Jim Rickards: Liquidity Crisis + Recession + Unrest - Will 2023 Be Worse Than 2008?

I looked for a severe

recession

in the US um really global because you know your question was how come the global outlook is pretty bad?

worse

than

2008

. welcome to richyon I'm Rich founder Adam Taggart, the global economy is stumbling and not just for financial reasons like the rising cost of debt. Supply chains remain compromised, we still have material challenges in both production and actual physical distribution. The goods found in our oceans and continents pose such a serious threat to global prosperity that bestselling author James Rickards has made it the focus of his new book, Out of Print, How Broken Supply Chains, Rising Inflation, and Political instability

will

sink the global economy.

The biggest imminent risks we should be aware of and what steps we should take as consumers and investors to get answers. We now sit down with James recording Jim himself. Thank you very much for joining us today. Thanks Adam. It's great to be with you. Thank you. Look, Jim. I have a ton of questions about this great new book of yours real quick, though let me throw out the normal opening question. I like to start these discussions with what your current assessment of the global economy and financial markets is. I am sure that the global economy is weakening a lot. quickly, that is backed up by many metrics, the most recent data from China indicates that they are on the verge of a

recession

, if not in a recession, which is somewhat shocking considering this is an economy that grew at a compound rate of 10 for about 30 years, so that's like seven percent became the new ten percent and then five percent became the new seven percent, but now they're close to zero, they lie about their numbers, no They are reliable, but you know you can. you can get something out of this, there are other private sources of information that you know that show the same thing, so its growth is close to zero, many reasons for that, you know, the housing

crisis

, the covered lockdowns, which you probably know as much politicians, since they are doctors, they don't have any medical sense, they should just know that people's immunity is damaged, that's how Europe and the United States overcame the pandemic, but China didn't, but they continue to do that.

You know, the decoupling of the demographic composition of the United States, the China disaster, Europe is not much better, they are again right on the verge of a recession right now, according to many data, but they are going to take a deep dive almost right away as the I guess they've had a bit of a mild period in Europe, but the cold weather won't be far behind. I actually saw the jet stream, you know, often the jet stream is straight with a little bit of a wave, but every once in a while it does uh Meridian Arnold, which means it's very wobbly, uh, that means that that's how these cold arctic blasts fall towards you, you know, it could be the United States, North America, where Europe seems like that's how they just flow.

It's shaping up so you're looking for a very cold winter in Europe. uh, your energy is exhausted. You know, you listen to the happy conversations of EU leaders and others. You know well. Germany's reserves are almost at 100 percent. Yes, but what I

will

tell you then is. that the reserves are only 20 of what they need, so you got 100 out of 20, which is 20 at least where I went to school. There are no new supplies in the latest information. He had always pointed to the US as being behind the sabotage of the North Stream pipeline. but when I say the US I put the UK in the same ambit because they work together, the most recent information is that it was actually a UK operation, obviously with the blessing that the US support gave us a little of plausible deniability, but not much because the UK, like I said, they wouldn't have done it without clearing it up with us, um, so, uh, but that takes away Germany's options, you know, if Germany had decided they wanted to do it, You know, make peace with Putin or at least talk to Putin so that natural gas flows in exchange for facilitating arms shipments to Ukraine, etc., that door was open, but not anymore because they took away Putin's influence , because he even said yes, I will give you more gifts he can't. do it at least in the short term because the pipeline blew up so it was almost like the United States declared war on Germany.

I mean, something we've done before a couple of times, but that's just sinking it, but you know, people talk. on liquefied natural gas was a big story, a few weeks ago, well, the European Union had signed a major liquefied natural gas deal with Gutter, you know, which is a major producer, so I looked into it and said, yeah, uh . It'll be online in 2026, basically, the guitarists who are not stupid and who are getting the Europeans to fund the construction of the infrastructure on a new gas field in the northern part of Gator, which is the Peninsula, um, yeah, so 2026, good. good luck getting from here to there, that sounds like four years, uh, no, they're not going to survive four months and that's the point, um, you know, they have some floating barges to absorb LNG, but the capacity isn't there .

LNG is not available and by the way, what's wrong with it? I live in New England. What happens to New England natural gas prices if we purchase and start shipping our natural gas to Europe? I can't say anything good to you. So Europe is um and this. It's more than a simple slowdown, more than a simple economic obstacle, this is that you are looking at something more like a catastrophe. I mean, Germany is the fourth largest economy in the world, it has been, it could actually be the third largest in this moment, let's show According to some recent data, they might have surpassed Japan, but they have the highest ratio of net exports to GDP.

You know, GDP is a series of components. The United States is very consumer driven. China is very investment driven. Germany is very export-driven. So what do they do? they let you know uh watches cars uh Precision Machinery uh you know crafter planes all kinds of high tech things Siemens you know Volkswagen look at the BASF the big companies there um they are already starting to close manufacturing lines but this is going to get much

worse

, the energy It's going to speed up, people, thermostats are going to be set to, you know, 50 degrees Fahrenheit. I mean, I'm not sure what the centigrade equivalent is, about 15 or something like that, but they're going to know that you know the Germans are buying trees for wood to keep warm this winter.

There is no firewood for sale. This is not medieval, this is Neolithic. And then you know that the polls are lined up to get coal deposits. to put some coal in their car trunks or truck beds for the same reason, so this is a disaster that doesn't affect the United States, um, our economy, you know, we had negative growth. in the first and second quarters of 2022, two consecutive quarters of falling GDP meet the rule-of-thumb definition of a recession, no one wants to use the r-word. They all hide behind the National Bureau of Economic Research, which is the official unofficial arbiter. of recessions and recoveries we'll see what they say normally the National Bureau of Economic Research declares a recession the beginning of the recession after it's already over it's like thank you, we've been through this thank you for letting us know we just had a recession, they I'll probably get out and I'll say something next year, who knows, but, um, but if it was a recession, it seems like it was very mild.

Granite growth in the third quarter was much stronger, 2.6 percent, but when you look at it, what you see is that that was almost 100 driven by net exports when that was the last time the United States had positive GDP driven by net exports probably in 1959. I mean, that's what normally is a drag on growth and we wanted us to be. have trade deficits forever huh, but there it was that meant people were still buying American products, but in the United States we weren't buying as much from other people, that's indicative of a slowdown, consumption was weak, private investment was weak , inventories were weak, those are the real ones. drivers of the economy and they were doing very well all week, net exports are not sustainable, so I would look for a recession, a more severe recession starting in the fourth quarter, that's what you know, combined with higher interest rate increases strict from the Fed, reductions in balance sheets, etc. a complete vector and I wouldn't give any importance to a low unemployment rate, it ignores the labor force participation rate, which is horrible, you know, it's down to about 62 percent versus 70 percent in 2000 , but beyond that, unemployment is a lagging indicator of unemployment. goes up after a recession starts, employers are very reluctant to lay off employees, you have to pay severance, um, it's expensive to recruit them, hire them back and train them, so you wait until the recession has already started, thinking, oh wow , okay, I have to license people, so it's not a leading indicator, it's a lagging indicator, so the FED is behind the curve, um and then beyond everything, Adam is the most big, you know, the real 500-pound gorilla in the room, if you will.

Let's say there's a global

liquidity

crisis

brewing, a global financial crisis, forgive me, that's different from a recession, it's uh Financial panics and recessions are two different things that can come separately in 1998 we had a financial panic but no there was a recession in 1990 we had a recession but there was no financial panic in

2008

we had both they can join together it looks like they could join again this is revealed in the inverted yield curves um uh the major dealers are bidding at an auction for treasury bills that The FED gives you treasury bills by phone call, you simply call the Federal Reserve and make a reverse repository with the FED.

They will give you some Treasury bills, but the banks are bidding in an auction for Treasury bills that have a shorter maturity than the one the Federal Reserve will give you. for a phone call, why would you do that? The answer is that Federal Reserve bills cannot be remortgaged, they cannot be used as collateral, but auction bills can. So what that tells you is that there is a shortage of collateral, which means deleveraging of balance sheets, it means financial difficulties and We also see it not only in the York Treasury, which is invested for six months to 10 years, but also in the euro-dollar futures curve, which is even more worrying; it's unprecedented, but it's rare and it's not a good sign, but The fact continues to, you know, raise rates despite this really bad data, so I expect a severe recession in the US.

Really global because you know that your question was: how come the global outlook is pretty bad? Maybe something closer to social. riots and

unrest

in Europe, and then on top of that possibly worse global financial

liquidity

crisis than 2008. Okay, so you just gave interview equivalent answers on that first question, Jim, that was wonderful. My challenge is that there are so many threads that I want. to move forward, um, but I want to, I want you to know, go towards the supply side, at least initially, uh. POV of the book you just published, um, I want to put a pin and a couple things in there. um real quick, I just want to ask a question based on what you said because I really love your comments on this. um when you were talking about the US you talked about the low labor force participation rate that we have here and um I think it says around 62 years and I'm just curious what's really driving that it seems like that we have a large portion of our working age population that is not working and you probably study this more than most people, like what's really going on.

There, do we have? Is it simply an aging population that can't really work? I know that disability has seen massive growth in the last 15 years. Know? Is there a group of people who are choosing to or gaming the system or whatever, but what is responsible for only 62 percent of our working-age population actually working well? There are two answers to that and while they are consistent, I'll give them both the short answer is no. It doesn't matter, you know, you hear the number of factors. I'll go over those factors again and you're right, but it doesn't matter, it's low, it's low, in other words, the issue of labor force participation is very simple. calculation you say how many people are working that's the numerator and how big the workforce is that's the denominator that's all it is now is never 100 correct because there are students, housewives, retirees and others, there are good reasons why Some people may not be in the labor force at any given time, but as recently as 2000 that number was 70 percent, which pushed this between 19,practice of posting my top takeaways from these weekly interviews to get mine from this interview with Jim for free, just go to richyon.com adamsnotes and finally, if the challenging macro Outlook that Jim details in this interview if you're feeling a little vulnerable about the prospects of your wealth, then consider scheduling a free, no-strings-attached portfolio review from a financial advisor who can help you manage your wealth taking into account the trends and risks that Jim has mentioned here. just go to richion.com and we'll help you set one up.

See you in the second part of our interview with Jim Rickards abroad.