Tuesday, April 12, 2016

Book Review: The New Case for Gold

Book Review: The New Case for Gold, by Jim Rickards.  192 pages, April 2016.

James Rickards is my go-to-guy for the unique mix and insight into current and predicted international relations, national security and monetary policy.  Few can speak to these areas with the knowledge he does, and fewer still have a track record of reading and forecasting events more accurately. 
P127:  “All of these countries are working behind the scenes to end the dollar hegemony while the United States seems to be asleep at the switch.  Investors will wake up one day and find that the dollar is in free fall and they won’t know why.  Still, you can already see this big switch coming.  If the dollar collapses from a lack of confidence, the entire international monetary system collapses too.  That is what I expect.”
He just published his third book, The New Case for Gold.  I enjoyed reading it and I learned quite a lot.  I recommend this book to those interested in precious metals investing and those interested in understanding the dynamics of the international monetary system.  I have added this book to the Ushanka library at the left.  Mr. Rickards joins Ayn Rand and Aleksandr Solzhenitsyn as authors with more than one book in the Ushanka Library.
P18:  “Our goal is not to rehearse the same old arguments, but rather to put the gold discussion in a twenty-first-century context.”
I saw three main themes in the book: inflation, monetary collapse, and the dwindling supply of physical gold.  He explains, in detail, how he anticipates these three factors to merge into a perfect storm for gold.

A relatively small book at 192 pages, you’ll find it is quite condensed with new and valuable information.  I marked nearly every page with notes.  And I felt many paragraphs read as summaries, and could easily have been introduction paragraphs for more chapters on related subjects.  One benefit I had going into The New Case for Gold was I had read the author’s previous two books, Currency Wars and Death of Money, so I understood many of the concepts that he did not use a lot of space to explain in this book.

The New Case for Gold offers a comprehensive discussion on the manipulation of the gold price.  It is far better than I’ve seen anywhere else.  I think the author explains it well, but I still hesitate to embrace the idea that the price can be kept down, artificially, year after year.  The March news that Canada had sold all 1.7 tons of their gold was too late for this book, but it is an example of how the price of gold stays low.  There are sellers out there too - something you won’t read about in this book.

The author makes a convincing case of price spikes in the near (2-10yr) future driven by an international monetary collapse, or the collapse of the dollar.  But then he tells the reader to only allocate 10% of his savings into gold.  That allotment is down from his suggestion in his previous book.  While conservative and in line with many financial advisors, this advice does not make sense in the current economic climate.  The stock market is inflated by as much as 50%.  Bonds are losing appeal as defaults are more likely and rating agencies’ rankings are now suspect.  You can’t earn a penny with a savings account.  And the supply of physical gold is in question while the price is 40% below its 2011 balance.  In this environment, and while reading this book, I was (and still am) considering a far larger allotment.  The fact that Rickards says only 10% makes me question if there are some other monetary solutions that restore confidence yet do not translate into higher values for gold.

You’ll also read about current monetary schemes in The New Case for Gold such as the war on cash, bail ins, replacing 401k funds with IOUs, and negative interest rates.  My understatement of the year: It is better to learn about these now.

My earlier post about this book, with video - here.

Click here to see my Book Notes, with selected quotes from the book.


sth_txs said...

I don't see how gold can ever be money again at this rate. The people are simply too dumbed down. I have MBA friends who are taught functional stupidity about how bad gold was without any historical context.

I do have a handful of those 50 cent silver pieces from my grandparents. They sure do feel nice.

Karl said...

sth, me neither. Rickards is skeptical too, I think, but he makes the case that when confidence is lost, it must be restored. People like you and I are going to be slow to believe any govt or IMF statement that "all is well now" unless it backed by a something solid. Rickards thinks it'll be gold. It could be a strict policy that allows for only a 3% increase in money supply each year (to match growth) as Friedman once suggested.

Whether it is a gold standard or even a strict policy, history shows that when it becomes uncomfortable for the elites, they will modify it to their liking. Thus the monetary cycle that even gold can't fix.

The only protection is to understand this process/cycle in order to best protect your ass. I mean assets.