Jim Rickards: The Golden Bullet

I think it’s time to dust off those old Sean Connery Goldfinger DVDs again, because Jim Rickards of Omnis has suggested a new tool for the Federal Reserve to adopt, that they probably don’t even realise they can use, especially if they become the official financial agent for the US Treasury’s gold supplies in Fort Knox and New York.

In a King World News interview, Rickards predicts that the Federal Reserve will engage in Quantitative Easing again (QE2) after the US November elections, but that this will once again fail to work.

When people don’t know how to change something, they often start searching for a way to justify failure, rather than thinking about how they could try doing something different to make it work.

Richard Bandler, co-founder of Neuro Linguistic Programming

Rickards suggests that the Fed might adopt a new tool to devalue the dollar, which he calls ‘The Golden Bullet’:

That tool is for the Fed to engage in open market operations in gold and for the Fed to pick a number, say $1,500 dollars an ounce, and then to buy gold at $1,495 and then to sell gold at $1,505. Once the price goes over $1,500, Fort Knox will then start emptying [if there’s actually any deliverable gold still in there], so the Fed would then set a new mark of $1,750 and then re-iterate the same game, to re-fill Fort Knox.

This process would keep on going until a market level for the gold price in dollars is discovered (for example, $2,500 dollars an ounce). The Fed would have effectively deflated the dollar down by 100%, thereby carrying out the deflation that the free market is trying to engage in anyway, without having let prices come down, and without the same failure risk as quantitative easing;

[Although Rickards is actually opposed to such interventions by the Fed, his circle-squaring plan is so cunning you could almost brush your gold-filled teeth with it.]

Rickards would himself prefer a ‘proper’ deflation, to clear out the malinvestments of the Greenspan and Bernanke bubbles, but he is surprised that his ‘Golden Bullet’ tool hasn’t made the light of day yet.

Who knows? It may yet come into operation. And surely if it does there has to be a James Bond script in there somewhere too.

You never know, Mervyn King could even take an unlikely cameo role as ‘M’.

Would Pussy Galore come back too?  I think for that to happen we would have to be dreaming.