Jim Rickards: Fed Can’t Get Out – Buy Gold Now

Four time best-selling author Jim Rickards says the Fed's “throwing in the towel” on rate hikes is signaling a big problem for the economy. Rickards says, “The Fed was tightening to get ready for the next recession. . . . You need to cut interest rates somewhere between 4% and 5% to get out of a recession. How do you cut interest rates 4% if you are only at 2.25%? The answer is you can’t. You have to get to 4% before you can cut 4%, and that’s what the Fed was trying to do. . . . How do you raise rates in weakness to get ready for the next recession without causing the next recession that you are preparing to cure? That was the conundrum. I never thought they would get it right . . . and, as of now, it looks like they didn’t get it right. Meaning, they tightened so much to get ready for the next recession they slowed the economy.”

Rickards says, “Bernanke painted them into a corner, and they can’t get out. There is no escape from the room. By the way, one of the reasons gold is preforming so well, the Fed has proved that they can’t get out of this. They got into it, but they can’t get out of it because every time they try, they sink the stock market. They sink the housing market. They raise the specter of recession. They slow economic growth. They don’t want that. So, they sort of pause and maybe tiptoe back into it, but they really can’t get out of it.”


On gold, Rickards says, “People always say there is not enough gold to support commerce and trade and the money supply. I always remind them that is nonsense. There’s always enough gold, it’s just a question of price. At the current level of around $1,300 per ounce, that’s too low. . . . What price does (support commerce and trade)? So, if you take . . . supply and say back it by 40%, divide by 33,000 tons, that comes to $10,000 per ounce. Could it be higher? Sure . . . if you used a larger money supply, you would need a higher price. If you would use a larger percentage . . . that would be a higher price. If you do that math, you can get to $40,000 per ounce easily. I want to make this clear. These are actual calculations based on actual numbers that are publicly available for money supply. It’s not made up. It’s not science fiction. It’s just a simple question. If you wanted to go to a gold standard today without causing deflation, given the amount of gold and given the amount of money, what would the price have to be? The answer on some very conservative calculations would be $10,000 per ounce. . . . The time to buy gold is when sentiment is low and people hate it. . . . So, the bull market is intact.” We are in the fourth year. Bull markets start off slow because of all the bad sentiment, but then they gather momentum. So, it’s still not too late to jump on this train, and my expectation is this will pick up. . . . The signal the gold market is getting right now is the Fed is throwing in the towel. . . . They made some headway, but it came at a high cost because they slowed the economy . . . and they can’t continue. . . . Now, they are going to be desperate for inflation, and that is very bullish for gold.”

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