Dear Money & Crisis Reader,
Memory is a funny thing.
Folks can hold a personal grudge their entire life.
But when it comes to large-scale geopolitical and financial crises, we tend to forget all too easy.
In the last 30 years alone, we’ve had a financial crisis once every six years on average. And it’s been 10 years since the 2008 financial crisis… meaning we’re due for a big one any time now.
Yet how many people do you know who are prepared for the next crisis, right now? Too few is my guess.
And that’s just the tip of the iceberg.
In today’s issue of Money & Crisis, financial expert Jim Rickards rounds up some of the pressing threats we face today.
All the best,
Editor, Money & Crisis
P.S. Jim was one of the few folks who predicted the 2008 financial crisis. And I’m proud to say he’s a key part of the Money & Crisis team. His latest book The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis is an essential read for anyone who is working to bulletproof their finances. In it, he reveals the simple steps you can take to protect your money and your family from the next crisis. Claim your FREE copy now.
Crisis on the Horizon
By Jim Rickards
One of the long-standing reasons to own physical gold is to hedge against the risk of natural and geopolitical disasters.
From the Black Death in the 14th century to the 30 Years’ War in the 17th century to the world wars of the 20th century, gold has been a reliable store of wealth.
Some folks mistakenly believe that crises on this scale are no longer a danger. But there are a litany of global threats at play even today:
The United States is determined to prevent Iran from obtaining nuclear weapons. Iran is equally determined to develop them.
While Iran’s neighbors, such as Saudi Arabia, have said that if Iran obtains nuclear weapons, they will quickly do the same.
In that case, Turkey and Egypt would follow suit. The choices boil down to a conventional war with Iran or a wider nuclear arms race in a highly volatile region.
Defiant North Korea
Meanwhile in the Korean Peninsula, North Korea already has an arsenal of nuclear warheads with a yield approximately the size of the Hiroshima atomic bomb — about 15 kilotons of TNT — and it has tested much larger weapons.
It has also developed intermediate-range ballistic missiles (IRBMs) and has tested intercontinental ballistic missiles (ICBMs).
Denuclearization discussions are ongoing between the U.S. and North Korea, but President Trump has made it clear that he will attack North Korea if it advances further toward its goal of a nuclear weapon that can reach the U.S.
If talks fail and the U.S. does attack North Korea, it is likely that North Korea will unleash a devastating attack on South Korea and possibly launch a nuclear weapon aimed at Japan.
Venezuela is a political and humanitarian catastrophe and is approaching the level of a failed state, which could result in civil war, riots, mass refugees and a cut off of its oil exports, about 3% of the world total today.
Its inflation rate is now running at over 40,000%. That means its hyperinflation has officially exceeded Weimar Germany’s, where the highest recorded monthly inflation rate was “only” 29,500%. The IMF now forecasts Venezuela’s hyperinflation will reach 1,000,000% by the end of the year.
And That’s Not All…
Other hot spots around the world include Syria, Ukraine, Israel and its confrontation with Hamas and Hezbollah, the Saudi war with Iranian-backed Houthi rebels in Yemen and conflicting claims in the South China Sea.
And that’s just scratching the surface. Natural disasters abound from the extreme flooding of Hurricane Harvey to the lava flows of Kilauea on Hawaii. The Ebola virus has reemerged in the Congo, four years after a prior epidemic in West Africa caused 10,000 deaths.
New threats are also emerging that are not traditionally geopolitical or natural. These include power grid collapses, cyberwarfare, hacking, data theft and misuse of big data including examples such as Russian interference in recent U.S. elections. Killer robots, swarm attack drones and rogue artificial intelligence applications.
And what about purely financial crises? We have had major stock market crashes or global liquidity crises in 1987, 1994, 1998, 2000 and 2008.
That’s five major drawdowns in 31 years, or an average of about once every six years. The last such event was 10 years ago. So the world is overdue for another crisis based on market history.
Does any of this mean you should go to your fortified bunker and curl up in a ball? Of course not. We all wake up every morning and face the day, come what may. I’m not paralyzed by fear and neither should you be.
But it does mean that we need to dismiss the notion that the recent calm is any sort of forecast for the future (this is called “recency bias” by behavioral psychologists).
When the next hurricane Harvey hits, it’s too late to buy flood insurance. Likewise, when the next financial crisis hits, it will be too late to buy gold at today’s relatively attractive prices.
The best time to buy flood insurance is when the sun is shining.
Editor’s note: For more of Jim’s insights into money and crisis, check out his new book The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis.Right now, it’s free to readers of money and crisis. Click here to get a hardback copy delivered straight to your home.