 Our guest this weekend from Agora Financial is Jim Rickards, author of the great new book The New Case for Gold, and he's here to talk to us about how gold relates to the current geopolitical environment, how it relates to Austrian economics and commodities, how countries actually fight currency wars instead of hot wars, and we'll even discuss whether Hillary will be indicted paving the way for a Biden-Elizabeth Warren ticket. So if you're interested in gold and geopolitics, stay tuned for a great interview with Jim Rickards. So Jim Rickards, good morning and thanks so much for joining me this weekend. Good morning. I want to get into your new book, but before we do so, I have to ask, I noticed recently that you placed a bet in a UK betting parlor that Joe Biden would be the next president of the United States. So I got to ask what you're thinking was there. Sure. Jeff, that's exactly right. I was in London recently doing the international part of our global book tour for my new book, The New Case for Gold. We had done the U.S. launch on April 5th, and that was very exciting. We had a book party in New York, and we went to London for the international launch. But in London, they have a chain called Ladbrooks, and they're almost on every street corner, not quite, but kind of like ATMs. You see them everywhere, and perfectly legal to walk in and place a bet. And they'll make odds on almost anything. They have obviously sporting events and certain news items posted, but you can just walk up to a counter and give them a bet, and they'll look it up online and give you odds. And so I placed 20 pounds sterling, 20 quid on Joe Biden to be president. I got 101 odds, so if I win, that'll pay me 2,000 pounds, which is worth a little less than $3,000. I'll go back to collect, but of course, the point is what was my thinking. I do expect that Hillary Clinton will face criminal charges sooner than later based on misuse of classified information and perhaps official corruption in her role as Secretary of State. One of the reasons this FBI investigation is taking so long is because they've gone beyond just the server and the email and are looking into other allegations involving basically contributions to the Clinton Foundation in exchange for official action by the State Department, which is a backdoor former bribery. So I'll leave it to the FBI to sort that out. But based on my own, I am a lawyer. I've done quite a few government enforcement cases. I have a background in national security as well. So probably have more kind of hands-on insights into the issues involved here than, let's say, the everyday reader of newspapers or websites or someone who's following this. And it seems that she is in some jeopardy here. And it'll probably play out in drips, meaning we'll hear about Huma Abedin. We'll hear about Cheryl Mills. We'll hear about Jake Sullivan, other close advisers. Perhaps they're taking the Fifth Amendment. The FBI has been pretty tight-lipped on this to the point where James Comey, the director of the FBI, has even said he'll put his own FBI agents under lie detector tests, which is not unusual, by the way, when you have security clearances and the certainly some or all of the FBI agents involved in this would have top secret or higher security clearances to take polygraph tests if someone's trying to run down a leak. So the FBI has been pretty tight-lipped. There have been a few leaks, some reporting on this. But it does seem that this is all converging. Now, politically, the Democrats, of course, are as fearful of Bernie Sanders as the Republicans are of Donald Trump. We don't have to get into the whole Trump phenomenon. Clearly, Trump will be the Republican nominee. But fair to say, a lot of Republicans not too happy about that. But over on the Democratic side, if Clinton becomes nonviable because of the criminal charges I've described and if the party establishment doesn't want Sanders because he would be likely to lose in November, they may just pivot to Biden. I'm not saying Biden's going to throw his hat on the ring. I'm saying the party may turn to him at a late stage, at which point he could even go so far as to pick Elizabeth Warren as his running mate that would satisfy certainly women who were upset that Hillary wasn't at the top of the ticket and also progressives who were upset that Bernie Sanders wasn't on the ticket. So Elizabeth Warren would go a long way to satisfying women and progressives. And of course, Joe Biden is a very likable candidate. And he's already said in an earlier interview, different contexts that he would only be a one-term president. So it could be setting up for one Biden term, two Warren terms, who knows. Anyway, it seemed like an interesting punt, as they say. And the UK will see how it plays out. Well, that'd be a nice little $3,000 payday if you're right. But we can talk about Hillary all day long. But I want to get to your book. It's called The New Case for Gold, put out by Penguin now in 2016. I guess first and foremost, writing a book about gold doesn't necessarily make you popular in book circles. I notice in the introduction, you do give a nod to Carl Manger. Tell us, for our audience's sake, to what extent the Austrian viewpoint on money influences you in terms of gold and your own writing. Sure, Jeff. Be glad to do that. But just on your first point, it's interesting. I think it's fair to say that quite a few people in publishing, book publishing, magazine publishing, particularly in New York circles, are fairly liberal. But they love conservative authors. Their conservative books sell way more than liberal books. So there's sort of a marriage of convenience there. But I have to say my publisher, portfolio imprint of Penguin, have been extremely supportive of this project from the start. I wasn't sure they would like it. They published my earlier books, Currency Wars and the Death of Money. I wasn't sure they would go for a book on gold. But it turns out that they love it. They think it's a book that's going to just sell and sell and sell. And it has sold well. We're a national bestseller ranked number six on the Wall Street Journal, hardcover business, bestseller list, over 50,000 copies sold in a month, which is if you know anything about the book business, that's a lot. So we're off to a great start. But particularly with reference to Carl Manger, what I did in the book, it's called the New Case for Gold. But there are certain arguments against gold that you hear over and over again. And they just do not hold water. And I was actually tired of hearing them. I said, well, before I can go on for the reader about why they should have gold in their portfolios, I have to shoot down these arguments. Because you go to a cocktail party or you go on my case on TV or at a public event and you say something positive about gold, you immediately get these pushback arguments. I call them robot responses. People say gold has no yield. There's not enough gold in the world to support commerce, gold mining. Output doesn't grow fast enough to support the world growth trade. By the way, none of these arguments hold water. And I explain this in the book. I just take them one by one and shoot them down. But the one that struck me and that you're referring to with regard to Manger and Austrian economics is people say gold has no intrinsic value. They'll look at a piece of gold. They'll say, well, gee, a stock in a company. The company's worth something or a bond. It's going to pay you off a stream of cash flow. So that has a machine or a car. Anything has some intrinsic value. But gold has no intrinsic value. You hear people say it's just a pile of shiny rocks. Of course, it's not a rock, it's a metal. So they get that wrong, too. And my answer to that is congratulations on your firm grasp of Marxian economics because the theory of intrinsic value as a way to come up with a value of anything has been discredited, not well regarded by economists, since Karl Manger shot his down in 1873. Now, intrinsic value goes back to David Ricardo. Now, we're talking about the early 19th century. And the issue was, well, what's something worth? This is when market economics were in the very early days, not that long after Adam Smith's The Wealth of Nation from 1776. So Ricardo said, well, think about the inputs. Think about the labor and the capital that went into it. That's a measure of what something is worth. And that's what he meant by intrinsic value. And it was also called the labor theory of value, like how much went into it. Well, Karl Marx took David Ricardo and in Das Kapital and took it a step further. And he said, well, yes, that's the right way to think about it. But we have labor inputs and capital inputs and capital controls the means of production and doesn't give labor their fair share. So Marxist theory was that, yeah, there's a labor input that adds value to goods, but labor only gets paid a fraction of that. And the surplus labor theory that was Marxist theory went to the benefit of capitalists who control the means of production. That was unfair, that would lead to a proletariat revolution, et cetera, so the labor would get their fair share. Well, along comes Manger, one of the fathers and founders of the Austrian School of Economics and says, that's all nonsense. He says, sure, there are inputs and so you can measure them, but that's not how we decide what things are worth. Manger advanced what's called the subjective theory of value based on utility. He said, everything, whether it's money or an object or any of the other things I mentioned, has some value to a consumer, to a user based on their subjective preference for that particular good or service. And they decide what that is. And of course, that's the foundation of market economics. Now, since then, Manger's theory of subjective value has been the predominant and best way of thinking about things in economics. That's the foundation of market economics and really the foundation of all Austrian economics. Now, you can go on and on from there and to 20th and 21st century, economics talk about marketing imperfections and government intervention. That debate still goes on. And of course, the Austrians are a big part of that, but Manger really overthrew Marx and overthrew Ricardo. So all I've done is taken what we just described and applied it to gold and said, well, gold is money, dollars are money, euros are money, Bitcoin is money. They're all forms of money. And if you want to know what gold is worth, just ask anyone who uses money. We all need money. So we have a subjective appraisal of what each kind of money is worth. And in a world where we have very high confidence in central bank money, we're confident in dollars and euros. Gold might not be worth very much, but in a world where we start to lose confidence in central bank money, our subjective preference for gold as money would start to go up. And this is exactly what Manger would say. Manger would have said, okay, you've got six or seven or eight or 100 kinds of money competing in the marketplace for the preferences of consumers based on their assessment of utility. And if you think gold's a better form of money than paper dollars, and personally I do, then you're gonna have a bid for gold and the dollar price of gold will go up. So I've basically demolished that intrinsic theory that you hear all the time. People just don't think about it. As I say, I congratulate them on being good Marxists and that catches them off guard. But I think Manger had it right. And I think today, based on subjective utility, which is an Austrian concept, gold is coming into its own as a preferred form of money. Let me ask you your view on this. We talk about gold as money and Austrians also tend to talk about gold as a commodity. Some writers like Steve Forbes have proposed kind of an ersatz gold standard, but with a fixed dollar gold ratio. Some of our own writers like David Gordon said, no, that's nonsense. Gold and the dollar should be allowed to float against each other in terms of price. Do you have a sense whether, you know, do you view gold more as money or more as commodity? Neither, I just think of gold as money, period, full stop. I don't think of gold as a commodity. And look, gold, and there's a reason for that. Now gold is dug up out of the ground. You need a mining industry and capital investment and geology and surveys and a lot of other things to find gold. And that it is quite scarce, which is just an interesting attribute. If you're thinking about gold as money, and it does trade on commodity exchanges and the commodities reporters, you know, breathlessly report the price on TV. So I understand all that, but it doesn't really meet the definition of a commodity. And the reason is definition of a commodity, it's a commodity is a fairly generic or uniform input that goes into the creation and manufacturing of other things. So for example, copper is an input in pipes and construction of steel is an input in manufacturing and construction, you know, et cetera. You can go on and on coal is an input in energy production. Go through all the commodities, corn is food, you know, cotton goes into clothing. All the other commodities go into something else. Gold is not really good for anything. Gold is not used for anything except money and a store of wealth, which is part of the definition of money. Now people look at the jewelry industry, but I consider jewelry to be wearable wealth. Okay, it's decorative and it's pretty. I understand all that, but if you talk to an Indian bride with, you know, three pounds of gold draped around her neck in the form of gold necklaces, she'll tell you that's her wealth, that's her bank account, that's her IRA. That's gonna put her kids through college or pay for her house. And so that's how they think about it. And that is the right way to think about it. So gold is not a commodity because it's not an input. It's not really used for anything, but it's a great form of money. So I do think of gold as money. Now, having said that, I am a big admirer and student of Austrian economics. I think Austrian economics has a lot to offer, but I don't consider myself a pure Austrian. I'm certainly not a Keynesian or a monetarist. I'm more in the historical school of economics if you want to categorize it, which was also, I would say Joseph Schimpeter and Karl Marx were both in the historical school. It doesn't mean I agree with Marx. It just means that we all think of large historical forces that tend over time to dominate the evolution of economic systems. But I'm also a complexity theorist. I'm using a lot of late 20th and early 21st century science coming out of physics, applied mathematics, network theory, and also behavioral psychology. And I use the very old mathematical formulation known as causal inference, inverse probability. Also goes by the name Bayes Theorem. So I would say I'm a complexity theorist, a Bayesian, and a behavioralist. Those are the three tools that I use plus history. So I'm an historicist also to understand economic systems. So again, Austrians have a lot to offer and I am an admirer. But I like to say if literally when Mises were alive today he'd be a complexity theorist. Well, that's why we interview you, Jim, because you're an interesting guy, not because you're 100% in one camp or another. I want to bring up a sentence you wrote in a recent article and it really goes to everything that's in your book. You wrote, for a century elites have worked to eliminate monetary gold, both physically and ideologically. So given that reality, talk to us about how we might start to get central banks to consider gold again. Well, that's right. Again, going back to what I said earlier about these arguments against gold that I shoot down in my book, I may shoot them down, but you still hear them. You hear them from scholars, you hear them. It's not just sort of the everyday citizen is repeating something they may have picked up. I mean, you hear PhDs, you hear prominent public officials, certainly television personalities, now they're repeating these things. And I say to myself, well, where did they get this? And I know where they got it. They got it from the elites who like the central bank system and think about it. If you were a PhD from MIT on the board of governors or maybe the chairman of a central bank, why would you have anything good to say about gold? You control the printing press. You control money. Anyone who controls money controls politics, controls culture, controls the world to some extent. And certainly all these PhDs collectively, I mean, go around and look at the bios of the heads of all the major central banks. So Mario Draghi in the European Central Bank, Karoda in the Bank of Japan, the head of the People's Bank in China, he said, well, we got Italians and Germans and Japanese and Chinese. They all went to the same schools. They all went to either MIT or Harvard or the University of Chicago or Stanford, a very short list of schools. They had the same profession. In many cases, Stan Fisher, who's the vice chairman of the Board of Governors of the Federal Reserve, former head of the central bank of Israel was for many years, a decades, really, a professor at MIT who was the PhD thesis advisers for a lot of these other central bankers. So this is a very small club. They were all taught the same thing. They all believe the same thing. And collectively, they control not just the dollar printing press, but all the printing presses in the world. Why on earth would they want to give up that power? So what's happened is since gold was demonetized in the mid 1970s, this is 45 years ago, 45 years is almost three generations. It's kind of two and a half generations. You have, let's just say two generations plus of scholars who have never learned about gold. I happened to be slightly older. I was at the tail end of that. I got a graduate degree in international economics class of 1974, but in 72, 73, 74, when I was studying international economics, gold was still a reserve asset. It was a monetary asset. And we had to study gold as money. If you joined the IMF in the 1960s or early 70s, you had to pay for part of your IMF quota in gold. And so I was the last class to really learn it in a monetary sense. I joke that if you're younger than I am and you know anything about gold, you're either self-taught or you went to mining college because the university just stopped teaching it. So what we have is a conspiracy of ignorance, a conspiracy to not teach it, not discuss it, not take it seriously. The older scholars know better. I've spoken to Ben Bernanke about this. He understands it. He just won't say anything good about it for the reason I mentioned this. He's one of the guys with his hand on the printing press. But all the younger students and younger scholars have been greatly, I would say, discerved and disadvantaged by the fact that they have not had a good education in gold. And what you get are these really propaganda points that gold caused the Great Depression, which is not true. There's not enough gold in the world to support finance, which is not true. Again, we don't have enough time to go through all the explanations, but they're all in the book. In the introduction to the book really, in just about 20 pages, I give the readers facts, figures, analysis. They can draw their own conclusions. I really wrote the book for educational reasons. I mean, I'm not a gold salesman. I don't get commissions if you buy gold or don't buy gold. It doesn't affect me one way or the other. But I do think it will affect you and your portfolio. And that's why I wrote the book really, was to kind of fill in this missing link, if you will, in most people's monetary education. Jim, you mentioned your earlier book, Currency Wars. Talk a little bit about what currency wars are and what they really mean. How could a government engage in a currency war with another government? How does that work, technically? Well, I would separate two kinds of war. Currency war, which is what you're asking about, Jeff, and financial warfare. A currency war is nasty business, but it's economic. It's you're not trying to destroy the other guy. You're trying to help yourself. Currency wars arise in a situation when there's too much debt and not enough growth. Notice, how do you handle debt? Well, there are kind of three ways out. You can grow, you can actually grow and make enough money to pay the debt. You can default, not pay the debt, or you can inflate it, which is just a disguised form of default. So I inflate my currency. So I say, hey, Jeff, here's that billion dollars I owe you. Good luck buying it low for bread because it's not worth very much. So growth, default, and inflation are the three ways out of debt. We're not getting growth. It'd be nice if we were, but we're not. This is the weakest expansion since the recession in history. I really regard the United States as having been in a depression defined as actual growth below trend, i.e. an output gap since 2007. I think the US is Japan. By the way, I said that in 2011 in my book, Currency Wars, and I actually said it even earlier than that, here we are five years later, none of the policymakers would have expected this kind of weak growth to persist this long. But it's exactly what I was expecting because we made the same mistakes as Japan. Japan said 30 years of on and off depression recession and weak growth. The US is now seven years into the same pattern. And if we don't change, we're gonna have, we'll end up with 20 or 30 years of this. So that's the state of the world today, not enough growth. So that leaves the other two options, default and inflation. Well, there's no reason to default. I mean, why would you? If you can print the money, why would you default just print the money? So we end up with inflation as the answer. But there's one problem. This is what I call the Mick Jagger economics. You know, the Rolling Stones had a song. You can't always get what you want. And just because central banks want inflation doesn't mean they're gonna get the inflation very easily because now we're into behavioral psychology and the fact that people don't wanna print the money. This is the flaw with negative interest rates and helicopter money and all the things you hear about. You can drop money out of helicopters, but if people don't wanna spend it, if they would prefer to reduce their balance sheets, pay off debts, pay off credit card, student loans, car loans, house loans, et cetera, then you're not getting the velocity you need to create the inflation. So they're probably gonna end up with governments, which is, you know, goes by various names, but debt monetization or Bernanke came up with a funny name the other day. But basically it's all, you know, people don't wanna spend the government's will to some increased deficits, recover the deficits with more government borrowing and the central banks will print the money to buy the debt, which is debt monetization. So that's the elite plan, but it's gonna take a little while to play out. In the meantime, I'm just watching this whole show saying, well, fine, I can't control the world, but I can't control my own portfolio and converting central bank money, which goes by the name of dollars or euros into gold as a way, in my view, to preserve wealth with this coming inflation. We haven't seen much inflation yet. That's true, but it's coming. The elites are working overtime to produce it. Now, as far as a gold standard is concerned, there's not a central bank in the world that wants a gold standard. It can be certain of that. My question is, are you at some point forced to go to a gold standard? Not because you want to, but because you have to to restore confidence and some kind of, you know, collapse of confidence or systemic crisis, probably much worse than we saw in 2008. And the answer is you might, you might have to do it just to put a lid on things if you don't reform the international monetary system sooner. So we're stuck in this weak growth cycle. Central banks want inflation. They're not getting it, but they're not gonna give up because they can't give up. They have to keep trying. The inflation will come eventually. And again, even before the inflation arrives, we're seeing lost confidence in central bank money and that's part of what's driving the price of gold higher. Now, that's a currency war because you try to cheapen your currency to important inflation, steel growth, steel inflation from the other guy. Financial war, which I think is kind of what you were getting at, Jeff, that is warfare. That is no different than dropping bombs or firing missiles at the enemy except you're using financial weapons. And there are a lot of ways to do it. We kicked Iran out of the global payment system. They say we meaning the United States. We're putting financial sanctions on Russia. Russia invades Crimea and Ukraine. And we don't drop the 82nd airborne into Sevastopol, Crimea. What we do is impose financial sanctions. That's the example of financial warfare. But there's something, I do quite a bit of consulting for the US government, the intelligence community, the secretary of defense and others. I certainly spoke with the Treasury and the Fed and other agencies at different times. And people say, well, what keeps them up at night? What is the deepest fear? And I think most listeners are very familiar with cyber warfare and cyber threats. A lot of them had to do with taking control of critical infrastructure. That could be the power grid. For example, you could take control of a hydroelectric dam, open the flood gates and drown 200,000 people in their sleep who were kind of unsuspecting downstream and suddenly the floods came because you opened up the dam, shutting down the power grid, that's an easy. And where financial warfare involving market manipulation, et cetera, will combine those two, combine cyber and financial. Cyber financial warfare, that's the thing that our defense establishment fears the most. And the way you would do it, people imagine a first order effective, go in, shut down the New York Stock Exchange, which is easy to do, or what's called distributed denial of service attacks where you flood JPMorgan's online banking system with so much message traffic that it can't function, so people can't get to their accounts. Those things are trivial. What's a lot more threatening is not that you would shut down a system, but that you would take over a system. You would get inside the order entry system in one of the stock exchanges and start spoofing orders, sell Google, sell Apple, sell Tesla, sell this, sell that. And the brokers and the exchanges wouldn't know what was happening. They would treat them as legitimate orders. You can have all these sell orders. By the way, something like this happened by accident a couple of years ago with night trading. Nobody could find the kill switch. That firm almost went out of business, lost $450 million in a matter of hours because their computers went on autopilot and started putting in all these sell orders. So you could do something like that. It wouldn't be that difficult. The FBI and Department of Homeland Security found a Russian attack virus inside the NASDAQ operating system in 2010. Nice job, they disabled it, but who knows how many other viruses are lurking in there. So that's one more reason to have gold. It's not digital. You can't hack it. You can't erase it. Other markets can go crazy, but your gold will preserve your wealth. Jim, we only have time for one last question. You've written quite a bit about China in your strategic intelligence newsletter and you predicted accurately that by amassing gold, China would win itself a seat at the IMF table. So tell us a little bit about the different psychology people have regarding gold in Asian countries, particularly China and India, versus how gold is viewed in the West. Well, it's a really good question. And it goes back to what I said earlier about Western release being miseducated. Again, for someone who's closer to the 60s or 70s, or who has spent decades as a monetary scholar, someone like Ben Bernanke, they get gold. They just won't talk about it. Greenspan is another example. Greenspan had nice things to say about gold before he was Fed Chairman, and he's had nice things to say about gold since he left his Fed Chairman. But during the 20 plus years that he was the Fed Chairman, he didn't say anything nice about gold. So it shows you a little bit how that system works. But there really is a, what I would call this education gap and people don't really understand it, but that does not seem to be as prevalent overseas. You know, I travel around the world quite a bit, I speak and do consulting on five continents. And I do find that Asians, in particular, Indians and Chinese, and also others, you know, go to Malaysia and other places, they do understand gold a lot better. They haven't been as, I'll use the word brainwashed or miseducated as Westerners. That will work toward disadvantage because I think the US should be buying gold. Particularly if they leave the European Union, we'll see how that Brexit vote turns out on June 23rd. But to me, it would be a little scary to leave the EU and not have gold, which the UK doesn't. They only have 300 tons, which is, you know, I mean, Greece has 100 tons. Of course, it's in Hock to the European Central Bank, but at least on paper, Greece has 100 tons. The UK has 300 tons. Yet, you know, Greece is a tiny economy and the UK is the world's fifth largest economy. So they don't have enough gold to split. They seem not to be worried about that. I would be very concerned if I were they, but it's a great question. And I do attribute it to what I'll call the propaganda of the PhDs. Well, Jim Rickards, his newsletter with Agora Financial is called Strategic Intelligence. I can personally say it's excellent. His book, which I've read parts of, is the New Case for Gold, a Penguin Portfolio book, just came out in 2016. Check it out. Jim Rickards, thanks so much for your time. And ladies and gentlemen, have a great week. Thank you so much for your time.