout in history, and as always the taxpayers will be left holding the bag. You’ve suggested we may find ourselves in a situation where the damage is irreversible and the collapse of the global economy is inevitable, as more banks fail and the Fed continues to print money. Jim, welcome back to London Real.

3:44 James Rickards: Thank you, Brian. It’s great to be with you.

3:46 Jim, it’s always a pleasure and an honor to have these conversations before we get started. I just want to alert everybody to an important video that you’ve just recorded that won’t be available to the public. Here you discuss the upcoming crash that you say will be fast, bloody and unavoidable, but then you also explain how anyone can position themselves to profit from this crash. Our viewers can access that video at londonreal.tv /gym and I highly recommend that everyone go watch that immediately after our conversation.

4:14 Jim, where do we start? I mean, the last three weeks in the banking sector has been hard to fathom. You and I spent decades in the banking sector. I was talking to our good friend Robert Kiyosaki last week and has hit Brian their centralizing banking. What is your read on Silicon Valley Bank, Credit Suisse, Republic Bank, Deutsche Bank, everything we’ve seen over the last three or four weeks?

4:37 James Rickards: Well, first of all, it’s a good capsule summary, Brian. But yeah, around of course, the Silicon Valley Bank was taken over by the regulators on March 10th, but you can see it coming. You know, it was in distress. There was 40 billion dollars, 40 billion pulled out of that bank in one day on Thursday, March 9th, the day before it was taken over. 40 billion just, you know, hit the road.

4:57 Just left. It was a complete collapse. And I was having a discussion with my editor, my managing editor of one of our publications, Strategic Intelligence, and we had, you know, you worked a little bit in advance, and I plan to write something for our April issue on climate change. Yeah, that’s a big subject. I had outlined it, and he said, “Jim, we got to do the spanking crime.”

5:13 I said, “Of course, let’s put climate change down the road. We’ll work on the banking crisis.” So I started researching and writing on Silicon Valley Bank, and then like, you know, get into more detail. But two days later they took over Signature Bank. He said, “Well, we got two banks now, we gotta zero in on this.”

5:28 It was a crypto connection, Signature. We talked more about that, and then the next day, First Republic, hanging by a thread. It’s still hanging by a thread. By the way, we’ll go over all this in more detail. And so I couldn’t write fast enough, because as I’m writing the story is unfolding.

5:43 And then you get all the corruption inside. You’re selling stock before the crash. Mary Daly, the chief regulator, president of the Federal Reserve back in New York, she’s running around doing, with the LGBTQ+ and pride flag and all this stuff. Fine, that’s you know, it’s a pre-country. You can do that if you like, but she wasn’t running the bank and she knows nothing about risk management.

6:03 She’s a labor economist, protege of Janet Yellen, came up the ranks, but knows nothing about risk management or actually running it. Back so it just got worse, and then again, here comes Credit Suisse, right? The one thing I know Maybe a little before your time, Brian, but it was a very, very popular rock celebrity writer in the 1960s named Marianne Faithfull. She had a great career, lots of hits, Mick Jagger’s girlfriend, etc. But her summary of the 60s, she said, “If I wasn’t there, it didn’t happen.”

6:35 And I thought there was a very, very good way to put it. In her case, that was true, but I started to feel that way about financial crises: if I wasn’t there, it didn’t happen. I go back to the Herstatt Bank collapse in 1974, which was a shock. That was back before. That was a foreign exchange crisis, but highlighted the fact that when European banks closed and the US banks were just opening, if you had a failure here it never settled over here.

6:58 It wasn’t real-time settlement, so it was just all these open positions of a bank that had just failed. The S&L crisis in the 1980s, the Latin American debt crisis, the early to mid 1980s, the Flash Crash in 1987, the Mexican tequila crisis, 1994. Long-Term Capital, Russia 1998. Of course I negotiated that bailout. Dot-com crash, 2007, mortgages, 2008.

7:23 Everything falls apart. 2020, COVID, and now today. So I’ve, you know, I’ve. I don’t know if I’m a magnet for trouble, but I’ve seen my share of financial crises. And as an analyst, they have certain things in common.

7:35 The entities are always different, the currencies are always different, but the dynamics are very much the same, and the one thing I can say to our viewers is that this is not over. There’s been a little bit of a sigh of relief. The stock market rallied a little bit toward the end of, uh, beginning of April. And okay, that’s a normal reaction, but any thought that the problem has been solved, the bill is complete, you’re not going to hear more, is just not true.

8:03 There’s more coming. Get ready for it. I can’t tell you, I’m not going to pick a specific name, and we all know the names of the big banks that might be in distress. Is Deutsche Bank, or Barclays, or HSBC, Santander? Yeah, I’m not picking on any of them.

8:16 I’m just saying that they’re more dominoes waiting to fall. A really interesting part about this, and again, we can come back to the specifics, is that the domino’s following is a good metaphor. If you knock, you’ve got 100 dominoes, you knock the first one, they’re all going to fall. That’s just physics. So how do you stop that?

8:34 How do you stop that crisis? Well, you truncate. You drop a steel wall between two dominoes, and this one hits the wall and this one’s still standing, but that’s the bailout. But the problem is each crisis tends to get bigger than the one before, which means each bailout gets bigger than the one before. My question that I’m wrestling with: are we now at the point where the needed bailout is bigger than the capacity of the central banks, that they’ve pulled all the rabbits they ever had, played all their cards?

9:04 And again, this goes back to what I did say about the Silicon Valley Bank rescue. It is the biggest bailout in history, and I can explain why. But if that’s the case and what else do they have? And then so now we’re dangerously close to the point where, as the crisis gets worse, it’s no longer, “Oh gee, let’s wait for the Fed to bail it out,” or “let’s wait for the ECB to bail that you get to the point. I think we’re there.

9:27 We say, “No, these guys actually can’t stop it,” and you lose confidence in the currency itself. It’s the dollar. The crisis is the dollar itself, and the euro goes along with that, and then that’s the crisis, and there’s no way to bail out a dollar crisis with dollars, because you’re just pumping more of what people have lost confidence in. And then where do you go? And there are good answers to that.

9:51 We’ve seen it again, we’ve seen it all before, but you have to take the timeline out a thousand years, or the 1350s, with the failure of the Bardi and Peruzzi banks in Florence to see how these things can really play out. So this is big. It’s not over. The regulators will attempt more bailouts, but we’re at the point where I think you can start to question the regulators themselves.

10:13 Brian Rose: Yeah, you mentioned the velocity of this happening, and I want to just quickly talk about that, Jim, because you just said 40 billion dollars being removed from a bank in 24 hours.

10:23 Like I didn’t even think that was possible. And put that on top of, or maybe that’s because of, the rumors spread so fast? And again, you’ve lived through this at Long-Term Capital Management in 1998, and you’ve seen, like you said, a litany of bank failures. Tell me about this one and how it’s different now, and I guess forevermore with the fact that we’ve got Twitter, we’ve got social media, and we’ve got electronic banking. I actually still am flabbergasted that people like Peter Thiel could take out billions, kind of online.

10:56 I remember famously, Jim, when the mortgage crisis happened here, I wanted to get my money out of NatWest, and funny enough, when I called them, they wouldn’t let me do it on the phone. They said you have to come into a branch, and I said, “Oh, I see what you’re doing, you’re trying to stop a bank run. I’m like, I’m sure that’s not legal, but I get it. They were putting frictions in place. I had to go and line up with 100 people, and then by then it was either going to be over or I couldn’t do it, or it would slow it down.

11:23 But speak on maybe the fact how fast the rumors spread, and then how fast people get the money out, how that’s different than the previous ones you’ve seen?

11:32 James Rickards: Well, you make a very good point. Perhaps here let’s go back to the Brazil, Mexico, Argentina, the Latin American debt crisis, broadly defined, in the early 1980s that played out. The intense phase lasted about three years, you know, 82, 83, 84. It wasn’t until 1990 that we got around to Brady bonds, which were the ultimate refinancing technique, but the intense period lasted about three years.

11:55 Come forward to 1998. Long-Term Capital Management, that was about three months. That was July, August, September 1998. SVB was three days or less. It was like Wednesday, Thursday, Friday, and done.

12:08 Um, and you know, I talked to a guy I know, we, no reason to mention names, but you know, runs a very, one of the largest endowments in the world, and he said, “Jim, we moved, we were moving eight billion dollars out of Silicon Valley Bank, and we got the wire transfer request in, but we didn’t know because, you know, you’ve got to close the business. Seriously, we didn’t know until Sunday that the money was going to move. We got a confirmation on Monday.

12:34 We did end up moving the money, but there was this about a 48-hour period there from Friday to Sunday when no one knew that the wires had been completed. The recipients didn’t have them. It was just in limbo. And, uh, you know, and it worked out. One of the big crypto promoters, they, forget the name, well, the particular name of the bank, but they back one of the one of the stablecoins, actually it’s USDC, had three billion dollars in Silicon Valley Bank, and they talked about, you know, all these small entrepreneurs and startups, they got 100 employees and five million working capital, and that money’s gone and they’re all going to fail.

13:13 There was something to that, but the fact is you had Roku, Cisco, eBay. I mean, they were huge companies with multi-billion dollar deposits in that bank. It wasn’t all a bunch of little guys. So, but yeah, you can, yeah, the old days you had the lineup around the block, and maybe it was raining or standing there, ain’t waiting for your turn to get up to the tower. Now you can be in line at McDonald’s, you know, with your cell phone, and just a couple hits, QR code, and boom, you know, 10 million dollars is gone.

13:41 And what Peter Thiel did, and it was right. I mean, I’m not criticizing him. He got his own money up, but he sent out like an SOS to Silicon Valley. He said, “All of you, whoever you are, get your money out now.” And a lot, a lot of people did, and that was that 40 billion dollars.

13:55 So, the time frame is becoming more compressed because of technology. You’re exactly right about that, which means that the response function has to be equally compressed, or else you are going to have all the consequences of a, you know, an honest-to-goodness global financial crisis. So, and I’m not sure if everyone knows the sequence, but on a Friday night, March 10th, the FDIC, um, took over Silicon Valley Bank, and they issued a press release, and they said, “Here’s what we’re doing.

14:25 We’re taking over. We’re putting it into what’s called a receivership.” Anyone with $250,000 or less, your deposits are fully insured. No, no errors. You’ll have your money Monday morning.

14:35 At over $250,000, your deposits are gone. They didn’t say frozen. They didn’t say suspended. They said gone, and they gave you a receivership certificate, basically an unsecured, printed-up IOU from the FDIC, but not money. As the receivership certificate, they said, “Hang on to them.

14:56 In effect, we’re going to sell assets, and as and when we realize proceeds, some assets, we’ll give you something. We’ll give you distributions on these things. Don’t know how much, don’t know when we’ll do the best we can.” Remember, in the RTC days in the early ’90s, it took them two years, and they were very efficient. I worked with them at the time.

15:14 We were in their offices, we were sitting on boxes because they didn’t even have furniture, but they were doing deals, so they had to write the right attitude, but that took two years. So, um, that was it. Well, that’s when I call the billionaire crybabies came out. And for us, Bill Ackman always says, “Oh, you’ve got to say this.” You know, I was like, “Well, you’ve got to trade on ability.

15:32 Five billion is not enough.” But anyway, they pounded on the White House all weekend. Now, here’s something that very few people say. Almost nobody knew at the time, except the management, although they seem to be asleep at the switch. Everyone’s like, “Yes, startups, Venture Capital.”

15:46 There’s a lot of truth to that. 97% of the deposits of Silicon Valley Bank were uninsured, and by the way, that’s my new metric for assessing banks. You used to look at, you know, working capital and debt-equity ratios, and, you know, bad assets, governments. There are lots of ways to measure the health of a bank, but the most relevant way right now is, and this is publicly available, take the ratio of uninsured deposits to total deposits. 30 percent is comfortable.

16:13 If you’re like, you know, 70% of my deposits aren’t short, which means they’re not panicky, they’re not necessarily going to run for the hills. 30% uninsured, but I have assets. I have that much cash or more. That’s a comfortable ratio. When you get over 50%, you’re in the danger zone.

16:29 Well, Silicon Valley Bank was 97% uninsured, which meant all the money was going to run, and it did. So that’s the way, if you’re looking at these big banks, or, uh, um, you know, any institution, or your own savings institution, to look at it, but um, but Silicon Valley Bank was a climate bank. Were they investing in startups? Yes, with investing technology, yes, but these were climate, these were green new scam, uh, uh, startups looking at, you know, battery technology, uh, you know, chemistry, physics, you know, to try to make a better battery, but not much improvement of the battery in 200 years, but, uh, there’s, they’re working on it, um, you know, wind turbines, uh, you know, other sustainable fuel alternatives, etc.

17:12 Again, I’m not, do that if you like, if that’s your field of research, but so much this is subsidized by the government, and then further subsidized by Silicon Valley Bank, and that’s where the, that’s where the assets were, that’s where the loans were, by and large, and so the White House is getting hammered, not only because of entrepreneurs’ job losses, and by the way, we are in an election cycle here in the United States. Yeah, but from the Greenies, who are extremely powerful. So, within, so that was Friday night, so Saturday everyone’s crying to the White House.

17:40 Sunday night at six o’clock, by the market on your calendar, Sunday 6 PM is when they tell you what they’re going to do. You know, they, yeah, uh, 6 PM, Sunday, November 12th, they came out on, sorry, March 12th, they came out on uh, Silicon Valley Bank. The following week, 19th, that was Credit Suisse, and then the week after that it was something else. But they always, they always announced the collapse on Friday, and they announced a relief on Sunday, so they have the weekend to work on it.

18:06 Um, they’ve got to be careful about three-day weekends. I think Easter uh, you know, Easter is an example, but um, so, on six o’clock on Sunday March 12th, 48 hours after the FDIC announcement, the gunman said, “Just kidding, the deposits are fine.” They did a complete 180 under pressure from the Fed, the White House, etc. Even though the FDIC did the right thing, you know, legally, uh, they said all the deposits are good, all of them, including my friends, 8 billion, and somebody else’s 3 billion, etc.

18:39 And then they went further, and this is what I meant, Brian, by the biggest bailout in history. Jay Powell said to every member bank, not Silicon Valley, but every member of the Federal Reserve System, “If you have underwater bonds, U.S. government securities, you know, Treasuries, or certain mortgages, uh, you can ship them to us. We will give you a loan at par value. We’ll give you cash equal to par value, even though the loans are only worth 80 to 85 cents on the dollar, because interest rates have been going up for over a year.

19:09 The value of the bonds goes down. Let’s, bond math 101: rates up, prices down. Rates go down, the prices go up. Well, the rates have been going up, so the prices are down, so these bonds are worth 80 to 85 cents on the dollar, but here’s the Fed saying, ‘We’ll give you a hundred cents on the dollar for your 85 bond, uh, on a one-year loan.'” So the loan was important, because that means they didn’t actually sell them. It was collateral for a loan.

19:35 Except you’re under-collateralized, and the Fed’s like, okay, I said I have a 14-year-old car that my dealer says he won’t give me any money for. So I sent a tweet out. I said, ‘Hey, would you give me the $70,000 I paid for it?’ It’s not worth anything, but you know, let’s get back to par here. That’s what the Fed was doing for the entire system, but the thing is, Brian, you’re talking about multiple trillions of dollars of bonds that fit that description I just gave you Now the banks are kind of saying, “That’s good.

20:03 That’s a good deal. I’ll take that. I’ll do that myself.” You know, here’s something under-collateralized. You give me the cash on a one-year, low-interest-rate loan, and now, in theory, I’ve got all the cash.

20:14 I need to, you know, pay depositors if they’re taking the money out, but better yet, I don’t have to record the loss. See, because I could sell the bonds in the market and get cash and pay my depositors, but the minute I do that, I’ve got to mark down my entire portfolio. And by the way, those unrealized losses, I estimate, probably 800 billion dollars in the banking system as a whole. So you’ve got 800 billion dollars of buried losses. And here’s the Fed saying, “We’ll give you, you know, 100 cents on the dollar, even though your bonds are worth 80, and you don’t have to take the loss because it’s structured as a loan, not a sale.”

20:52 So this is a multi-trillion-dollar bailout. You know, it’s legal in the barest sense, but it’s, it’s an accounting game. It’s a bailout game of unprecedented magnitude. And by the way, we’ll get, you know, a year from now, March 2024, they’ll extend the loan. I mean, oh, it’s only one year.

21:10 Yeah, exactly. You’re not going to be able to repay this. Who says interest rates are coming down? We’ll see, but they’re not gonna, they’re just, they’re just extended. So this goes back to my earlier point: what else you got in your bag of tricks?

21:23 I mean, you just guaranteed every deposit in the system de facto. You just guaranteed par value for, you know, trillions of dollars of government securities that are underwater. You just told everybody they don’t have to record any losses. You’ve just given them all the cash that your printer can print, with no consequences. But then they get, what else have you got?

21:47 There’s nothing else they can do. And one more twist on this. Remember what the Fed’s been doing for the past 14 months? They’ve been raising interest rates. Yeah, we know that, but they must have been reducing their balance sheet.

22:00 I run to people all the time, they bang the table, “Hey, the Fed’s got to stop printing money. They’re printing too much money. They’ve been burning money. They’ve been just, they’ve been reducing the base money supply for over a year, about a year and a half.” Well, now, okay, so the base money supply is coming down, rates are coming up.

22:15 But what does it mean if a trillion dollars’ worth of bonds show up and the banks deliver them in the box? They give us the cash. Where does the cash come from? The Fed prints it. So now you’re going to expand base money by perhaps a trillion dollars or more, at a time when you’ve been pretending to reduce base money.

22:36 So this completely blows up their monetary tightening. Okay, they’re not cutting interest rates, so we’ll see what happens there, but they are increasing the money supply, by again, estimate, upwards of a trillion dollars. So what happened to your inflation fighting? What happened to your monetary tightening? And they don’t.

22:53 They just want to pretend. I mean, you do have to, you know, you do have to be expert to understand all these mechanics, but they’re not that hard to explain. I mean, you can just say it and play it in English, which is what we’re doing. But from a policy point of view, it completely blows up their monetary tightening.

23:09 Brian Rose: Yeah, I’m really glad that you put that right out there in plain view, and I want to go deeper on that.

23:14 Just want to say that you have recorded a video where you go really deep on this, on the upcoming crash that you say is going to be fast, bloody and unavoidable, but you also explain how people can position themselves to profit from it. Again, people can watch that video at londonreal.tv/gym. I highly recommend everyone watch that video. It won’t be available on socials. You know, Jim, when I saw them do that guarantee, I was like, say, you just printed money, basically.

23:36 You can call it this, you can call it that, you can mix it up, you can do this, you just printed money, which is the opposite of what you’ve been doing and what you’ve been trying not to do, which is really hard for them to not do. But they’ve been trying not to do for what, a year, two years. But that’s basically what they did. They called it something else, fancy new name, but it’s basically the same thing. And like you said, it’s the largest bailout in history, but they would never say that.

24:02 Brian Rose: You’re like the only one telling people that that’s the case if you really drill down on the numbers, and again, they kick the can down even further. Um, as has anyone woken up to realize what’s going on, or is that the point? To just get the public looking past this?

24:18 James Rickards: Uh, that’s the point. The universe of people who really understand this, you know, certain lawyers, certain regulators, certain analysts, you know, just experts because it’s what they do, is pretty small, but the overlap between that group who really get it and the group who have an interest in making sure no one else understands it, is large, meaning they’re all in on it.

24:40 The number of people who really get it, they can raise their hand and say, “You know, I’m an expert in federal finance and government securities and repo and off-balance-sheet accounting and all that, and I think you’re trying to pull the wool over people’s eyes.” That’s like a handful. I mean, and you know, uh, uh, I’m one of them. There are others, you know, glad to say. But, uh, uh, yeah, it’s, I mean, and that’s the other thing that really, um, I just had a little tolerance for.

25:04 Just the lies, you know, if you have to do what you have to do.

25:07 Brian Rose: Yeah, you don’t want the whole system to collapse. I understand that, but you can be honest with people about it. So, um, Jim, let me ask you: they couldn’t let that fail, though, could they? What would have happened if it failed?

25:17 Because, like, we were going to feel it here in the UK, like, you know, the Prime Minister was meeting with the chancellor about what they were going to do, and then Israel’s got companies. I mean, if they let that sucker fail with 97% of the deposits. I mean, USDC, the stablecoin, was de-pegged, which boggled my mind. That the CFO wasn’t fired that weekend for keeping 10% of his money in an unsecured deposit account. I mean, I don’t know where to get started, Jim, but, um, like, what would have happened if they let it fail?

25:50 James Rickards: Well, one thing, uh, one thing I really like about, uh, Britain is, um, like, every regulator, uh, politician, they, they mess up, and, uh, they make mistakes, and it happens all over the world, but the British are really good at stepping up. They resign. You know, if you’ve done very badly, you’re a minister or head of something, and just things go badly on your watch, even if it arguably wasn’t your fault, they resign. So I’ll just resign. The Japanese do too, and someone takes their place.

26:17 In America, we act like nothing’s wrong. Nobody resigns. Nobody takes responsibility. And I would have said Jay Powell, uh, Michael Barr, who’s the vice chairman of the Federal Reserve for supervision, so he’s the guy who wears the regulatory hat, Powell the chairman, and Mary Daly, who’s the president of the Federal Reserve Bank of San Francisco. Why haven’t all three of them resigned or been fired?

26:40 I mean, this was not arcane. I mean, I’ll grant, Brian, that you can get into derivatives and crazy off-balance-sheet structures, and very few people understand it. You don’t see it coming, okay, that’s true, but this was simple. These were, uh, 97% uninsured deposits, ready to run out the door, with a massive, massive bond loss, and they were in, they were in like 30-year bonds, 10-year notes to 30-year bonds. It wasn’t like they had Treasury bills, so you can always sell a Treasury bill, maybe take a little haircut, but not really.

27:10 So you can have a government security, which is a Treasury, almost no credit risk. I won’t say none, but almost no credit risk, but there’s always market risk. But the thing about Treasury bills, you know, three-month bills or six-month bills, there’s, there’s very little market risk. They’re not volatile, but you’re into 30-year bonds, forget it. You can take 20-point hits when you get the kind of interest rates we saw, and that’s what they had, and they put them in this, this held-to-maturity account, HTM, health insurance.

27:35 Yeah, we own them, but we’re going to hold them for 30 years. And, um, so therefore you don’t have to mark them to market, except if you sell them. If you sell one because you got a run on the bank, you’ve got to mark them all to market right then. That’s what this, this Fed facility was about. Um, the CEOs sold over three million dollars’ worth of stock about 10 days before the collapse, uh, now he says, uh, what was according to a pre-filed plan with the SEC, so it wasn’t in response to any news or whatever.

28:07 What do you have to understand? There are such things, but these pre-filed plans can be part of the scam, in other words: I see it coming, so I’m going to file a plan so I can keep selling my stock, and then if I get accused of insider trading, I’ll go, oh, it’s all according to plan. Well, who’s to say that the plan wasn’t part of the scam? That’s the kind of stuff that was going on. The CFO sold a lot of stock.

28:28 Um, so they’re, you know, there’s necessarily going to be investigated, but you can see this coming. But, but my point is, a bright high school kid with a spreadsheet could have seen this coming. This is not, these are, you don’t have to know Black-Scholes in your sleep to see this. It was assets, liabilities, huge uninsured deposits, about 125 billion dollars of uninsured deposits, ready to flee, and a comparable amount, slightly more, of the most volatile government security.

28:55 It’s okay, but extremely volatile, not liquid, not that liquid in a crisis. That’s all you had to look at. So where, what, where were the regulators? Where were the supervisors? They said, “Well, we sent them a bunch of letters,” and they tried out the letters as if that was exculpatory in terms of their regulatory incompetence.

29:17 It wasn’t. If anything, it made it worse, because, like, “Oh, okay, you actually knew about it and didn’t do anything.” The one thing, if you never went over and knocked on the door, but you did, you saw something extremely risky, you sent him a letter and then didn’t do anything. So. Um, and again, this, um, uh, it’s amazing how Washington works.

29:35 Mary Daly, I mentioned her. She’s president of the predatorship back in San Francisco. She was on the short list to be nominated to the Board of Governors in Washington to fill the seat that Lael Brainard left. Little Brainard was a member of the Board of Governors. I believe she was vice chairman, but she left to go to the White House in the National Economic Council.

29:55 She, but she, she really is smart. She’s a big brain. She knows what she’s talking about. Very few of them do, but she’s one of them, but she goes to the White House, but that’s an audition for Secretary of the Treasury, because they’re going to throw Yellen under the bus. Yellen knows nothing.

30:10 If y’all were on this call right now, she wouldn’t know anything.

30:13 Brian Rose: We’re talking about, how is that possible, Jim?

30:16 James Rickards: Affirmative action. She’s a, uh, she’s a, uh, when she was chairman of the Fed, I said she was incompetent, and I was right. And then she became secretary of the Treasury.

30:24 She’s a, she’s a statistics gig from Berkeley. She’s got a big brain. I’ll give her credit on IQ points. So what? That’s not the same as common sense or working knowledge or knowing how the street works.

30:36 She’s never worked, you know, outside of government in her entire life. I don’t care what your resume is. If you’ve never run a business, met a payroll, you know, negotiated a personal sale agreement, you know, kept your morale up with negative cash flow, if you’ve never done any of those things, you don’t know what it’s like to be in the real world of the economy. She doesn’t, but she, but her specialty as an economist was labor economics. Okay, well, there’s a place for that, but not as U.S.

31:05 Treasury secretary. You have to know much. She didn’t know monetary policy at the Fed. She doesn’t have fiscal policy of the Treasury. There’s nothing about international economics, and that gets us into the role of the dollar.

31:16 She’s just, she was like, uh, her husband won a Nobel Prize, okay. George Akerlof. I know a lot of her close associates. Um, she, you know, if you don’t want to say affirmative action, you can say the Peter Principle, uh, which, you know, just goes back to the ’60s. But the Peter Principle is, you get in a bureaucracy and you do a good job, and they give you a promotion, and then you keep doing a good job, and they give you another promotion, and you keep doing a good job, eventually you get to a promotion to something where you’re incompetent.

31:43 You’re actually in over your head and you fail, but then you stay there because you’re not getting another promotion. Um, and so the result is bureaucracies are populated with incompetent people, because they’ve all risen to their level of incompetence and have nowhere else to go. I would say she got there. The Fed, how she got another chance at Treasury, but that’s, you know, that’s the answer. Um, and, uh, but Lael Brainard, I’ll say, is, uh, is more talented, and hopefully she’ll be.

32:10 So they’ll throw Yellen under the bus, blame her. That’s, by the way, that’s the Biden technique: deflection and denial, and, uh, just blaming other people. So they’ll blame her for the whole thing. She probably doesn’t see that coming. By the way, maybe she should tune into London Real, and then they’ll put a little Brainard over there.

32:26 But Mary Daly was on a short list to Brainard’s seat at the Fed. Well, you can forget that. She can’t get to a hearing at this point, but she was, um, running around on, you know, climate change, uh, social justice, uh, George Floyd, BLM, and again, pre-country, you want to express it, be my guest, but not as chief regulator of Silicon Valley Bank.

32:49 Brian Rose: Yeah, yeah, it’s, uh, so should they have let it fail, and what would have been the carnage, Jim, if they had?

32:56 James Rickards: Well, against hindsight, it shouldn’t have been allowed to get to that place anyway, but there might have been more. This is where there’s a lack of creativity. It’s kind of all or nothing. It’s like, oh, if this fails, we’re going to have a bunch. We’re gonna have a wave of failures of startups in Silicon Valley.

33:10 That’s probably true. Probably true, um, but most of them fail anyway, if you know the venture capital business, and I’m sure you do, uh. Most of these things fail anyway. A couple winners here and there. Well, how difficult would it have been?

33:23 So now you’re the entrepreneur. You had five million dollars of working capital, but you got in an, around, you know, an angel round or whatever from some venture capitalist in Silicon Valley. You got some premises, you’ve got to pay. Well, you’ve got some developers, you’ve got employees, all that stuff, and now your cash is frozen, not just frozen but gone. You’ve got to look at your money, and they got a deal from the FDIC.

33:47 Um, if those, now, who’s to say if those companies were well run and they actually had some good technology? How difficult would it have been to make a few phone calls and say, “You know what, we’re stuck in this thing. Um, I need a, I need a two-year bridge loan. I needed a one-year bridge line, uh, and, uh, I’ll collateralize it by the proceeds of my receivership certificate, and that’s when I get paid. I’ll pay down the loan.

34:11 We can have a simultaneous closing. All good. You could have got money. Those, some of those friends could have got money, some of them not.” Um, maybe some layoffs, uh, maybe they would have failed, and, but most of them do anyway.

34:23 I mean, that’s my first point, but that was not the majority of, and you know, unemployment would have gone up. I mean, I’m not saying that there are no hardships, Brian, but we gloss over the greater hardships on the economy as a whole, and that gets to the other lie, which was Janet Yellen coming out and saying, um, there’s no cost to the taxpayer. Like, wait a second, because you mentioned the bailout of the Fed, taking the loans below market value and giving them you know, yeah, so at market value and giving them par value, which is more for one year, and glossed over that whole thing.

34:59 Um, but there was a separate bailout, which is the FDIC guaranteed every penny of every deposit in all those banks. Well, when you look at the numbers, you have grossly, uh, depleted the insurance fund. After, I see, as an insurance company, that’s what the I stands for, uh, and, um, they have reserves just like every other insurance company. They charge premiums, that’s how they go. Uh, this would have basically wiped out the reserves.

35:22 So how are you gonna top up the reserves in the FDIC for future bank failures? Well, they said, “We’re going to raise premiums on the banks.” Okay, they are, but what do the banks do? Well, they’re going to either pay you less interest or charge you fees. In other words, the bank isn’t just going to sit there and write checks to the FDIC and watch their P&L evaporate.

35:43 They’re going to pass the costs onto the customer, which is us, which is the American people. So does your tax bill go up? No, but your interest rate is going down, or your banking fees are going up, so the cost is shifted to everyday Americans. So don’t tell me that we’re not paying the bill, because we are. So again, these are, these are, in the nature of government, lies to kind of, you know, discuss what they’re actually doing.

36:05 Brian Rose: Yeah, at MIT Sloan School of Management, one of the lessons that one of my professors taught me early on was, there’s no free lunch. Uh, so yeah, there’s none here as well. I just want to let people know you have just recorded an important video. It’s not going to be available to the public. It talks about the upcoming crash that, as you say, it’s going to be fast, bloody and unavoidable, but then you explain how people can position themselves to profit from the crash.

36:27 Our viewers can watch it at londonreal.tv/gym. I highly recommend people watch that video. Jim, I want to ask you about the international banks, because when I worked in credit derivatives here in London for 10 years, two of my biggest clients were Credit Suisse, and Deutsche Bank, and it was very hard for me to watch a massive institution like Credit Suisse literally just go bankrupt in front of my eyes, and Deutsche Bank, again, one of the biggest European banks, one of the biggest derivative traders in Europe, again, at one point was faltering and looked like it might be going that way.

37:00 Brian Rose: What do you make of this international crisis as well, and again, how does this play out?

37:06 James Rickards: Well, that’s a great question. I do think that’s the next battle space, as we put it in European banks in particular, but internationally, but there’s a thread that runs from Bitcoin in November 2021 through Silicon Valley Bank, Credit Suisse. Let me, let me explain, uh, explain what that is, what’s going on is contagion. It’s been natural contagion, and the word contagious is not just a kind of acute metaphor.

37:34 It’s the mathematics of a viral contagion, which we’ve all just lived through with COVID, and we don’t need to rehash that, and a financial contagion are the same. Uh, and, um, Robert Schuller pointed this out in the book, but I, I had identified it years ago and I use it in my own analysis. It’s called the SEIR model, and S is for susceptible, so, like, you might get the disease. E is exposed. You were exposed to it.

38:01 I is infected, and R is recovered. So, are you susceptible? Did you actually get exposed? Did you get the disease, and did you recover? They left out dead.

38:10 I mean, there’s recovery to this. Like, what’s Ned, of who people get, and some of them die, and they’re the banks that get carried off this off the field. But the math is the same, and um, so when we look at how disease spreads, financial spreads the same way. Now, this panic, you can say it started with Silicon Valley Bank, and that’s fair enough, but this goes back to November 2021. That’s when the Bitcoin crash began.

38:34 So between November 2021 and November 2022, Bitcoin fell 70%, went from about $68 000 to about $15,000. Now I know it’s back, it’s up over 25%. That’s Bitcoin, but that happened, and a lot of people had Bitcoin loans. They had deposits in crypto exchanges that themselves had over-invested in Bitcoin or had leveraged that’s on Bitcoin, so you were saying a crypto crisis. You were seeing a financial crisis in crypto land with um, uh, Alameda, FTX, of course, that was a fraud.

39:08 Um, Genesis, um, three Arrows. There were holes, and they’re still happening. Their whole series of crypto firms collapsed and I was watching this, and the question I kept asking myself is, okay, there’s a fire in crypto land. They call it the crypto winter. Does that jump from crypto land to mainstream banking?

39:27 That was the question I was asking. It’s, in biology, it’s called the zoonotic transfer. Does it go from the bat to the human? Although the Wuhan virus came from a lab, but the idea that there is zoonotic transfer is true. So I said, does this somehow jump from crypto land to mainstream banking?

39:45 And it did, and the vehicle was not Silicon Valley Bank. It was something called Silvergate Bank. So Silvergate Bank announced it was filing for bankruptcy the day before Silicon Valley Bank went down. But what’s special about Silvergate Bank? Silvergate Bank, you saw, Silvergate Bank was a regular bank, member of the Federal Reserve System, FDIC insured, but it was completely encrypted, was financing crypto lenders.

40:09 Uh, it owned crypto, uh etc. And so that was the bridge. That was how the virus jumped from crypto land to mainstream banking, and then Silicon Valley Bank fell right after that. So now, uh, yeah, we have, again, we’ve gone over the kind of capsule history of Silicon Valley Bank and so forth, but now the contagion, uh, spreads to Credit Suisse. But let’s get in our time machine and go back to 2014.

40:37 Uh, Brisbane, Australia, uh, November 2014. What happened? That was a G20 meeting, and it was not long after the 2008 financial crisis, and the biggest blowback out of 2008 is, hey, the taxpayers bailed out everything, which they did. They didn’t get any reward, and all the big shots kept their jobs. You know, Jamie Dimon’s bonus didn’t take.

40:59 Didn’t get whacked. To me, they all got, they all kept their jobs. You know, John Mack and Jamie Dimon, and, you know, down to the list of names. Lehman Brothers failed. Okay, they were carried out Pete first, but all the other banks were propped up by the Fed.

41:13 I mean, Morgan Stanley was days away from failing. Uh, you go back over the history of that. They were calling John Mack saying, could you bail out Lehman? He was like, I’m kind of busy bailing myself out right now, and Morgan Stanley would have fallen. Goldman next, probably Citi, if JP Morgan was the last guy standing.

41:29 Don’t know, but that’s what was happening. As I said, they dropped the curtain, truncated it. They made Goldman Sachs and Morgan Stanley bank holding companies overnight. I’ve worked on bank applications. They take two years if they like you, in three years if they don’t, but this happened in literally overnight.

41:45 Hey, your bank holding company, which meant the Fed could be on the mountain. They did, but there was a big political reaction to that. This contributed to, you know, the rise of Donald Trump, the rise of the Tea Party, Nigel Farage. I mean, there was just a lot of nationalist, conservative blowback to this. So the elites at the G20 meeting said, “We can’t have that happen again, so here’s the New Deal.

42:06 We’re not doing any more bailouts.” We’re going to do the bail-in, and what’s the difference? The bail-in is um, we’re just going to whack the, the parties in interest. Equity gets, so in a, in a crisis, in a collapse, there’s a hole in the balance sheet. Equity gets wiped out.

42:22 Um, depositors are going to get wiped out to the extent needed to fill the hole in the balance sheet, and, and senior credit. We’re just going to keep going and take money from all the holders of any level until the hole on the balance sheet is filled, and only then will the government get involved. Hopefully that won’t be necessary. No more bailouts of bondholders. In other words, no more bailouts also for depositors.

42:44 That was the bail-in rule. So now come to Silicon Valley Bank. What happened? The FDIC actually did the right thing. They said, “Okay, bail-in applies.

42:52 We’re not going to grow the taxpayers or the insurance fund. We’re going to say those deposits are gone.” And they did, but that lasted 48 hours, and then they said, “You know, I said just kidding, the deposits were all good.” So they abandoned it. So this is, uh, what, nine, nine years: 2014 to 2023.

43:10 This is nine years of living under the bailing regime, and when they tested it, it only lasted 48 hours. Okay, so that was a joke. So now come over to Credit Suisse, and this is, this is your question, Brian. What did they do? Well, if you were applying the Brisbane bail-in rules, you would have said equity zero, uh, you know, bondholders, okay, you’re gonna take a loss, etc.

43:33 It’s not what they did when the Swiss National Bank did the shotgun merger. UBS gave three billion dollars to equity. Now that was down 97%. It was a hundred billion, that market, not not that long ago, and they got three billion, but they got something. But then there were these other bonds called CoCos, which are contingent convertible.

43:56 What the heck is that? Well, it’s called an AT1. That’s the category on the capital table, and it counts as equity even though it’s a bond, um, and if a regulatory capital purposes, and so what the way, way contingent convertible works, it’s a bond, pays interest, all that good stuff, but if the bank gets into stress, it can flip to equity it, so it builds up the equity cushion and saves the bank. That was the idea, and the bondholders were going to take that risk because they got a higher yield.

44:25 They said, “Hey, if I end up as equity, that’s not all bad either, maybe the bank’s worth something.” But what happened was they waited until the bank was dead, then they flipped the CoCos from bonds to equity, and then wiped out the equity. So the idea that this was your life preserver, it was a pretty soggy life preserver. They got wiped out, but they still gave three billion to the old equity, even though they wiped out the newly converted equity in the CoCos.

44:49 And by the way, this destroyed the CoCo market. It’s $275 billion, that market’s dead. You know, if you own them, you know, enjoy, as we say in New Jersey. But um, but why? So why did they get three billion equity?

45:00 Because it was equity that was owned by the Saudis, because they had bailed out Credit Suisse not that long ago, and this, the kingdom said, “Hey, if you wipe us out, we’re taking all our money out of Switzerland.” So they had to throw him a bone of three billion dollars’ worth, just to kind of appeal, so a loss of face with the Saudis. So, man, you’ve got layers behind this, Brian. Like, you know, that’s crazy. The kingdom calling the Swiss National Bank saying, “Don’t mess with us.

45:26 Our history, building. What about the CoCos? Too bad for them. They’re not, they’re not the kingdom.” Um, and you know, there was a shotgun wedding, and they passed it together.

45:34 Hopefully UBS will survive. Uh, but pardon me. So, um, they broke these very, these, these long historical capital structure hierarchies. They just kind of mishmashed them up and said, “You’re gonna get paid. You’re not going to get paid,” and it’s all because of the relationships they had to keep correct.

45:55 And the Silicon Valley thing, uh, you know, bailiology department, that was very much driven by the green new scam and the climate change crybaby babies and all that, and the UBS thing was driven by the Saudis. I didn’t know it was all political. None of it was in accordance with what they said they were going to do. They literally made it up. And it kind of gets back to what we’re saying earlier.

46:15 Bank crises are now compressed from, like, three years to three days, which they are, including the weekend. Um, you better have some pretty fast answers. So they’re just improvising. This is like um, you know, Tom Brady used to do a French Tarkington, and then there’s other quarterbacks get in the backfield, the whole play would fall apart, but they were famous for, like, being like ballet dancers. They move around the field, look for open receiver and throw the pass.

46:40 Um, that’s what they’re doing. They’re scrambling in the backfield, helping someone catches the ball, right? And that works until it doesn’t.

46:47 Brian Rose: That’s the problem, correct? And like you said, when we opened this broadcast up, very, very powerfully, that they’re running out of ammo.

46:53 They’ve been running out of ammo for a long time, and even though no one’s really looked into how big this is. If you run the numbers you just put out, this is massive. Maybe the biggest in history, and so it’s going to get to a point where they literally won’t have the capital reserves, because it’s all about confidence as well. And if you don’t believe that they’re, if you’re not confident they have the reserves, then it’s no longer about the banks, knowing about the Fed.

47:16 It’s about the dollar, and when the dollar fails, like you said, you got to go back to the 1350s. I don’t even want to consider that scenario, because it’s the strongest fiat currency in the world. So what the hell do we go back to? Gold, and does Bitcoin go to a million? I mean, what else is left?

47:30 Brian Rose: Cattle? I mean, what are people using? I don’t even know what that doomsday scenario looks like.

47:35 James Rickards: Jim, well, it’s funny to say cattle. I just, you know, I’m a geek.

47:39 I was studying, uh, the British Zulu War of 1879 the other day, but the currency of the Zulus was cattle. It was like a little thing on Wikipedia. It’s like currency, cattle, so it works, uh, in certain places. But yeah, um, well, okay, so we’ve gone through all the bad news, so have a little good news. Um, I’ll leave the Bitcoin thing to others, uh, it has its place, so I’ll leave that to other experts.

48:01 But, um, as far as gold is concerned, turn the one. There are many, many failures on the part of government, regulators, the chancellor of the U.S. Treasury, ECB, we talked about a lot of them, but the biggest single failure is assuming, but the biggest single failure is taking everything for granted, assuming that whatever occurrences happen, whatever bailouts are constructed, that the dollar itself will not be called into question, and there is no legal limit on the amount of dollars that they can print.

48:34 There isn’t. There used to be, uh, as late as 1968. Um, the Fed was required to keep, uh, 25% in gold. Uh, but the Treasury has the gold, but there had to be that much gold around, so your, uh, your base money, your M0, could not be more than, uh, four times the, uh, the gold supply, and earlier that was even tighter. Um, but they abandoned it.

48:58 This was at the time of the Vietnam War, when Lyndon Johnson just wanted to print. Hey, the Great Society and the Vietnam wars. They took it away, since then there’s been no limit on the Fed’s ability to create base money. So when you say, oh, well, the balance keeps getting bigger, and they do, and the money printing keeps getting bigger, and it does. But if there’s no limit on that, why can’t you keep doing it?

49:17 And that’s how the elites view it. They’re like, yeah, we’ll just print as much as we can. What’s the problem? Um, but there is a limit. It’s a psychological limit.

49:24 It’s a um, behavioral, um, you cross it. What physicists call a critical threshold, where you’ve gone through the looking glass. No, it’s no longer more of the same with a bigger balance sheet. She’s like, you know what, I’m looking at your whole balance sheet, I don’t like anybody, get me out now. Here’s where people are.

49:42 Everyday people are much more creative and much more adaptable than the regulators understand, because if I, I made a close study of modern monetary theory, and I write about that, and um, uh, you know, Stephanie Kelton. She’s the big brain, professor at, uh, um, Stony Brook, uh, State University of New York. She’s the thought leader of modern monetary theory. Also, by the way, chief economic advisor to Bernie Sanders and his two campaigns, and chairman of the Senate, when he was chairman of the Senate budget committee.

50:11 But, uh, but that’s their starting place. They’re like, what’s the problem? We can print as much as we want. I have as much debt as we want. They actually say debt is a favor to investors.

50:20 The government doesn’t need the debt. Just give it to our, instructions for Lockheed, and we’ll send in the money. Why do we have to issue bonds and then pay them? Yeah, cut out the debt. Mark is a favorite of investors.

50:29 That’s actually what they say. Um, but what she’s missing, what the advocates are missing, what the Congress is missing, what everybody’s missing is that people will have a revulsion against the dollar. Uh, and I remember when I was a kid, uh, in the ’50s, uh, but not that far removed from the 1930s, there’d always be a great, great uncle or somebody at the family reunion, and they say, “Yeah, you’ve been, like, nine years old, saying, ‘Hey kid, don’t take any wooden nickels,'” you know, those advice from your great uncle.

50:56 Well, I was like, what’s a wooden nickel? Well, there actually were wood nickels in the 1930s. Some, in a town, there was a severe shortage of money, that the Fed completely screwed that up. Nobody wants to borrow, nobody wants a loan. They weren’t creating any money, and it was as short as your money, and some carpenter in town would take a dowel and slice it and make wooden rounds, and they would stamp it.

51:17 You know, it wasn’t five bucks, because that was a fortune. You know, five cents or whatever it was. A wooden nickel. But if everybody in the town agreed, like, I could go into a barbershop and get a haircut, and pay for the barber, who could pay his assistant, and that money circulated. It was money, money.

51:31 I think gold is a great form of money. It doesn’t have to be gold. It has to be whatever it is. It has to be something that everyone has faith in, and if you have confidence that if you take it from me, and it shares your goods and services, and someone else will take it from you, and that shared belief is sufficiently widespread, it’s money. That’s all it takes.

51:47 And so people will go find other forms of money, and they’ll do it very quickly, because you need money. I mean, you need a medium of exchange now. The obvious candidates are gold and silver. Um, I’ve always recommended, uh, American Gold Eagles, one-ounce gold Eagles, for um, uh, for, you know, as a store of wealth. By the way, I’m not a gold dealer.

52:07 People always go, Jim’s just selling this product. I don’t sell gold. You know, buy it or not, it’s up to you. Knock yourself out. But I, I, uh, but I do recommend it.

52:15 Um, but lately I’ve been, uh, very interested and then did a little work on the history of the one-quarter ounce, uh, American Gold Eagle. It’s a, it’s an eight-gram coin, but that was patent on the British sovereign. The British sovereign was not a, it was, it was 7.9 grams, uh, but the reason was it was spendable. Like, if I show up with an ounce of gold or five ounces of gold, it’s like, well, I don’t need, you know, it’s two, only ten thousand dollars’ worth of groceries.

52:42 You know, I probably need 100 bucks, or whatever, to feed my family for a week. So that’s where the, the eight-gram, the one-quarter-ounce coin, which would be, even today, is like 500, um. But better yet, the one-ounce silver coin, the American silver, but you know, the Canada’s Maple Leafs, and, you know, the, the UK has their own coins. There’s a Viennese Philharmonic, uh, there are lots of good coins around the world. Um, but the one, one-ounce silver dollar, by the way, that was the dollar in 1780.

53:11 That’s what a dollar was. It was copied from the Spanish doubloon, uh, you know, pieces of eight, because you would break off an eighth of it, and that’s why stocks were traded in eighths uh, for a long time. But um, but that’s practical. So a one-ounce silver coin today is worth about 25 bucks, 25, 30 bucks, depending on the commission. Well, that’s, as we said, Philadelphia.

53:31 That’s walking-around money. I mean, you can buy a meal, or, you know, four silver dollars. I’m again, um, when I was a kid, like, if you were 10 years old, you know, your parents would give you 10 silver dollars for your birthday present, you know, but it was real silver. I mean, that act today would be worth 300 bucks. Um, so but people can go to that.

53:50 You can get the quarter-ounce gold coin, which is, you know, I mean, in ’17 or said 1910. 1910 is a good, good searchers. You could board the vessel in Southampton with your purse of sovereigns, go to Shanghai, get off the vessel. That was money, good. That was, you could spend that.

54:07 No, you didn’t need travel objects. You didn’t need anything else. So people will go to forms of money they have confidence in: gold, silver. All right. Bitcoin, um, I, I don’t know any, but uh, it has its place.

54:20 Um, but uh, and get out of dollars. Now we’re seeing a lot of evidence that that’s actually happening. The US, by the way, Brian, I, um, I do this kind of analysis, but I actually teach a seminar in financial warfare at the U.S. Army War College. Um, and I’ve been, I’m involved with the Florida Institute of National Security.

54:40 Um, it’s a good think tank kind of group down in Florida, but we got the, we have the world’s third fastest non-government computer. Uh, you know, it’s used for a lot of other things, but it’s available to us. We’re working on artificial intelligence and financial warfare, so I do a lot of tweeting pictures of that down there.

54:55 Brian Rose: So I want to ask you a little bit about AI.

54:57 James Rickards: Definitely.

54:58 Yeah, yeah, that’s, that’s the new thing. But um, but my point is I do a lot that is kind of on the front lines of um, you know, warfare, financial warfare in particular. They don’t need me to jump out of helicopters, but uh, that’s not the battle space today. I mean, some people are, but the battle space is financial. This is not just the financial economic uh, ancillary vector to a kinetic war.

55:21 You could argue this is, this is the war. This is a finite global financial work. And so, uh, the, the, the fact that we’re depending on that in terms of dollars, but confidence in dollars eroding. I don’t have to go. I think our viewers know the list.

55:38 China, Saudi Arabia are advanced in discussions to pay in yuan for oil. Uh, Brazil, China just did a real um, uh, yuan, uh, currency swap facilities. They’ll be paying each other. Russia, China are very far along. Russia pays in rubles for, uh, Chinese manufactured goods and systems, telecommunications.

55:58 China pays in yuan for Russian weapons and oil. Um, this has gone on all over the world. The BRICS+ are coming out with a new currency, uh. I talk to people in the Treasury, in the Pentagon, in the intelligence community, and I tell them what I’m telling you and our viewers, um, but they don’t listen. So, uh, I think I told you the one story I was in that we call Vault in the Pentagon, and I was describing kind of what we’re talking about right now, and this guy is sitting two seats away from me, one person in between us.

56:29 He was the assistant, uh, he’s a senior official in the U.S. Treasury, and he was assigned to Japan for, uh, dollar, yeah, international economics. Basically, it was a currency expert. He was Treasury. Interestingly, his name was David Dollar.

56:42 So I think kind of interesting last name for the guy. But I say what I just said, and he sat up, and he took both hands and slammed them on the table, palms down, and said the dollar has been the global reserve currency. It is the global reserve currency, and it always will be the global reserve currency. And I said, I took a beat, and I said, uh, David, I feel like I’m in Whitehall in 1913, listening to John Bull tell me about the British sterling, which, you know, it always will be the global reserve currency.

57:08 Say, well, that was over by 1944. So these things take time, but uh, that’s the threat, and the regulators don’t see it.

57:14 Brian Rose: Yeah, that’s powerful. And again, like you’ve been talking about this for a long time, you know, currency wars, all this, but that’s interesting, because a couple years ago I realized we were in an information war, but I haven’t really thought deeply about how we’re really in a financial war, and how that is much more important. People should be paying attention to that, as opposed to this kinetic war in Ukraine.

57:36 And we might have time to talk about that. I got to ask you a couple more pressing things. Just want to say, viewers need to take time out and watch this video of yours. It’s the londonreal.tv/gym. They can find out deeper analysis on this and ways that they can profit as well.

57:50 Um, I’ve got to ask you about something happening today in the states, and that’s the indictment of Donald Trump, former president of the United States. What is your take on what’s happening there, and what the consequences will be like for the next year and maybe longer?

58:05 James Rickards: Well, obviously it’s a, it’s a challenge for Donald Trump. My expectation, and this may not even go to trial, this case is so flimsy, gender, blatantly political. Um, kind of hard to describe.

58:16 And you know, you’re very kind at the introduction, Brian, dimension on being an economist analyst. I also happened to be a lawyer, so I, I know a little bit about that side of things. Um, the, uh, there’s, there’s an aspect of this that may be litigated to the United States Supreme Court before this ever gets to trial, and because it would be one of your opening motions, and if it gets to the Supreme Court, the Supreme Court actually won’t care about Alvin Bragg, Donald Trump, or anything else.

58:44 They might care a lot about the constitutional precedent that they’re trying to set, which is the following: you’ve got to show a crime. Right? So what’s the crime? Well, they’re saying is he violated the business, everybody says, you know, hush money to a porn actress. Well, you know what, I should probably, do a porn actress is actually legal.

59:01 I’m not saying it’s commendable. It’s legal. I, uh, I’m not going to, I said, I don’t know how many, uh, you know, employment-related sexual harassment-type cases. I said, oh my, every business does, every day. I hated those cases.

59:13 They were always a mess, but you basically gave somebody money, got a non-disclosure agreement, and life went on. Um, and that’s what this was. Uh, but uh, but they want to play up the porn side of it, because obviously it’s, you know, it doesn’t reflect well on Trump, but technically, when the money changed hands, you’ve got to record it in your records books and records, and New York state has a business records law that’s basically civil. You know, a lot of the fake your records, etc.

59:42 Um, because it wasn’t recorded, I was like, you know, hush money to a porn actress, because I don’t know what you’re supposed to say in the ledger, but something more than, you know, legal fees, I guess. You know, I don’t know, we always said legal fees. Uh, but um, uh, but the original payment, whatever it is, is long outside the statute of limitations. Uh, and the business records law is outside the statute of limitations, with one exception, which was if the business records violation was to cover up a crime, then the statute of limitations is longer on that particular business records violation.

1:00:18 So they had to come up with a crime on the other side of the, of the ledger, to extend the statute of limitations on the ledger entry, to make the whole thing a crime. Well, what’s the crime? Because again, it is not illegal. Um, well, the crime was, it’s a violation of Federal Election Commission rules, because his motive was to cover it up, because he was running for president. Um, now that’s a stretch, because yeah, I can think of 100 reasons for settling.

1:00:48 You know, allegations, false or real, you got people throwing mud at you. You know, get it out of the way, settle, settle the case. So and by the way, there was a famous case. John Edwards was running for president, who did something similar. Not, it was you know, a legitimate child mistress kind of thing, but he paid that person off, and it was alleged that was a campaign violation, and it was litigated in a criminal case, and I wish, was acquitted.

1:01:15 The jury said that’s not, you know, it’s personal, you know, again, on you, but not a campaign violation. So we even had precedent that that’s not a campaign violation, but um, but Bragg says it was, and therefore there’s the crime, and therefore the business record exception, criminal cover-up rule applies, and we’re still in the statute of limitations. So that’s how tortured this whole thing is to begin with. But here’s where it falls down. Uh, that federal election violation is a federal law.

1:01:44 Now we have a federal prosecutor system. The United States attorneys, there’s like one, sometimes two or three, in every single state. The United States attorney’s office in New York looked at it and said, no, we’re not, we’re not taking this case. So here’s Alvin Bragg. Alvin Bragg is, you know, I got another U.S. federal system.

1:01:59 He’s a county prosecutor. He’s not even the state attorney general for New York. He’s a county prosecutor, local D.A., district attorney. And he’s creating a crime that’s highly attenuated, but the ultimate crime that extends the statute is a federal crime. So here’s the constitutional question: can a county D.A. bring a federal case?

1:02:22 It’s never been litigated, because no one was ever dumb enough to try it. But now we have our man. So, um, but I’m sure Trump’s lawyers will be arguing statutory limitations, political motivation, um, you know, and a lot else besides, but you know, evidence, you think, but, but it may be that the first stake in the ground is, uh, this is unconstitutional, because a D.A., state D.A., cannot bring a federal case, and that’s something the Supreme Court would be very interested in.

1:02:49 This is now we’re heading back to Marbury versus Madison, you know. But this thing is, it’s a disgrace. Uh, you know, Beria, who of course, Lavrentiy Beria was the head of the, uh, um, the NKVD, the, the, the, the secret police under, uh, Stalin, before, you know, the KGB was around. But this was, this is back in James Bond days. So, uh, but Lavrentiy Beria was the head of the secret police under Stalin, and he said to Stalin, show me the man, I’ll find you the crime, meaning tell me who your victim is, we’ll find a crime.

1:03:22 That’s the easy part. And that’s kind of what this looks like. This is just, this, you know, Trump derangement syndrome, which I think psychologists in the future will treat as a medical condition. Um, but people just lost them. This isn’t like, oh, I like you, I don’t like you, I’m voting for you, I’m not voting for you.

1:03:37 Whatever this is, it’s like a disease, and their obsession with Trump and he’s skated on everything so far. In the tax records, remember, they got the tax records. There’s nothing there. It’s like you know, it’s a consolidated return of like 100 real estate entities. And so, what I mean, like, I used to be international tax council at Citibank, back in the days before electronic filing.

1:03:57 We used to send, uh, our tax return in a truck, because that’s how big it was. Um, so uh, that nothing came of that. Nothing came of Russiagate. The impeachment was a hoax. Um, you know, the tax returns were like boring.

1:04:13 Uh, you know, they haven’t been able to nail this guy, but now they’re going to, a part. But so, so I think it’s a disgrace. I think it’s a politicization of the law. It’s interrogation. It’s bad for the law.

1:04:24 It’s bad for civil society. Uh, it’s, uh, inflaming, uh, passions on both sides. The mayor of New York the other day said, uh, I know they’re going to be demonstrations when Trump shows up for his arraignment, but uh, I want everyone on their best behavior and I sent out a tweet. I said, I don’t remember the mayor’s office talking about best behavior during the George Floyd riots, antifa, BLM, burning police cars, running cops down in the streets, mashing windows, turning Fifth Avenue into a ghost town.

1:04:53 I don’t remember anyone saying, beyond your best behavior. So that’s how bad it is. I, yeah, I mean, I, I could go on, but I guess as a lawyer, all the political, all this social disruption, the derogation of law. It’s all there, and it’s all bad, but I’m a little bit intrigued by the fact that there’s maybe a world-historic, or historic, constitutional issue at the heart of this case that may go to the Supreme Court before we ever see a trial.

1:05:18 Brian Rose: Yeah, it’s interesting that some of these people ran on, you know, the platform that I’m gonna put, jump in jail, like, again, like I’m gonna get that guy, so elect me.

1:05:28 Yeah, so again, like you said, back to the Stasi. Uh, we’ve got Dershowitz here on Friday, who wrote a whole book called Get Trump, who’s been kind of breaking this case down in real time. My last question regarding Trump is, Jim, did they just get him reelected by doing this?

1:05:44 James Rickards: Um, well, you know, Trump is Trump. He kind of wanted the handcuffs.

1:05:48 Uh, they’re not putting handcuffs on them and they’re not releasing a mug shot, but he wanted the handcuffs, because, you know, Trump, he’d be holding them up like this with a big smile, that would be worth five million votes right there, which is what he needs. Right? That might be all he needs. That’s, yeah, well, yeah, when you count the counterfeits. Uh, that’s so much he needs, but uh um, it’s, yeah, yeah, I mean, he’s, you know, he’s kind of.

1:06:11 DeSantis and Trump are the only two in double digits, the rest of them, you know, nice people, whatever, but Nikki Haley, Mike Pompeo, um, now Marco Rubio is working around the fringes. Who else is in? Uh, a couple others, but they’re all like one, two percent in the polls. Uh, and then Trump’s closer to 40, and DeSantis says close to 30. That’s a horse race, you know, let’s see how that plays out, but this might have put Trump over the top in terms of the nomination.

1:06:37 Um, and then when you get to the general election, now, the Biden situation is really interesting. He’s, I told a bunch of national security professionals the other day, we were in a meeting. I said, if you want a good analysis of Biden when he’s on camera, hit um, hit the mute button. That’s what the Germans call MOS, mid-out sound. You know, uh, just watch.

1:06:58 It’s ten times scarier than anything that comes out of his mouth. Uh, the frailty, the stutter step, the, you know, the blank stare, the looking around. We watch that without sound, because that part of your brain’s not getting distracted. Uh, it’s scary. So somewhere that he might not run.

1:07:15 I, I’m not there yet. I would say I would expect him to run, but if if the sources are good on that, they may be. Then that tells me that he’s got a diagnosis. That, um, it’s not a question of, you know, can you hide them in the basement and get the media to play along? We know that works.

1:07:34 Uh, can you print up ballots and stuff in Maricopa? Can that works? But um, but if he’s got some kind of more serious diagnosis, then yeah, then you can’t do it responsibly, or at least it makes the vice presidency kind of interesting. Um, so I don’t know. It’s, uh, I watch it carefully, but, you know, I mean, I had, you, sleep shares, but the one thing about politics is, you know, you know, three weeks is like three years.

1:07:59 You just, it’s very hard to forecast, uh, until you get very close to the election day, just because of, you know, land mines and wild cards.

1:08:07 Brian Rose: I saw you post that picture of you in that supercomputer down in Florida, you know, and I want to ask you about AI. We can close on this one. Um, obviously the whole world’s been paying attention to AI, mainly because of ChatGPT in December. It came out and really woke everybody up to it.

1:08:22 They went from zero to a million customers, and I think four days, which is the fastest adoption of technology in human history that I’m aware of. Then up to a hundred million customers in a month, and now they release ChatGPT-4, and everyone’s talking about when is the AGI coming, artificial general intelligence? Even an interview recently with Sam Altman, saying, asking the interviewer, is this AGI? Do you think it’s AGI? We’ve been following this closely.

1:08:47 I’ve had Ben Goertzel on, who’s the chief science officer of SingularityNET. He’s been on the show before talking about some of the ramifications. What do you see here, Jim? What do you see?

1:08:58 James Rickards: Well, AI is exploding, uh, and, uh, you know, you know, the biggest topic, and, uh, you know, certainly technology circles, but also, uh, other circles, uh, financial, military, business, etc., because if the AI lives up to its promise, then there’s a whole bunch of problems in all those fields that could get solved almost overnight.

1:09:17 Medicine, uh, you know, etc. So, uh, it’s exciting, a little daunting. Um, and, uh, the, uh, there are three things you need. My first day, I had a conversation with a consultant from, uh, uh, Arthur D. Little, in like 1979.

1:09:34 So it’s been around. They’re, they’re, they’re writing some Aristotle, 2300 BC, where he was speculating about what happens when it was, you know, basically a spinning wheel loom kind of thing. What happens when the loom works itself and you don’t need to do it by hand? What do we do with all the leisure time? So this is Aristotle, right?

1:09:51 Uh, Alan Turing in the 1950s, same place. There’s a lot of writings on it. So why is it so big right now? We need three things. One, you need a theory or a vision, kind of need to know what it is.

1:10:01 That’s what Alan Turing provided. Then you need data. Like a fast computer doesn’t matter if you don’t have a billion billion pages of data, and that really kind of came along in the ’90s with the world wide web, and, um, uh, uh, search engines, and, and all the rest. So okay, now we got the theory. Now we got the data.

1:10:19 We got access to the data. The missing ingredient, the third thing, was processing speed. They kept getting faster, Moore’s law, but now we’re there. Now we’re there. So, uh, you can um, uh, and then self-learning, which is, okay, the computer just kind of talks to itself.

1:10:36 Like a computer produces an output, and then, but it evaluates its own work, and so, you know, I could have done that a little bit better. So I’ll change my code myself, meaning the machine, to make it better. The less time, well, now when you’re into machine learning you don’t know where the machine’s going. Like, you know, what the output is, you know what it can do, kind of, but you don’t know how anymore, because you’re not coding it. You’re not, it’s, it’s off on its own.

1:11:00 And then ultimately, you know, did the machines take over, a Terminator, and all that? Um, and they’re legitimate concerns. There are some safeguards, but um, one of the things that we’ve seen already is that the machines will make things up. Like, there was a guy who was on ChatGPT, and he said, uh, tell me about, and the blank was himself. He put his name in.

1:11:23 Tell me all about so-and-so. Shane took a few minutes, came back with a pretty good biography, and saying, it and said, and the guy’s reading it and said, died in 2019. It’s like, uh, I think I’m still alive. So, so but he queried the machine, just back, well, what did he die of? Um, and then, but the machine came back with, like, a pretty good description of how he died in the obituary, and all that.

1:11:45 Well, turns out this journalist who was doing this was the obituary writer for one of the top UK publications. I forget if it’s a Daily Mail or whatever, but he was the obituary writer so the machine got obituary, you know, on the brain, so to speak. It’s not a brain, but, you know, whatever. And um, uh, but the machine made it up, and that was the striking part. The machine, I I warned, as with my colleagues, to be done in Florida, University of Florida, but the picture you saw me was with the HiPerGator.

1:12:14 The HiPerGator is the third fastest non-government computer in the world, so there might be some faster ones at Los Alamos, and, you know, Sandia Lab, and all that, but this thing, and it turns out that the, um, the founder, um, of, uh, Chris Malachowsky, of, uh, Nvidia, was, I was an alumni of the University of Florida. I mean, I’m, I’m kind of new to the oscc thing, and all that. Um, I’ve been involved in the field, but you get down at the University of Florida, I mean, the gator loyalty, the Gators, the alligators, their motto, oh, sorry, they’re mascot.

1:12:47 Uh, so everyone, they refer themselves as double Gators or triple Gators if you have two degrees or whatever. Anyway, the Nvidia founder is a Gator. He’s a Florida alum. He donated these things, um, uh, like a banks of video, top, top high-end processors, faster than the ones they use in Bitcoin mining. So they built this machine.

1:13:06 It’s unbelievable, and I was taking a tour of it with the engineer, but um, one of the things, another thing that’s going on, so these, these computers make things up. Um, but uh, beyond that, they feed on information. So we’re already, you mentioned information warfare, uh, Brian, and you’re right, but imagine information warfare conducted on an AI environment. So some of the bad actors, from, uh, 11 actors, are already flooding the internet with false information that the computer will Hoover up and not know as false information, but will include in its analysis.

1:13:44 This is like planes putting out chaff to mess up radar, you know, and stuff like that. So, uh, if you know, the computer is going to suck up all the information to produce a report. You can flood the zone with false information that will throw the computer off, and now how do you know? Because you can’t see the code anymore, because the computer’s doing it on its own. So a lot of things like that.

1:14:04 So um, yeah, I’m in a very deep field, moving fast. Um, I’m involved in it from a national security perspective with a great team of colleagues, and, uh, you know, under the umbrella of the University of Florida, uh, Florida Institute for National Security, but um, but one last thing, and, uh, uh, they’re saying the artificial intelligence is the depth of the search engine, and it is, because that’s why Google’s all over AI. Google’s done. The Google search engine will be, it’s probably obsolete already.

1:14:34 I used one this morning, but it’s probably obsolete, and the others, but we’re all going to have ChatGPT, whatever, um, a generalized, uh, pre-trained, uh, AI system. Um, but I can tell you what’s going to wipe out AI. Is, you know, your viewers like to move a couple steps ahead, right? Um, we are witnessing, we’re coming out the end of a 2,300 year-old tunnel that we entered with Plato. When Plato, in Chapter 10 of the Republic, trashed Homer, he said we got to get past Homer, and everyone’s like, “Hey, Homer’s a pretty good poet, Plato’s a pretty good philosopher.

1:15:12 Why is he trashing Homer? Well, the answer is Homer never wrote a thing. It was all oral. It was all recited over and over and over, and that’s how you memorize, and later on somebody wrote it down, and Plato was a writer, and he insisted that we had to move, use the phonetic alphabet to get into writing. We’ve been doing that ever since, like about the stages, and we’re going to print press, and all that.

1:15:32 You’ve got to go back to Marshall McLuhan and others to follow that thread. But um, we’re now in a world where we’re leaving the phonetic alphabet behind. We’re coming out the other end of that tunnel, and you see it, and I don’t mean it’s in a frivolous way. You know, hip-hop, rap. Um, what’s an emoji?

1:15:54 It’s a hieroglyphic. What’s a QR code? It’s hieroglyphic, and as we’re going visual, oral in the aural sense. Um, you know, Marshall McLuhan said, when they said the first satellite, the entire globe became a human artifact because we wrapped it in aluminum foil. So the point being, and this, by the way, maybe another day we talked about how this relates to Bitcoin, but we are, when you leave the phonetic alphabet behind, all those billions and billions and billions of pages and all that code, all based on the alphabet, suddenly becomes obsolete.

1:16:28 Brian Rose: It’s a powerful message. You just said that. Yeah, I was actually just listening to the chief technical officer of OpenAI, and they were talking about how the AIs need to learn from other mediums, right? Because they’ve been studying all of the written texts that man’s ever created, but there’s layers and layers and layers above that, and like you said, the future is understanding that layer of communication. Um, yeah, there’s a lot to think here.

1:16:51 Um, definitely keeping my eye on the AI. I think most people are sleeping on it, and um, you know, it just moves so fast when it does move.

1:16:58 James Rickards: That, uh, look, the next few years are going to be very spicy, to say the least.

1:17:03 Brian Rose: Right? Um, absolutely.

1:17:04 Jim, it’s always a pleasure to have you here. I just want to give everyone a final reminder to, uh, check out the video that you recorded. Again, talks more and deeper about the upcoming crash. It’s going to be fast, bloody and unavoidable, but also the great thing about having Jim here is he explains how you can profit from that crash. That video won’t be on social, won’t be on our website, um, except for this link, which is londonreal.tv/gym.

1:17:23 I recommend everybody go and watch that. Uh, Jim, thank you for coming on short notice. I got a funny feeling we’re going to have you back, hopefully a few more times this year, because this isn’t over yet, and as you said earlier, if there’s, funny enough, there’s always material in this day and age. I don’t think that’s going to slow down in the next couple years. So thank you so much for the time, Jim.

1:17:44 James Rickards: Always appreciate it. Thanks.

1:17:51 Brian Rose: All right, we’ll see you next time. Take care, everybody. We’ll see you next time on London Real.