Jim Rickards: We are on the Brink of Runaway Inflation or a New Currency

If we move into a stage 4 currency collapse, the new currency will undoubtedly be

gold-backed and the price of gold will skyrocket.

Jim Rickards, author of Currency Wars and The Death of Money  points out that, “Inflation does not move uniformly through an economy.

It moves with lags, something Milton Friedman also said in the 1970s. Inflation, according to Cantillon, moves in concentric circles from a small core of people to an ever widening group of affected individuals.”

The inner core are the high net worth individuals, who get hit first, then the middle class are in the outer circles, getting hit later.

“Think of the way ripples spread out when you drop a pebble in a pond. Cantillon said that the rich and powerful are in the inner circle and see the inflation first. This gives them time to prepare.

“The middle class are in the outer circles and see the inflation last. They are the victims of lost purchasing power.”

Inflation, according to Cantillon, moves in concentric circles from a small core of people to an ever widening group of affected individuals. In the first stages, hyperinflation hits the rich, which it already has over the past couple of years.

The last fall opening art auction at the famous Sotheby’s hit its highest total ever, with art selling for exorbitant prices never seen before. Collectibles are also experiencing a boom.

A Babe Ruth rookie baseball card sold at Heritage Auctions for $101,575, or 69 percent higher than was expected.A paisley velvet vest worn by rock legend Jimi Hendrix sold for $37,500 – more than 1,700 percent higher than initial estimates

High end real estate has also gone through the roof.

Marc Faber says,, “The issue here is when you print money…not all prices rise at the same time equally. You create price increases in one sector of the economy and then in another sector, and so gold had a huge run that’s been correcting, and lately what we had is a huge increase in price with art, with specific artists, and stock prices, especially in the US. Eventually the money will flow out out of the inflated markets into the less inflated.”

“This Cantillon Effect may explain why wealthy investors such as Warren Buffett are buying hard assets like railroads, oil and natural gas that will retain value when inflation hits.

Official measures of inflation are low today but those in the inner circle already see it coming first, just as Cantillon suggested,” explains Rickards.

Inflation is here in small doses and people barely notice.
Be nimble and begin to buy some inflation insurance in the
form of hard assets before the Stage Three super-spike
puts the price of those assets out of reach.”

“Money illusion has four stages:

• In stage one, the groundwork for inflation is laid by central banks but is not yet apparent to most investors. This is the “feel good” stage where people are counting their nominal gains but don’t see through the illusion.

• Stage two is when inflation becomes more obvious. Investors still value their nominal gains and assume inflation is temporary and the central banks “have it under control.”

• Stage three is when inflation begins to run away and central banks lose control. Now the illusion wears off. Savings and other fixed-income cash flows such as insurance, annuities and retirement checks rapidly lose value.

If you own hard assets prior to stage three, you’ll be spared.
But if you don’t, it will be too late because the prices of
hard assets will gap up before the
money illusion wears off.

• Finally, stage four can take one of two paths…Read the rest at GramsGold.com