James Rickards Quotes

“Debt used to finance government spending is acceptable when three conditions are met: the benefits of the spending must be greater than the costs, the government spending must be directed at projects the private sector cannot do on its own, and the overall debt level must be sustainable.”

“Deflation increases the real value of government debt, making it harder to repay. If deflation is not reversed, there will be an outright default on the national debt, rather than the less traumatic outcome of default-by-inflation.”

“Derivatives serve practically no purpose except to enrich bankers through opaque pricing and to deceive investors through off-the-balance-sheet accounting.”

“Economists’ failure to embrace the new science of complexity goes some way toward explaining why the market collapses in 1987, 1998, 2000, and 2008 were both unexpected and more severe than experts believed possible.”

“Gold and silver have, uninterruptedly to this day, continued to be the universal currency of the commercial and civilized world.”

“Gold offers adversaries significant benefits in a world of U.S.-imposed dollar-based sanctions. Gold is physical, not digital, so it cannot be hacked or frozen. Gold is easy to transport by air to settle the balance of payments or other transactions between nations. Gold flows cannot be interdicted at SWIFT or FedWire. Gold is fungible and nontraceable (it is an element, atomic number 79), so its provenance cannot be ascertained. The United States is unprepared for this.”

“If an economy has a stagnant labor force operating at a constant level of productivity, it will have constant output but no growth. The main drivers of labor force expansion are demographics and education, while the main drivers of productivity are capital and technology. Without those factor inputs, an economy cannot expand. But when those factor inputs are available in abundance, rapid growth is well within reach.”

“In markets today, the dead hands of the academic and rentier have replaced the invisible hand of the merchant or the entrepreneur.”

“In our time, the aureate has become brazen – the golden has become brass. A return to true value based on trust is long overdue.”

“Inflation is the stealth destroyer of savings, capital, and economic growth.”

“Ironically, solutions are not hard to devise. These solutions involve breaking big banks into units that are not too big to fail; returning to a system of regional stock exchanges, to provide redundancy; and reintroducing gold into the monetary system, since gold cannot be wiped out in a digital flash.”

“It may be too late to save the dollar, but it is not too late to preserve wealth. We live in an ersatz monetary system that has reached its end stage.”

“It was curious that just as Federal Reserve officials were publicly disparaging gold’s role in the monetary system, the president felt the need to mention gold to the Congress as a confidence booster. Despite disparagement of gold by academics and central bankers, gold has never fully lost its place as the bedrock of global finance.”

“Policy makers respond to economic distress by pursuing polices designed to improve the data. After a while, the data themselves may come to reflect not fundamental economic reality but a cosmetically induced policy result. If these data then guide the next dose of policy, the central banker has entered a wilderness of mirrors in which false signals induce policy, which induces more false signals and more policy manipulation and so on, in a feedback loop that diverges further from reality until it crashes against a steel wall of data that cannot easily be manipulated, such as real income and output.”

“So the dollar is money, money is value, value is trust, trust is a contract, and the contract is debt.”

“The economy is like a high-altitude climber proceeding slowly, methodically on a ridgeline at twenty-eight thousand feet without oxygen. On one side of the ridge is a vertical face that goes straight down for a mile. On the other side is a steep glacier that offers no way to secure a grip. A fall to either side means certain death. Yet moving ahead gets more difficult with every step and makes a fall more likely. Turning back is an option, but that means finally facing the pain that the economy avoided in 2009, when the money-printing journey began.”

“The Fed sees inflation as a way to dilute the real value of U.S. debt and avoid the specter of deflation.”

“The Great Depression is not an argument against gold; it is a cautionary tale of central bank incompetence and the dangers of ignoring markets.”

“The gross size of all bank derivatives positions now exceeds $650 trillion, more than nine times global GDP.”

“The solutions to this systemic risk overhang are surprisingly straightforward. The immediate tasks would be to break up large banks and ban most derivatives. Large banks are not necessary to global finance. When large financing is required, a lead bank can organize a syndicate, as was routinely done in the past for massive infrastructure projects such as the Alaska pipeline, the original fleets of supertankers, and the first Boeing 747s.

The benefit of breaking up banks would not be that bank failures would be eliminated, but that bank failure would no longer be a threat. The costs of failure would become containable and would not be permitted to metastasize so as to threaten the system.

The case for banning most derivatives is even more straightforward. Derivatives serve practically no purpose except to enrich bankers through opaque pricing and to deceive investors through off-the-balance-sheet accounting.”

“The wealth effect is one pillar supporting the Fed’s zero-interest-rate policy and profligate money printing since 2008. The transmission channels are easy to follow. If rates are low, more Americans can afford mortgages, which increases home buying, resulting in higher prices for homes. Similarly, with low rates, brokers offer cheap margin loans to clients, which result in more stock buying and higher stock prices.”

“When it comes to betting on a sure thing, greed trumps common sense and makes the bet irresistible.”

“Workers receive raises in nominal terms, while wages adjust downward in real terms. This is a form of money illusion or deception of workers by central banks, but it works in theory to lower real unit labor costs.”