Jim Rickards: Failure To Deliver Physical Gold Is Coming
SilverDoctors.com
November 29, 2017
“This paper gold market is so manipulated, we no longer have to speculate about it…”
by Jim Rickards via Daily Reckoning
I’ve often compared the causes of financial crises to snowflakes that can trigger an avalanche. A massive amount of snow can accumulate before that one final snowflake comes along to start the chain reaction.
The climbers and skiers at risk can never know when an avalanche will start or which snowflake will cause it.
But it helps to know what to look for. Let’s look at three of the most likely snowflakes that could trigger the next financial crisis, all of which are likely in my view. These are by no means farfetched.
Snowflake #1: Credit Crisis in China: China, believe it or not, is in more of a credit bubble than the United States. The United States has got lots and lots of problems. But China is actually much worse — and they don’t have as much experience with this type of credit bubble.
I believe they’re naïve about how bad this can get. They’re over relying on the ability of Communist Party officials to keep a lid on it. I was out in the countryside south of Nanjing not too long ago, visiting some of China’s famous ghost cities.
I was with some Communist Party officials and provincial officials who were behind it all. Everything I saw, construction as far as the eye can see, magnificent in scope, was all empty. I’ve seen it firsthand.
I turned to one of these officials and said, “This is all debt finance. This is all empty, so you have no revenue to pay the debt. So how are you gonna pay the debt?” And he said, “Oh, we can’t. But Beijing’s going to bail us out.” Not we hope Beijing will bail us out — but Beijing will bail us out.
That isn’t an isolated viewpoint. It’s widespread.
But Beijing has its own problems. Whether it’s wealth management products, shadow banking, real estate finance, crony capitalism of the worst kind, flight capital, oligarchs taking all they can and then funneling it out to Vancouver and Australia and Park Avenue, etc., the problems can no longer be papered over.
This has all been happening on a massive scale. It’s going to collapse. But China doesn’t really know how to deal with it.
Snowflake #2: Failure to deliver gold: This is almost definitely coming. So much of the gold market is “paper gold.” This paper gold market is so manipulated, we no longer have to speculate about it. It’s very well documented. But it all rests on a tiny base of physical gold. I describe the market as an inverted period with a little bit of gold at the bottom and a big inverted pyramid of paper gold resting on top.
The Rest…HERE
