Jim Rickards: Pentagon's Financial War Game Playing Out

Fri, Sep 20, 2013 - 4:02pm

In 2009, within a top-secret weapons laboratory outside of Washington D.C., the Pentagon conducted its first ever “financial war game” pitting the U.S. against its major economic competitors. Along with Pentagon officials, this economic simulation of using financial instruments in a global game of chess also involved members of the intelligence community, Treasury department, Federal Reserve, Wall Street, and various think tanks.

One of its planners and participants, Jim Rickards, author of the must-read book Currency Wars, tells listeners in an interview with Financial Sense Newhour that the hypothetical simulation is actually playing out in real life…and not in a way that’s good for the U.S. or the international monetary system.

As he also details in his book, one of the key strategies outlined at the time was for Russia and China to stockpile massive quantities of gold and then issue a new gold-backed currency to marginalize or even eliminate the U.S. dollar as the global reserve currency.

“Since 2009, Russia has increased its gold reserves by 65% from about 600 tonnes to over 1000 tonnes. China has increased its gold reserves by multiples—no one knows exactly how much because they keep it secret—but they’ve gone from about 1000 tonnes to my estimates are somewhere in the range of 3000-4000 tonnes—a 300-400% increase. So, they’re behaving exactly the way we hypothesized in 2009,” explains Rickards.

If Russia and China decide to issue a new gold-backed currency, what does this mean for the fate of the dollar?

On this point, the future isn’t so clear, but Rickards thinks it’ll actually be the collapse of the international monetary system in general, with the U.S. dollar leading the charge, whereby a new global currency is eventually created.

“Remember,” he explains, “all the central banks are printing enormous amounts of money so the dollar won’t collapse in isolation. If the dollar goes, it’ll take all the paper currencies and the whole international monetary system with it. So, I do expect some sort of collapse of the international monetary system; and when I say that, it’s not meant to be a provocative statement. The international monetary system actually has collapsed three times in the past 100 years: 1914, 1939, and 1971. So these things do happen from time to time and when they happen, it’s not the end of the world—it doesn’t mean we’re all living in caves eating can goods. What it means is that all the major economic powers get together and rewrite the rules of the game—they come up with a new system.”

So, is this all some sort of grand plan being conducted behind the scenes?

It appears the endgame Rickards envisions may just be an inevitable consequence of every nation reacting to one another in a predictable manner. Again, the financial war game conducted years back wasn’t part of a conspiracy—it was a simulation where each nation simply ‘gamed’ the financial landscape to their advantage until the system broke down and, as Rickards says, had to “rewrite the rules of the game” all over.

What exactly this means for investors and how long until this may happen is discussed further by Jim Rickards and Financial Sense Newshour host Jim Puplava in this must-listen interivew HERE.

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