EXCLUSIVE INTERVIEW – ‘$9,000/oz gold could back world currency’ – Rickards
A post-dollar world may emerge with a global currency that could be backed by gold, Currency Wars author Jim Rickards argues in his latest book.
A further collapse of the global economy and a resulting demise of the US dollar as the reserve currency could trigger a move to the International Monetary Fund's (IMF) Special Drawing Rights, which may then be backed by gold at $9,000 per ounce, Rickards says.
"$9,000 per ounce is a good first approximation of the non-deflationary price of gold in a global gold-backed SDR standard," Rickards writes in his new book, The Death of Money.
"In Currency Wars I said it was late but not too late to avoid a collapse of confidence in the dollar. But now I believe that, while the catastrophe is not upon us, we may have passed the point of no return," he tells The Bullion Desk in an exclusive interview.
"The biggest problem is that policymakers and the central bankers are using the wrong models - their models do not accord with realities," he says.
Three mid-term outcomes could lead to a collapse of confidence - hyperinflation, disinflation or social chaos.
"One of these has a 100 percent chance of being right but we don’t know ex-ante which one it is," he says.
"The most likely outcome is some sort of catastrophic collapse - the Fed wants [benign] inflation but they are not getting it. They have tried everything - QE1, QE2, QE3, Operation Twist, currency wars, forward guidance and nominal GDP targeting - but none of their measures has had the desired effects," he adds.
In a post-dollar world, he sees one of three scenarios playing out - the creation of regional currencies, a fiat SDR or a gold-backed SDR.
"There is absolutely a plan to expand the role of the SDR as a global reserve currency - that is not a secret, it is stated on the IMF website," he says.
"As far as gold is concerned, we know Russia has increased its gold reserves 70 percent in the last four years, and China has increased its gold reserves several hundred percent. Other central banks have stopped selling - many of them are actively acquiring," Rickards says
Central banks were net buyers of gold in most of 2013, with developing nations leading the charge. Central banks added a net 37.3 tonnes of gold to their coffers in December, with those of Russia and Turkey accounting for around 90 percent of that figure.
"And so we see a trend towards some sort of gold standard or at least to use gold as a hedge against paper liabilities," he adds.
"[And] if we look at Crimea, it has a new currency - it is called the rouble. And even if the rouble isn't ready to fulfil the role of a regional currency yet, if Putin continues to reconstruct the Russian empire, it may be able to fulfil that role in the future."
All three of the scenarios may even play out at the same time, he also says.
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