Gold Will Explode In Value Well Beyond What Jim Rickards Forecasts

Jim-Rickards-Case-For-Gold-FIMAGEWhile Jim Rickards explains many reasons why it is important to own gold, he leaves out the most important factor.  Jim has become one of the more prominent names in the precious metals community due to his strong opinion on owning gold even though he worked on Wall Street (the anti-gold financial establishment) for 35 years.

Jim Rickards has written several best-selling books such as, Currency Wars, The Death Of Money and more recently, The New Case For Gold.  Rickards is a big believer in owning gold to protect against the collapse of the highly leveraged derivatives based financial industry.

Rickards has gone on record in stating that his technical target for the price of gold posted in the article, Gold “Chart of the Decade” – Math Suggests $10,000 Per Ounce Says Rickards:

“I have a technical level for gold, it is $10,000 U.S. per ounce. That amount gets bigger over time because it’s a ratio of physical gold to printed money. The amount of physical gold doesn’t go up very much, but printed money goes up a lot, so the dollar target goes up more over time because of all the money printing.

$10,000 U.S. per ounce is the implied non-deflationary price for gold. If you have to go back to a gold standard, or anything like it to restore confidence, that is the number you must have to avoid deflation.

So $10,000 per ounce is mathematically derived and is not a guess.”

Rickards as well as legendary gold trader, Jim Sinclair both believe the value of gold will rise due to backing all the outstanding U.S. Dollars with physical gold.  Thus, Rickards mathematical formula for arriving at that $10,000 per ounce figure is based upon the outstanding fiat currency in the system.  Rickards believes for the U.S. Dollar to continue to function as a currency after the coming financial collapse, it will have to be backed by gold.

While I applaud Rickards for coming out against the anti-gold Wall Street financial establishment, he fails to mention the most important reason to own gold going forward.  Furthermore, Rickards suggests a 10% ownership in gold as “INSURANCE” in the case of a financial and economic collapse.

Rickards explains about gold insurance in his article, Gold: The Ultimate Insurance:

If you have a 10% gold allocation, it’s like owning fire insurance. If the stock market goes to new all-time highs, and gold goes nowhere, that 10% allocation won’t hurt you. But if the markets collapse, which I do expect, and the price of gold skyrockets, that 10% allocation will increase by multiples. That profit will protect you against losses in the rest of your portfolio. So gold has that insurance function. And that can’t be downplayed.

As Rickards suggests, gold will act as insurance protecting your wealth during an economic and financial collapse.  His rational here is that even if your portfolio suffers from huge declines during a stock market crash, the individual’s gold holdings will multiplying in value, offsetting loses in stocks and even bonds.

Before I get into the most important factor that Rickards fails to consider in owning gold, I’d like to mention that I respect the work he is doing.  If only 2% more of investors in the world decided to allocate 10% of their portfolio to gold, the price of gold would skyrocket on that MOVE alone.  So, by Rickards going out and publicly stating investors should own gold through interviews and his new book, The New Case For Gold, he’s providing excellent advice.

However, his recommendation for owning only 10% of one’s portfolio in gold is DRASTICALLY TOO LOW.  This is where I differ from Rickards on gold and silver ownership.

Gold & Silver Will Explode In Value Well Beyond What Rickards Forecasts

As I have mentioned in several articles and interviews, the value of gold and silver will explode in value due to the permanent collapse of the U.S. and Global Markets.  This goes well above and beyond anything that Rickards demonstrates in either his interviews or books.

According to Rickards, the next financial and economic collapse will be just another BIG BUMP in the road.  Most precious metals analysts, Jim Rickards included, suggest the importance of owning gold to protect wealth during this next financial and economic calamity.  Unfortunately, the most important factor they leave out is the “PERMANENT COLLAPSE DUE TO FALLING ENERGY PRODUCTION.”

I just had an interview with Doc and Eric Dubin at SilverDoctors on Thursday on this very subject.  I believe that will be posted this weekend.  I must say, I was a bit passionate about new energy information and why the U.S. and Global Markets are going to be in much more serious trouble than individuals realize.

That being said, the U.S. (world included) was able to pull itself out of the Great Depression of the 1930’s as well as other economic and financial shocks due to the GROWTH OF WORLD OIL PRODUCTION.  This will no longer be the case going forward.

I wrote about this upcoming collapse which was detailed in my article, The Coming Breakdown Of U.S. & Global Markets Explained: What Most Analysts Miss:

The U.S. and world are heading toward an accelerated breakdown of their economic and financial markets.  Unfortunately, the overwhelming majority of analysts fail to understand the root cause of this impending calamity.  This is also true for the majority of precious metals analysts.

The reason for this upcoming systemic collapse of the U.S. and Global markets is quite simple when you understand the information and are able to CONNECT THE DOTS.  While it has taken me years of research to be able to finally put it all together, new information really put it all into perspective.

The reason I believe this collapse will be different than anything in the past is due to the Falling EROI – Energy Returned On Investment.  This is shown in the following chart:

U.S.-Public-Debt-vs-U.S.-OIl-Gas-EROI

I don’t want to get into too many details here (as they were explained in the article linked above), however, the massive increase in U.S. public debt is directly tied to the falling EROI of U.S. oil and gas energy production.  In 1970, the U.S. enjoyed an EROI of 30/1.  Thus, we had 29 profitable barrels of oil for the energy cost of each barrel to maintain and grow our modern society.  In addition, a high EROI allows oil companies to remain profitable and to continue future exploration.

Unfortunately, the EROI of U.S. Shale oil production is 5/1… thus, it only provides four profitable barrels.  Nearly half of U.S. total oil production is from shale oil fields.  Thus, the overall EROI of U.S. oil and gas energy production has fallen considerably and is now below the MINIMUM REQUIREMENT of 20/1 EROI to sustain our modern society (source found on linked article above).

This is why we are experiencing runaway Health Care, Education, Food and etc costs.  We just don’t have enough profitable barrels of oil anymore to pay for it all.  So, to try and continue business as usual, we add a lot more debt to the system as costs continue to increase.

Sure, government and corporate corruption are partly to blame for rising costs, but overall, the falling EROI is destroying everything in its path.  For example the major U.S. Oil companies are hemorrhaging under the low price of oil as they had to fork out an additional $18.1 billion 1H 2016 to cover their capital expenditures and dividends that they didn’t make from their operations:

Top-3-U.S.-Oil-Companies-Free-Cash-Flow-Minus-Dividends

Some folks believe that when much higher oil prices arrive, the oil companies will tap into more expensive reserves and production will grow.  While this is a NEAT IDEA, new information points to a “Thermodynamic Collapse” of oil due to the rapidly falling EROI:

EROI-Oil-Pearl-Harbor

This chart was put together by the work of the Hills Group (oil engineers and project managers) and Louis Arnoux.  Instead of seeing much higher oil prices in the future, they forecast the price will head back much lower as the AVAILABLE NET ENERGY for society continues to decline.  Basically, they believe the price will fall because the value of the oil will diminish.  Even though someone might want to pay a higher price for energy, the society as a whole will be only able to afford a much lower price due to the collapse of NET OIL SUPPLIES to the economy.

This ENERGY FACTOR is not even spoken about by Jim Rickards.  I imagine Rickards is a very smart guy and it would surprise me if he didn’t understand this information.  If Rickards understood this energy information, it may not go over well to talk about this to the majority of investors who buy his books.  I am not criticizing Rickards here, I just realize this topic is well beyond DOOM & GLOOM.  It changes everything going forward.. and rather quickly.

Rickards states that investors should put 10% of their wealth in physical gold and keep the other 90% in the typical orthodox financial investments.

This is like saying:  I AM GOING TO PLACE 10% OF MY MONEY ON THE GOOD BET and 90% ON THE LOUSY ONE.

I don’t understand that reasoning at all.  We must remember, Stocks, Bonds, Real Estate and even Fine Art (which represent 90% of Rickards other allocation), are going to collapse in value during the Falling EROI Energy Supply scenario.  Why in the living hell would you keep 90% in assets that are guaranteed to collapse in the future????

Let me clarify my position on this.  I don’t recommend investors selling everything TODAY and buy physical gold and silver.  That is not my intent.  However, as time goes by, it will make more sense to get out of paper assets and into physical precious metals.  Just as Rickard’s claims, the collapse will take place in the future.  No one can give a date.

The difference between Rickards and my analysis is that Rickards focuses just on the financial system, leaving out the energy.  The ENERGY is the most important part of the economy whether investors want to believe it or not.  I gather Rickards believes we will continue to have infinite growth on a finite planet… so 10% is all you need in gold because stocks, bonds and real estate will come back even stronger than ever in the future.

THIS IS PURE FOLLY.

I will be writing more articles on this in the coming months.  Also, Financial Industry expert Vic Patane and I will be doing another WELCOME TO THE CONVERSATION next week on how Brokerage Firms are now mentioning gold to their clients:

Charles Schwab just published a white paper on gold and gold investment vehicles.  Stunning…well done…discussion of Gld, ETFs, futures, fees and rationale for investing in gold. Timing indicates investment community wants gold exposure. Wasn’t written in 2011 or when gold touched $1048, but now, why? And why no discussion now of owning physical gold in your pocket?

Because coins in your pocket mean taking currency out of the system…..we can’t have that…not even at Charles Schwab….buy GLD…….(spoiler alert, DONT!). More next week.

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47 Comments on "Gold Will Explode In Value Well Beyond What Jim Rickards Forecasts"

  1. Thank you SRS, I was waiting for someone to come out with this. I recall Rickards stating to own 5% before he accepted 10%

    What else concerns me is the Rickards has come out several times stating the US still holds 8.000 tons of gold in its vaults? Hope koos Jansen gets to find out the truth on that.

    Another concern is that he really doesn’t give Silver a strong foothold, come to think of it did he talk it down in his last video( the one with him showcasing some Gold and going on a cruise with his “insider”)

    farfetched? perhaps.

    • rickards has significant ties to the us federal government, he is a government apologist in many ways and tends to toe the party line much more than he should, when he knows better.

      but he is a smart fellow. i often wonder how much of the pro-government slanted comments that he makes, he actually believes.

      • I think Rickards is doing the same excellent job like Snowden does.
        Give the nervous suspecting masses a little simulation of truth so they dont have to listen to those crazy annoying worldchangers and conspiracytheorists anymore.

        Gold is only worth what people pay for it. If you create a World where everyone just wants food and clean water a brick of gold is no wealth at all in the eyes of the world. (You all know best what little percentage actually owns gold in this world. So there is no consent on the worth of gold in a shattered world that just kills for a piece of bread. I am german and i know how my grandfather lifed in the depression and during war) It’s like driving to an starvng african tribe and offering high end flatscreen-tvs. They kill and eat you and use the wires in the tv to create Spears. But if you give the tribe Electric power in advance they welcome you later like a god that can bring much much more prosperity in the future and they do everything you want.

        In other words: They are setting up their new World where THEIR chosen currency is already SPREAD under some people and worth what they want. (Best scenario: Many people have very little Gold) So they can actually trade with anyone, dont have to do too much cleanup (because everyone does it for a little gold) and be far on the top in advance again.

  2. sure gold’s value will explode. but the value of everything else will explode faster. better off buying a pallet of rice.

    • Preparing for economic decay is not about gold & silver only. You have to build a whole new world for yourself.

      Let’s use our drops of fiat wisely. It’s still raining.

    • gman,

      Actually, I think the value of most things will fall in value relative to gold and silver. Furthermore, I wouldn’t advise buying a pallet of rice. Rice does not have a long shelf life as other grains. So, what if you have Billions of Dollars of wealth… your advice is that you should buy all bulk food??

      steve

      • “Actually, I think the value of most things will fall in value relative to gold and silver.”

        if any markets are still functioning, sure, absolutely. after all almost no-one has any gold or silver, so when the fiat debt paper fails the demand for money will greatly exceed the tiny supply and drive its value up.

        IF markets are still functioning. they won’t be. not for a generation at least.

    • Your pallet of rice will be full of weevils in 6 months.
      PMs are forever, that´s why they are money.
      With money you can buy anything including rice.
      PMs work even in the most destroyed economies, in Zimbabwe and Venezuela gold and silver are working like a charm. In Venezuela 1 oz. of silver is enough to feed a family of 4 for 6 months.
      You are just selling gov. sponsored nonsense.

    • Gold is a conserver! Food and water instead bare the greatest opertunity to make a big fortune additionally to what you are conserving.

      All those 10% Gold believers will face the reality that there can be a very very long and even generationsspanning time where gold is worth nothing until it can be converted into something universal accepted again. It could even be illegal to convert Gold in an attempt to even out the terrible marks capitalism left on humanity. Who knows exactly . .

      In this transitiontime there could be several goods that can be collectively and without any goverments oversight considered currency. Cigarettes, Oil or canned food. Anything that has additional use to it than just looking good.

      So if you have a ton of rice at home people will give you for a cup the actuall most value currency that is circulating at the time. You are flexible and safe. At least if you hide it good and think through the buyingprocess in advance. . . then people will throw goldbrick at you for a little bite like it happened in my homecountry germany.Bakers made a huuuuuuge profit by accepting just gold against a little dry bread. This kickstart made them to the wealthy bakerychains of germany.

  3. ‘Silver-hater’ Friend of a friend of Another’s nice graph:

    http://3.bp.blogspot.com/_cvdgPlEKW9k/SwhvYm7eIRI/AAAAAAAAA6I/bx9LxOlO6yo/s1600/Freegold_bellcurve.gif

    The true value of gold and silver can only be seen when the fogs of fiat are blown away.

    • houtskool,

      Correct. Our friends over at first FOA, and then FOFOA, are guilty of the same blindsided analysis as most precious metals analysts, they fail to include ENERGY in their forecasts.

      While there is no ABSOLUTE guarantee that physical gold and silver will protect wealth in the future, I would much rather have physical precious metals to offer for trade or goods in the future than walking around looking stupid trying to pawn off a worthless 401K statement.

      steve

      • Steve – Clarification required;

        A False Misuse of “Entropy”.
        The Second Law of Thermodynamics

        It may be useful to consider statistical mechanical definitions of other quantities that may be conveniently called “entropy” but they should not be confused or conflated with “thermodynamic entropy” properly defined for the second law.
        These other quantities indeed belong to statistical mechanics, not to thermodynamics the primary realm of the second law.

  4. Steve,

    You along with Kunstler, Tverberg and the other writers affiliated with this site are among the 1% that truly understand what is actually happening and what our future is going to look like. The other 99% don’t have a clue.

    There are two points on which I disagree;

    1. “Instead of seeing much higher oil prices in the future, they forecast the price will head back much lower as the AVAILABLE NET ENERGY for society continues to decline. Basically, they believe the price will fall because the value of the oil will diminish. ” I think you are misinterpreting their work. The Maximum Affordable Societal Oil Price (MASOP) price will fall to under $12/bbl but the actual price will skyrocket along with gold and silver.

    The gold/silver/oil ratios will remain relatively constant. That is the magic, that they are stores of energy/work. The dollar ratios, i.e. the price, of everything will explode and all the markets and systems that rely on the dollar will explode with it. When this happens there will be world wide Chaos. So…

    2. “I don’t recommend investors selling everything TODAY and buy physical gold and silver.” I think everyone SHOULD start selling all of their paper assets and all of their non essential physical assets and start buying gold, silver and all the things they will need to survive the coming collapse.

    SteveW

    • SteveW,

      You first point I gather we will agree to disagree. On the second point, I believe in holding mostly physical metals, but I can’t advise that to be done RIGHT NOW and WITH ALL FUNDS. People have to take their time to get ready for this. Of course, if they had at least 10% NOW, then they have some protection.

      steve

      • I agree that people cannot sell everything right now but they need to get started RIGHT NOW.

        It takes time to sell things especially physical assets and for paper assets the markets are at unbelievable highs. It took me 5 years for me to find my perfect bug out location. I have owned it for 10 years and I still have a long list of things that need to be done before the SHTF. Lately, I have been selling inherited arts and collectables to pay for the changes I am making and to increase my stacks.

        Many of the so called experts (the 99%) have advised people to buy art as an alternative to paper assets to weather the coming collapse. My take on art and collectables is the same as numismatic coin collectors when push comes to shove that 1885s Morgan is still just a silver dollar with 26.73 grams of silver and it won’t buy any more than 2016 Silver Eagle after the SHTF. If you had one and sold it today you buy over 1,000 silver eagles.

        Point being that for the procrastinators, those that were late to the party, or those that have 10% and think they are ready being prepared takes time. And the time to start is NOW.

        Thanks for another great article.

        SteveW

  5. The problem with acceptance of EROI collapse thesis cannot be reduced to folly. It is very simple: people cannot imagine that; or if they can, they do not want to think about it; and if they do think about it, they do not know how to live in that world. Gold and silver is not much better that real estate or fine art in a collapsing world, because there is not much to be had in exchange for that. Thinking about is depressing enough for most, preparing for it is self-inflicted psychological torture. If one is past all those obstacles, it is clear what the priorities are for a life in a collapsing world: safety, safety and safety. One cannot be safe among people in a state of utter despair, or anywhere near them, not even in the same country. Neither gold nor fine art will buy safety when there is none on offer, and without safety what good is any asset?

    Another part of this grim picture is the dynamic of the process. It has its dynamic, it is not a sudden and instant end of life as one knows it. Some countries and economies will collapse first, some already have under a guise of some political disturbance, or war or what not. Venezuela and Ukraine, for example. But at the same time in other places people did not even notice: it has not reached them yet. One of the documented and epic collapses due to EROI was the Catastrophe of the Bronze Age at about 1200BC. It took them 50 years to completely annihilate their civilization, and it looked like never ending wars, economic collapses here and there, escalating hardship, refugees, more war, cities destroyed and never rebuilt, and ultimately a four or five centuries of non-civilization, during which culture was lost to the level of loss of literacy. But it took them 50 years, or about two generations, to take it all down. It will be much faster now, but still there will be a dynamic and variations between countries and economies. Some may even avoid it by forming self-sufficient economic blocks, such as the quickly developing Asian domain, where survival is not among the lost arts.

  6. Steve,

    I respect your work enormously, however you must forgive me harping on about the same issues regarding collapse.
    I just can’t seem to wrap my mind around how a market could even exist when the energy crunch arrives, unless it is at a entirely local level.
    People like Tainter,Korowicz etc spell it quite clearly that our systems are now far too complex too bow out gracefuly.
    Kuntsler’s idea of a ‘long emergency’, just seems nonsensical to me.

    • Agreed. There will be a ‘tipping point’. However, governments and central banks are in the know. They keep propping it up, because when they don’t, it’s hammer time.
      As soon as things really deteriorate, they’ll come up with their ‘new and improved’ monetary system. World trade however will collapse because of the lack of affordable oil. Regional currencies, backed by silver/gold is the only option imho, to maintain some sort of BAU light, but this could also be my blue pill residue from the old days.

    • Craig,

      I highly recommend you read Kunstler’s “A World Made By Hand” four book fiction series for an inciteful description of what it will be like in a world without oil.

      Reader,

      You are absolutely right that safety is the first and foremost concern in a collapse. Many will die in riots, from starvation, from preppers protecting themselves and eventually from disease as a result of societies systems collapse – clean water and sewage primarily.

      Silver and gold will not protect you and may make you a target if they know you have it, but if you are prepared and make it through the chaos, life will go on. The guy that owns the apple orchard will want more than apples to eat, the guy that has chickens will want more than chicken and eggs so a lot of bartering will go on. Ultimately, bartering is problematic because you have to find the person that has what you want and wants what you have. People need to have a system of money and will use what has always had value – silver and gold.

      SteveW

    • Craig,

      I agree. We have no idea how things unfold during the next collapse. So, WHAT TO DO is the big question? While there is no way to ABSOLUTELY GUARANTEE that gold and silver will be the best stores of wealth in the future, there is nothing else I would recommend.

      Think about this. If things collapse down to survival, but there are still warehouses in regions or local areas set up for trade, IS AN INDIVIDUAL GOING TO BRING THEIR WORTHLESS 401K STATEMENT FOR FOOD???? Or would silver or gold be a better trade?

      Or how about dealing with corrupt officials or corrupt security during MARSHAL LAW. Would you think they would act more positively if you gave them a few pieces of silver or gold rather than a silly PENSION PLAN STATEMENT????

      Do you see where I am going here? Again, these are WORSE CASE SCENARIOS. If this does not happen, then I would imagine precious metals will offer an individual MANY MORE OPTIONS than worthless Stocks, Bonds & Real Estate.

      steve

      • That’s the spirit SRS, although I would also make an exception for (farm)land, even when it may not be tradeable itself, the products you might catch from it could provide you a living. Staying alive is toppriority #1. Gold and silver are the most tradeable goods around the world, but if someone finds a better solution to these materials, that might do as well. And then evolution might kick in for that item, just like in the past for gold and silver. We’ve already tried so many other types of bartertrades (money).
        But like you say, we have no idea how things will be unfolding and how rapid this might take place in this overcomplexed politicized globalisation. Nobody seems to know, which means your guess is as good as mine.

  7. It is pretty simple from the start with a quick glance at our monetary system with no graphs, Bachelor’s degree to figure out this system doesn’t work folks? From the time they decided to spend three cents to make a penny and the same with the nickle and dime. You really don’t have to look much further than that? It has been a broke system for a long time You can’t keep printing money on paper IOU’s with nothing to back it up. If Fort Knox is empty as I do believe is the case? We are heading into some really tough times like very, very soon like we have never seen before. There will be no other option but to revert back to the gold standard and bring a end to this deceptive, Manipulative piece of paper game!, At which point it will become very clear and simple too see once again, It will be all about supply and demand? With China, Japan and other counties now allowed to own both gold and silver physical as Individuals which they have never been able to do? Think if just 1% of a Country that size wanted a ounce of silver or gold? So my opinion which we all know everyone has one,That Is to start stackin or burying all the gold and silver you possibly can afford to and SOON! Get your money out of the banks and lock boxes as well. Once the corrupt media “CNN being the worst!! don’t have this Circus of a election to pound into our heads and brainwash us all with,Along with the Black lives matters bull crap burning and Looting which is only getting started bye the way. More on that coming to a town close to you I may add, They may then be forced to switch gears and start talking about what they should be worried about our Financial situation!! The good times are over folks! But they have us all right where they want us, So focused on the Circus Election Along with the Media fueling this race war and us killing each other we so easily forget that our Government was Hours away from shutting down not long ago 08-09. What did we take away from that? Print more money and hand out bailouts? Once again it’s pretty clear for the simplest man to see this will NOT work?? I wish you all the very best! I really do. I would start stakin your precious metals,Stock up the ammo closet and hold your ground. Don’t wait till it’s to late, The time is NOW!! Tighten your seat-belts were in for a rough ride!!

  8. “However, his recommendation for owning only 10% of one’s portfolio in gold is DRASTICALLY TOO LOW.”

    Not if you are as wealthy as he is.

    1/10th of ten million in current valuations would put someone in good shape. He is very plugged into the system, and is likely to be able to get out on short notice, thus he can continue in what are risky equities and paper/digital investments. And have better-than-average sources to rapidly convert digital fiat to physical.

  9. When thinking about the decline of the oil production, one should also take into account the finite lifespan of human life. Most of us will be dead before the drastic effects of declining oil production will take place. The scenario Steve envisions will unfold over many decades, not just in a few months.

    Regarding the 10% allocation recommended by Rickards, that is a political necessity. There is not enough gold for everybody to be 50% in gold at present prices. In order for a large number of people to be 10% invested in precious metals, it is essential that only a minority holds a position of more than 10% in gold. I am sure that Rickards himself has invested more than 10% of his net worth into gold or gold related investments.

    If I remember correctly, all the gold mined during the past 10,000 years divided by the world population produces a per capita amount of gold of less than one half of an ounce of gold per world citizen. That is really a tiny quantity of gold. Under these circumstances, It would be irresponsible to recommend any allocation of more than 10% of gold to a large number of people.

    • That’s ridiculous.

      Under your theory then everyone should only allocate themselves a fraction of a percent?

    • Robert,

      Your optimism is totally misplaced. These events will take effect in less than a decade. Once that we reach the “straw”, things will happen much faster than people expect. Financial markets will experience a cascading collapse. It will likely start in Japan when they take a step too far as they are leading the world in in this Keynesian Kraziness. The credit rating agencies will degrade the country of Japan. Japanese banks will then automatically be degraded which will effectively be a default on many of their derivatives and credit swap with banks all over the world. There will then be a rush to liquidity but no one will be buying and everybody will want to be selling. With no one buying prices will plummet. The credit environment will evaporate in a matter of hours. Your credit and debit cards will stop working within 24 hours and America’s trucks will stop running. So you better have cash to buy your groceries and gasoline. 72 to 120 hours after the credit collapse, grocery stores and gas stations will be sold out. Then the riots will start. Then governments will declare marshal law and, in the US, call up the National Guard. They will start using their “strategic reserves”, if they have them, and start distributing food and water but NEMA is so f***ded up that major metropolitan areas will dissolve into riots, rape and pillage. Big cities will burn. If you are in them, a big city, your life will be precarious at best. All manner of payments will stop – mortgages, rents, pensions, government benefits. All paper assets, including the US dollar, will be worthless – mere fire starter material. Local governments will collapse. All utilities will cease to provide services. With no gas or electricity or water most subdivisions will be uninhabitable. Hoards of starving people will roam the environs of the big cities where they live seeking food. Killing or being killed by people with food stuffs or supplies -many will die. After 10 days of no safe water, disease will raise its ugly head. Cholera, dysentery and the normally controlled diseases like mumps, measles, whopping cough, Hep A & C will run rampant because so many have not been vaccinated. The great cull will occur. The world population will go from nearly 8 billion to less the 1 billion in less then a year. Those that remain will have to learn to live in a world without oil. All markets for food stuffs and goods will be very limited and local.

      You will have to have a skill that is valuable to the new world order. Gold and silver will be the on;y new world capital..

      SteveW

      • Steve, thanks for taking the time to respond to my post. Regarding Japan, we should not forget that Japan is still a creditor nation, that is, the world owes more to Japan than Japan owes the world outside of Japan. Indeed, most of the Japanese debt is held by Japanese people and Japanese institutions.

        Regarding riots and a collapse here in the US, we should also remember that we are bankrupt since at least 1933, yet life was pretty good during the past 80 years. Contrary to you, I do not believe that there will be riots during my remaining lifetime (I am 67 years old). Perhaps is 20 to 30 years. One of the advantages of the paper system is that it is infinitely flexible. The existence of high debts does not necessarily mean that the currency has to collapse. The Fed has done a very good job in devaluing the Dollar gently so millions of fellow Americans could live without having to work. Indeed, high levels of indebtness mean only that many have consumed without having paid for it. The pay was postponed for the future.

        Regarding your last sentence, gold and silver are money not capital. A tool or a factory is capital. Gold is money only. Money is not capital. These can be traded against each other but they are not the same.

        • Robert,

          I certainly hope you are right and the crash doesn’t occur for 20 or 30 years but as I said – I think you are overly optimistic.

          The reason I believe that it will start in Japan in spite of it being a net creditor nation is that Japan is the furthest down the Keynesian rabbit hole. All the easing and negative rates have doomed their three major international banks. Central banks are completely out of tricks and nothing they have done so far has had one iota of positive effect. Einstein said the “definition of insanity is doing something over and over again and expecting the same result,” So we have seen total insanity from the world’s central banks with no end in sight.

          Japan’s banks will be lucky to last even another ten years and the same can be said for all the other major world banks. Deutsches Bank is on the ropes right now. When they fail there is 1.5 quadrillion (that’s 15 zeros) dollars of derivatives and credit swaps that will go into default through out the world – credit will evaporate overnight.

          As for gold & silver being capital, you are absolutely right. I was being too clever and forgot the most important part – human and animal labor. Any and all new capital will come from the use of gold, silver and physical labor with the help from the six simple machines (lever, wheel and axle, pulley, inclined plane, wedge and screw). Petroleum products will be financially out of reach for all but the filthy rich.

          I have been buying back all of the hand tools I sold 40 years ago, hand planes, spoke shaves, brace and bits and such. Sure my battery operated tools will last awhile with my small solar and hydro power abilities but the batteries won’t last for more than four or five years at best. Will have the same problem with the storage batteries, charge controllers and inverters. Like death and taxes, you can postpone but the end is inevitable.

          I too am in my 60s and feel absolutely blessed to have lived in an era where anything and everything was possible. My heart aches for my children and grandchildren who were born into this era but will suffer the privations of the world to come and their having to learn new skills to just be able to eat and survive.

          SteveW

          • Einstein said the “definition of insanity is doing something over and over again and NOT expecting the same result,

            Sorry for the typo

          • We don’t know which domino will fall first – there are a few good candidates besides Japan – and what’s more important is that the whole world will be affected badly. Also, the central banksters having engineered the colllapse in order to introduce the NWO, they will “rescue” the world before the really huge disasters happen. Mike Maloney talks about a massive wealth transfer, not the destruction of everything.
            I thought the correct terms were ROI – return on investment – and EROEI, energy returned on energy invested. The latter is the one Dr Kent Moors uses to measure the profitability of energy extraction. He also talks about energy being the true store of value (thus the petrodollar).
            Energy does the same whether it’s “cheap” or “expensive”. “Cheap” oil only means that the USD is drastically overvalued.
            However. it’s being predicted that oil won’t be really expensive for a long time in the time that remains before EROEI kills its extractiion. Certainly the world economy will be so weak for a long time that oil won’t reach great price hights any time soon.

  10. With so much BS and propaganda in the world today one tends to get lost in fantasy, Rickards is CIA who claims 911 was cyber – Pull It !!!

  11. Steve,

    That’s why I keep on stacking.

  12. I don’t think that we get such a Mad Max scenario.Unlike to the 1920 everything is available.
    This is different to those years.So we don’t have a supply problem.We have a wrong value for everything, because it’s a “Schuldgeldsystem”.Money is created with debts.

    At the end we must delete debts and on the other hand wealth.Does any real goods dissapear in the real world when we make a new rating with the currencys?Important is only to make this transition worldwide at the same time.But this will happen automatically.

    All Fiat money systems hold maybe 70 years and it’s inner value go to zero.Nothing new so far.

    • In the 1920s, 27% of the U.S. population worked in agriculture. Almost 1 in 3 people worked on farms. Today, that number is 2.5%. When the Dollar dies so will our ability to import large reserves of fuel for our just in time transport system which is heavily dependent on long haul trucking for distribution. Today’s farming is also energy intensive endeavor. Imagine what happens when 300 million people don’t have easy access to food….

      • “Imagine what happens when 300 million people don’t have easy access to food….”

        … but they do have easy access to 300 million guns. be REAL interesting for about a month, then it’ll get real quiet ….

  13. I’m not quite as doom and gloom as our host, but agree that long-term things do not look to bright. They way I see it is that a lower ERO(E)I will put a solid price floor to producers (or bankruptcy). I interpret the recent price surge in oil as a bail-out of an underwater US (and global) oil industry and by extension, a bailout of the banks that gave (bad) loans to such companies. The global was better off with oil near 100$ a few years back than oil below 50$ now. I guess the elites will try to inflate away and do more of the same and who knows how long they will succeed? At some point, net energy production will stall (if it has not already), but till it goes really over the cliff the papering up may well go on. All this, however, ultimately this will be reflected in much much higher metals prices (first gold as CB base money), so vis-a-vis gold (and later silver), most paper assets will collapse, but I am not sure this will also be a “nominal” collapse, as CBs will print print print (what else can they do, or issue new devalued currencies vs. gold). Time will tell how this all pans out. GLTA and a great thanks to our host.

  14. Steve, I thought you were insane when I first started reading your articles, but they make sense. Thanks for your work.

  15. yngso,

    What both Maloney and Dent and all of the other 99% fail to understand is EROEI. In the past when the demographic waves washed through the system cheap energy was there to facilitate the rebuild. They look at their demographics and predict a collapse. So far so good. What they fail to understand and account for is that after the next collapse, what has saved us in the past is the EROEI of petroleum products, will not be there this time. Among others, our esteemed leader Steve St. Angelo, the Hills group and Louis Arnoux, have calculated that to support modern society you must have and EROEI of at least 20/1. Tars sands, solar and wind don’t even come close. When the world wide credit system collapses the supply chains and systems will be destroyed and cease to exist. There will be no cheap energy to rebuild the system so the system will not be rebuilt as we know it today and a whole new paradigm will evolve.

    It will get very ugly.

    Maybe TPTB will pull some patch out of their collective butts but we are on the down hill slide of a Seneca cliff and it will only, temporarily, postpone the pain.

    SteveW

  16. In germany they made a new law.Each person should buy a food and water reserve for 10 days.
    As a reason they claim, it’s not possible to exclude an external terrorist attack.

    In the next day they want pass the law.Additional they want to use the Bundeswehr(same as your army)
    to use for internal functions.

    Maybe they want to be prepared for riots and civil commotions.Really strange.

    • Terrorism is the mythical opponent that capitalism created in its late stage in order to federate people when society is explosing. It is the same thing with the roman empire which had absorbed christianity (and not the opposite).
      Consequently, states which are not entirely under the control of gods of money (not only banks but also major companies and some lobbys and their immanence ie medias) are preaching fear daily.
      Until capitalism became really itself in the 20th century, there were from time to time conspiracies from (some) people against states, now there are some conspiracies from states against people.
      There could be some kind of decreasing in “terror” if and when BRICS take leadership in the world capitalism but it will come back necessarly when BRICS developments will bump on their limits and that their alliance against american leadership will dissolve.
      Despite everything said, there are nearly no difference between west and east, they are just decades away in every fields because of the bolchevik and maoist eras.
      Lots had been said about the japanese bushido and hopes regarding the way to conciliate traditions and the modernity of capitalism. All these illusions has now faded away and the other asians countries will follow the same path but it will be even faster as they could “learn” directly from the west.

  17. “If only 2% more of investors in the world decided to allocate 10% of their portfolio to gold …”

    then comex would print however many GLD paper certificates were necessary to keep the price the same.

    guys, it’s real simple. 1) as long as the fiat debt paper is being accepted and comex is on-line, comex dictates the price. 2) if the fiat debt paper is not being accepted and comex has gone black, an ounce of gold won’t buy you anything.

  18. another great article, thanks, steve.

    only one small quibble: the value of gold won’t explode, it will stay the same. the price will explode.

    • “the value of gold won’t explode, it will stay the same.”

      completely incorrect. where markets continue to function the value of gold will skyrocket beyond measure – in fact those nice little 1oz rounds people like to get will be unusable. but where markets cease the value of gold will almost vanish – you’ll walk around with an ammo can stuffed full of maple-leafs and people will wonder why you’re burning the calories to do so, you must have food, hey he’s got food! ….

      • I side with mike on this one. Price is not equal to value. Example, a gallon of fresh, clean water is very cheap, yet it is immensely valuable. Be in a spot without water for 2 days and you’d give everything for this one gallon of water. Gold is (CB base) money, though it’s official “price” is not allowed to show it’s true value (yet). This said “price” is a scam anyhow, since the CONeX/LBMA are leveraged 300 paper ounces to 1 ounce of deliverable fizz. And the cherry on the cake is, this paper scam sets the “price”.

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