He says Basel III falls far short of what it needed for three reasons:
a. Weighting of assets, with Government bonds weighted at 0%, i.e. no capital requirement. Treated as “risk free” including Greek, Spanish, Italian, Portuguese, & Irish Bonds as he says “It’s a fraud, a pretence”
It encourages banks to invest in sovereign credit, and not private credit.
b. Timing. Over 8 years. “We’re not going to go 8 years without another banking crisis”
While I have no doubts that Rickards is frequently the smartest guy in the room, and I love hearing what he has to say, I find his “Gold is Money” line a little hard to swallow! There is no way we are going to see a return to the gold standard - such that gold supports m1 or m2 - and is priced at 5000 dollars an ounce or some shit. They’ll confiscate the gold before it happens. Hyperinflation is a political phenomenon and our politicians and civil servants are no where near crazy or desperate enough for it to be allowed happen! I’ve read “when money dies” and the most striking thing about it is the almost childlike insanity of the politicians and the central bankers. We are nowhere near as desperate/clueless as the defeated central powers were after 1918…
The G20 are going to have one more go with SDRs, the idea behind their introduction at the end of the 60s was precisely to demonetise gold and silver and turn the world over to paper accounting entries called Special Drawing Rights. The idea was that the SDRs would replace gold, silver and precious metals. It never came to fruition the world maintained the dollar hegemony. SDRs still came into being and are used internationally today to settle many accounts between nation states, could their role be extended?
I don’t agree that the USA and the central powers are in a similar situation. Germany was in a state of civil war after 1918 and had it’s industrial heartland under French occupation. The USA is the worlds sole superpower with a vast and dynamic economy, a huge resource base and the most powerful military the world will ever see. Even if they cut the value of the dollar by 80%, people will still buy and hold dollar denominated assets. I can’t see faith in the greenback collapsing without political turmoil and civil unrest in the states. Suffice to say, when and if we reach that point, wealth preservation will be the least of our worries.
The above is an interesting point. The US has considerable leeway still even with wholesale QE. They have been really lucky that every time things go bad they “discover” another mine or source of the worlds only real value retention substance - “dollars”. We should prospecting for that sweet ore over here .