Jim Rickards believes that the monetary system is in peril and consequently there is a plan in place to deal with the eventuality of the current reserve currency (U.S. dollar) to debase greatly. According to Jim in his book The Death of Money, he suggests the writing was on the wall not when the balance sheet of the federal reserve and U.S. government exploded with the issuance of U.S treasuries via QE 1 back in 2009 but in 2005 when the production of derivative products such as mortgage backed securities accelerated swiftly. In the eyes of the U.S. administration after consultation with Wall Street, the alternative to the government bail outs of 2008 / 2009 of Freddie Mac, Fannie Mae, GM, AIG, Bank of America, Citigroup etc was a run on banks and an economic apocalypse. So – what has changed? Jim believes an aura of acknowledgment is now pervasive amongst financial elites and that an orderly procession is underway to restore the gold standard through a unit called the “SDR” (Special Drawing Right). I surmise from Rickard’s writing that a nation’s currency would be correlated to the SDR based on balance sheets, circulation and gold reserves.
It is suggested that governments have great staying power in coping with financial stress given counterparty interests which has prevented the cataclysm to date. China has been a large net purchaser of treasuries emanating from the quantitative easing programs and apparently requires time to acquire more gold to position itself powerfully in the context of the SDR formula. Mr. Rickards throws out the figure of gold at $9,000 per ounce as a possibility at the time of gold standard reinstatement and SDR conversion. He naturally suggests that you allocate a portion of your portfolio in gold, namely 20 per cent. He recommends this modest percentage in the context of his theory given his belief that the gold market is manipulated and investors are at the whim of a price suppression scheme.
For the open minded – I recommend the book.