Four time best-selling financial book author James Rickards says don’t get too comfortable with the record high stock prices. Rickards explains, “I think the markets will have a very violent reversal in late November or early December. Let me be specific about why because I never make claims like this without backing it up. . . . Here’s what’s going on. Right now, markets are priced for a Fed rate hike in December. . . . The stock market is interpreting this rate hike as economic strength . . . everything is set for a violent reversal because the Fed is not going to hike interest rates in December.”
So, why is the Fed not going to raise rates? Rickards says it’s because of not enough inflation and way too much deflation. This has the Fed scared to move. Rickards contends, “Why is deflation a central bank’s worst nightmare? The answer is deflation increases the real value of debt. In other words, the dollar actually gets stronger in a deflationary environment. If I owe you dollars, and the dollar just got stronger, I owe you more money in real terms. It becomes more difficult to pay off debt in a deflationary environment because my income is drying up. The real burden of debt is going up, and if I couldn’t pay you to begin with, deflation is going to make it more difficult to repay you. . . . Imagine if we had one or two percent deflation . . . and the value of the debt was going up. The defaults would be even worse. Bad debts would pile up. The banking system would be under threat. Tax collections would go down in nominal terms. The credit of the U.S. government would be called into question. The U.S. government might default. These are all the horrendous consequences of deflation, and it’s why central banks cannot have deflation.”
So, what happens if Rickards is correct and the Fed does not raise rates? Rickards says, “When that happens, and I think it will happen . . . all of a sudden, the dollar is going to get weaker, the euro is going to get stronger, gold is going to go up and bonds are going to rally. So, there will be a lot of big market effects. I am not talking the end of the world . . . . I am not talking about a total meltdown. I am talking about a violent repricing of some major commodities and bonds . . . because the market thinks the Fed is going to raise, and they’re not.”
Is there a danger in October as many believe there could be? Rickards says “yes,” and it comes from increased tensions with North Korea. Rickards says, “We have a window from October 10th to October 21st. What is the significance of that window? October 10th is the anniversary of the communist party of North Korea. Kim Jong Un is getting ready to test more missiles. . . . We have two catalysts. The anniversary on October 10th and war games (with South Korea) on October 21st. In that window is when I expect one or more missile tests. That’s going to be another wake up call to the markets. The markets are sleepwalking . . . they don’t understand this war is coming, and it is coming. A shooting war, a pre-emptive war, a kinetic war with the United States against North Korea, I do expect by mid-2018. . . . Kim Jong Un thinks we are bluffing. We are not.”
Rickards also restates his case for “$10,000 gold” and contends it’s at a relatively low price, and people should buy it now and simply hold it.
Join Greg Hunter as he goes One-on-One with financial expert and best-selling author James Rickards.
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.