The New Great Depression

Guest Post by CCRider

Below is my review of Jim Rickards new book.

I want to continue my fantasy as the official (because I said so and no one stopped me yet) TBP excrement flinging book editor. The information I wish to relate is, in my view, vitally important to pass on to family and friends both of which I consider appropriate to my fellow TBPer’s. Although it’s not that I found the message enjoyable. In fact, it scared the excrement out of me.

I am an admirer of financial analyst James Rickard’s work so looked forward with great anticipation for the fourth book in his series on the decline of the dollar, this one titled “The New Great Depression”. When it came out on the 12th I pounced. I got the audible version due to having 71 year old eyeballs. Rickards does his own narration which adds to the impact.

I won’t be reviewing the entire book, just two of the six chapters, those I thought particularly impactful. I will leave out the rest because the information contained is too important to be glossed over and to do it justice would take too many words. If piqued by this review, buy this book.

Chapter five has this ominous title: Civilization’s Thin Veneer. He starts with an analysis of the 1918 Spanish flu which affected 500 million people, killing 100 million. Contrast that with the COVID numbers affecting 32 million, killing 1 million. The bad news is that pandemics like hurricanes have two hemispheres. The first wave hits, there is a respite then the second and much the more lethal wave arrives. The second wave of the 1918 flu produced many more deaths than the first. We are past the easy part.

Viruses have unique qualities that make them particularly insidious. Virologists, even today have no real understanding of their physical make-up or how they behave. We all know of cases where someone healthy who is stricken with COVID and has an extreme reaction whereas another in worse health hardly knows they have the disease. It’s why scientists need to lay back and wait for the empirical evidence to mount up. It can’t be determined beforehand by looking through an electron microscope.

What is clear from the Spanish flu experience is that viruses affect the brain. The virus changed the people it affected in a myriad of ways, all harmful. Famed 20th-century psychiatrist Karl Mennenger wrote in his 1924 book, ‘Influenza and Schizophrenia’ the mental damage manifests itself in two ways. There are cognitive impairments and behavioral dysfunction.

Cognitive impairments include depression, delusions, memory loss, and a host of other mental ailments. Behavioral dysfunctions such as alcohol, drug, spousal, and child abuse occur. Rickards is crystal clear in his denunciation of lockdowns which made matters significantly worse. He calls it a historic “blunder”. I, James Corbett, and a lot of TBPer’s have a different, more sinister interpretation.

There is a startling example of the change that can occur Rickards relates concerning Woodrow Wilson. At the start of the Versailles treaty negotiations, Wilson was steadfastly in favor of going easy on Germany. He then contacted the flu. He had an extreme reaction including hours of delirium. It changed him. He went back to the talks now allied with French president Clemenceau. Together they led the effort to blame the war entirely on Germany, embittering a generation of Germans and sowing the ground for the rise of Hitler. The virus changed history in the most sinister way imaginable.

Rickards cites studies that claim four in ten Americans are significantly more stressed than they were pre-COVID. Again, the lockdowns, social distancing, masks, and quarantines are making matters much worse. This leads to anti-social behavior. Humans are social animals. We need each other. (He doesn’t address the elephant in the room as to why this is happening. Rickards does analytical work for the government and knows the danger of pointing the finger in the wrong direction. He leaves it up to the reader to connect the dots). He pleases the libertarian reader by noting that government intervention, completely lacking in the Spanish flu case, is making matters worse. With the exception of small isolated interventions life just went on without all the disruptions and the people of that day coped with it as best they could.

He postulates that the George Floyd riots this past summer may likely have been fueled or certainly made worse by the reaction to the COVID measures. He believes we have only seen the beginning of such occurrences.

He sees a societal breakdown in the near future. It’s Republicans versus Democrats. Haves versus have-nots. White versus black. Those with food and those starving. He paints a dystopian future ending the chapter with “Once there is a societal breakdown it only takes three days before the law of the jungle happens. Society is skin deep”. Without naming it as such he describes the 4th turning.

The next chapter is about his financial analysis and recommendations. He starts on a positive note (thank God). He points out that at times of great financial disruption fortunes can be made. He points to a German businessman who saw the great inflation about to happen between the world wars. He borrowed all he could and bought hard assets such as factories, farms, and real estate. Once the inflation hit he repaid the loans with worthless currency. He became the richest man in Germany. He told the story of Joe Kennedy selling his stocks prior to the 1929 market crash then buying them back at fire-sale prices.

There is a recent debate on YouTube with Peter Schiff arguing for inflation and Rickards for deflation. It’s worth watching. Rickards makes a powerful case here for deflation. The prime driver of inflation is the velocity of money; how often transactions occur. Without it, the economy slows. Reduced velocity has slowed the U. S. economy since 1998. With so many people disadvantaged by the lockdowns this is not likely to change. We are entering a new great depression.

He thinks the unemployment rate will decline marginally but only from historically high levels, which will continue for five to ten years. He expects that with all the COVID issues, societal problems, collapsing corporate earnings, and the destruction of small businesses that the stock market will crash. He predicts the Dow at 16,000 and the S & P at 1750 by the end of the year. Pay no attention to those suggesting you buy for the long term. Those days are gone. This new era requires flexibility and maneuvering.

He makes a strong case for gold. From 1971 to 1980 gold went up 2,200%. It fell into a bear market from 1981 to 1998. The bull market returned in 2015 to currently just under $2,000. Since 2015 gold is up 90%. From 1971 to today gold is up 5,000%. He thinks the big moves up in gold are yet to come. He predicts gold will climb past $2,500 by mid-2021, then to $14,000 by 2025: 700% gains over the next four years.

He also is a buyer of resource mining stocks. Their prices will rise dramatically also but with a six month or longer lag. He cautions there are a lot of terribly run mining companies and outright frauds so you have to be careful. Rickards predicts quality, well-run gold mining stocks will increase by 2,000% by 2025.

I bought a gold mining newsletter from an old hand on the subject: Fred Hickey. It’s the best $150 I’ve ever spent. Here’s an interview with him, Grant Williams, and Bill Fleckenstein:

https://ttmygh.podbean.com/e/teg_0012/

He advises you to hold cash. In a deflation, things get cheaper so the buying power of cash increases commensurately. It also keeps you flexible for taking advantage of buying opportunities.

Here is his model portfolio:

Cash 30%

Gold 10%

Residential real estate 20%

T-Notes 20%

Equities 10%

Alternatives (no explanation) 10%

Conclusion:

I’ve read all of his books and believe this to be his best work in terms of the information provided and certainly in its timing. This report culled out those facts I believe to be critical to the TBP audience but it leaves out crucial explanations and context. I bought the Audible version of this book for the cost of a chunk of cheddar. If you want to improve your chances of leading those you love and care for through the 4th Turning this will help chart a course. Read this book.

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