September 30, 2014
- Back to “normal” at The 5… but these aren’t normal times
- The document that spells out what happens after the dollar collapses
- A lone protester leading to 20 million dead? Eerie echoes from Hong Kong
- The problem that wasn’t fixed in 2008 and looms even larger now
- America’s tiny-home future?… A “one-heart attack company”?… And more!
Call it the “Financial Patriot Act.” It might be enacted as soon as next spring.
That means you have six months to get ready.
Before we go any further, a bit of housekeeping: The 5 is back to regularly scheduled programming effective immediately.
Yes it’s me, Dave. I promise you won’t see any more funky redacted blacked-out text. No more invoking a mystery man who advises the CIA.
Even better, today you’ll learn about the contents of the packet I left behind with the rest of Agora Financial team before I took off for a little R-and-R. Between then and now, they’ve put together the puzzle pieces in exactly the way I figured they would fit.
That’s what the Financial Patriot Act is all about. It’s the key to the “Prophesy 2015” project — that spelling is on purpose — we’re unveiling today…
The original Patriot Act of 2001 was not something written hastily by congressional aides days after the Sept. 11 attacks.
“I remember someone asking a Justice Department official how did they write such a large statute so quickly,” recalled Stanford law professor Lawrence Lessig in 2008, “and of course, the answer was that it has been sitting in the drawers of the Justice Department for the last 20 years, waiting for the event where they would pull it out.”
A similar document lies in wait — ready to be sprung on you and me whenever the next financial crisis arrives. It’s a 42-page blueprint issued in January 2011 by the International Monetary Fund.
It’s the proverbial smoking gun that confirms our own suspicions about “the demise of the dollar” — a hot topic here at Agora Financial ever since our executive publisher and 5 founder Addison Wiggin published a book by that name in 2005.
Bank failures and the possibility your bank account is frozen? Your IRA slashed in value or even wiped out? Riots in the streets and martial law? That’s old hat…
The 42-page paper reveals what happens next. It proposes nothing less than a spooky new currency — for the entire globe.
Here’s the most diabolical part of it — you and I would still transact in dollars. Europeans would still use euros. The Chinese would still use yuan.
But no longer would the dollar be the world’s “reserve currency” — the go-to currency for cross-border transactions. That would fall to the new currency described in the IMF document.
The idea is to wreck your purchasing power — but to make the mechanism so complicated that no one would understand why the prices of gas and groceries are shooting sky-high.
Now, maybe you don’t find this paper’s existence a shock. Maybe you’re hip to “conspiracy theories” about a single global currency. I used to pooh-pooh that sort of talk. Not after seeing this document…
But is six months a realistic timeline?
We keep coming back to the avalanche analogy invoked by our friend Jim Rickards, author of Currency Wars and The Death of Money: You never know when an avalanche will start or which snowflake will trigger it. But a smart skier or climber does know when conditions are most dangerous and it’s best to stay in the lodge sipping coffee by the fire.
Six weeks ago in The 5, we ran down three of the most likely snowflakes as identified by Mr. Rickards during a private meeting with Addison, me and a handful of other people on our team…
- A geopolitical shock
- A credit meltdown in China
- A default by a major commodities exchange on a gold contract.
“But these are only three possibilities out of maybe 30 I could name,” he told us.
A nervous scan of the headlines in recent days reveals even more…
How about the snow squall of protests in Hong Kong spreading to the Chinese mainland?
“The Chinese government is taking clear steps,” says a BBC report from Beijing, “to limit information about events in Hong Kong by censoring Internet search terms and forums discussions. But if the protesters hold their ground, how far will Beijing allow events to spiral before getting directly involved?”
Not very, Mr. Rickards suggested in Currency Wars in 2011: “The study of Chinese history is the study of periodic collapse. In particular the 140-year period from 1839 to 1979 was one of almost constant turmoil” — from the Opium Wars to the Boxer Rebellion to the Japanese invasion to the Cultural Revolution.”
Snowflakes everywhere…
Those 14 decades go a long way toward explaining the 1989 crackdown in Tiananmen Square: “The Chinese Communist Party leadership,” Rickards wrote, “understood that the 19th-century Taiping Rebellion had begun with a single disappointed student and soon embroiled the southern half of the empire in a civil war, resulting in 20 million deaths.”
Chew on that while you watch the protests on TV…
Or how about the teetering snow shelf of financial instruments known as “derivatives”?
Global banks sit on $1.2 quadrillion of these debt vehicles — 14 times the world’s economic output in a year.
Last week, a federal judge gave the green light to investors suing 12 banks for manipulating the prices of credit default swaps.
If that term sounds familiar, those are the very type of derivatives that helped set off the Panic of 2008. Congress tried to fix CDSs later, only to make them even more unstable.
Even a few of the global elites are starting to realize a new crisis is looming.
That’s the takeaway from the 16th annual Geneva Report, issued yesterday by a panel of four prestigious mainstream economists, three of whom have worked for central banks.
It cites a “poisonous combination of high and rising global debt and slowing nominal GDP, driven by both slowing real growth and falling inflation.”
That’s exactly what Rickards warned about this year in his follow-up book, The Death of Money: It’s not government debt that’s the problem. It’s government debt growing faster than the economy. If there’s not enough tax revenue for Uncle Sam to keep paying interest and a little bit of principal on the national debt, something’s bound to go kaboom: “Either politicians must reduce deficits or the Fed must produce inflation. There is no other way to avoid a debt crisis.”
Alas, the Federal Reserve is insolvent.
That’s not hyperbole — it’s right there on the Fed’s weekly H.4.1 statement: $4.5 trillion in what it disingenuously calls “assets,” covered by only $56.3 billion in capital. That’s leverage of 80-to-1. It took only 31-to-1 to take down Lehman Bros. in 2008.
Mr. Rickards, being unusually well connected, confronted a Federal Reserve governor about this staggering figure. Jim said flat-out the Fed is insolvent. At first, the governor hemmed and hawed. Finally, she conceded the point, but said “it doesn’t matter.”
Of course, it doesn’t matter… right up to the moment it does.
That moment might be no more than six months away, by Jim Rickards’ estimation.
That’s why we’ve spared no effort with our latest project, Project Prophesy 2015. (Again, there’s a reason for that spelling, as you’ll soon see.)
We’ve given Mr. Rickards much digital ink in our pages these last 18 months. We find the analysis in his books consistent with our own. His connections both in Washington (including the CIA) and on Wall Street are beyond compare.
On Oct. 14 — two weeks from today — Mr. Rickards will set aside time for an online briefing, open only to readers of The 5 and The Daily Reckoning. You’ll even have a chance to submit questions.
Jim ordinarily charges a $15,000 speaking fee at conferences. And often, he doesn’t answer questions. But during this event, you can ask him what’s on your mind… and you can access it free as part of Project Prophesy 2015.
In addition, we’re launching a monthly letter with Jim. It’s called Jim Rickards’ Strategic Intelligence.
For the first time, his actionable analysis will be available on a regular basis to retail investors like you. Up to now, he made it available only to high-end hedge funds and the like. Rest assured it’s information you won’t find during his many media interviews or on his busy Twitter feed.
And there’s much more to Project Prophesy 2015 — three exclusive briefings identifying how to protect your portfolio starting tomorrow, and even a free copy of his book. (We’ll cover the shipping.)
The long buildup is over. Project Prophesy 2015 is now live. Check it out right now at this link.
To the markets… and stocks are down modestly as we write. The S&P 500 sits at 1,972. Gold slid uncomfortably toward $1,200 this morning but has recovered for the moment to $1,210.
The big mover is crude, which has been hammered 3.5%, to $91.22. Word is that OPEC supplies sit at a two-year high.
We can’t help but wonder if the future of American housing will be crammed into 225 square feet.
“The bustling stores that used to grace the oldest enclosed mall in America, the Arcade Providence in Providence, Rhode Island, have been transformed into mixed-use housing,” reports the website TakePart: “shops on the ground floor and micro-apartments on the top two levels.”
The Arcade dates back to 1828. As a contemporary mall, it couldn’t cut it after the Panic of 2008. Tearing it down was not an option: The place has been a National Historic Landmark since the mid-’70s.
Developer Evan Granoff figured he could do something: He’d already developed micro-housing in places like Boston and San Francisco. After redoing the Arcade, tenants began moving in earlier this year. “Despite their minuscule size,” says TakePart, “the spaces come with the basics: a bathroom, a bedroom, storage and a tiny kitchen (a mini-fridge and microwave are included, but there’s no oven or stove).”
Ummm…. Looks cozy.
Turns out Granoff took his cue from shipping containers.
Ingenious… but we can’t help wondering if much of American housing will start to look like this in Jim Rickards’ near-term future…
“Dave’s not here,” wrote at least one reader invoking Cheech & Chong during my absence. Heh…
“I am sorry to hear to hear Dave is missing,” wrote another two weeks ago, “and I am even more sorry to hear you are unable to publish The 5 Min. Forecast due to his absence.
“At the expense of starting the obvious, it’s never quite wise to advertise you are running a one-heart-attack company. As a paid subscriber, I have concerns about your business operations, since I was in the midst of picking some more subscriber services you offer, but I will defer my decision.
“I don’t write this email to sound mean or critical, but rather hope you accept my short missive in the spirit it is being given.
“Find Dave or replace him ASAP!”
The 5: Well, as you no doubt saw, 5 founder Addison Wiggin cobbled together some issues while I was away with the help of several folks on our research and writing team. (And thanks for the concern about my ticker, but it’s fine.)
What’s more, we urge you to check out Project Prophesy 2015. We threw as many resources as we could at getting this project ready the last two weeks — it’s that important.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Once again, access to Project Prophesy 2015 — including the Q&A with Jim Rickards on Oct. 14, 2014 — is available exclusively to readers of The 5 and The Daily Reckoning. The sooner you sign up, the sooner you assure yourself a slot.