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James Rickards - A Very Violent Market Reversal Before End of 2017  ( Original )
OCT 4, 2017

Rickards restates his case for “$10,000 gold” and contends it’s at a relatively low price, and people should buy it now and simply hold it.

“I think the markets will have a very violent reversal in late November or early December.  Let me be specific about why because I never make claims like this without backing it up. . . . Here’s what’s going on.  

Right now, markets are priced for a Fed rate hike in December. . . . The stock market is interpreting this rate hike as economic strength . . . everything is set for a violent reversal because the Fed is not going to hike interest rates in December.”

So, why is the Fed not going to raise rates? Rickards says it’s because of not enough inflation and way too much deflation.  This has the Fed scared to move.  Rickards contends, “Why is deflation a central bank’s worst nightmare?  The answer is deflation increases the real value of debt.  In other words, the dollar actually gets stronger in a deflationary environment.  If I owe you dollars, and the dollar just got stronger, I owe you more money in real terms.  It becomes more difficult to pay off debt in a deflationary environment because my income is drying up.  The real burden of debt is going up, and if I couldn’t pay you to begin with, deflation is going to make it more difficult to repay you. . . . Imagine if we had one or two percent deflation . . . and the value of the debt was going up.  The defaults would be even worse.  Bad debts would pile up.  The banking system would be under threat.  Tax collections would go down in nominal terms.  The credit of the U.S. government would be called into question.  The U.S. government might default.  These are all the horrendous consequences of deflation, and it’s why central banks cannot have deflation.”