A Global Monetary Crisis Is Coming & AI Could Make It Worse | James Rickards & Michelle Makori

Miles Franklin Media

52,098 views • 4 days ago

Video Summary

The video discusses the potential for an AI-triggered meltdown or a global monetary reset, with the latter being considered more likely and imminent. It explores the role of gold as a hedge against economic uncertainty and the potential for its price to reach $10,000 per ounce. The discussion delves into the mechanisms of a gold revaluation by the US Treasury, the implications of China's growing gold reserves and its aspirations for the yuan to become a global reserve currency, and the systemic risks posed by AI in financial markets, including deepfakes and automated trading. A key insight is that while AI poses significant dangers, it is unlikely to lead to true superintelligence or a global takeover.

A striking fact is that a gold revaluation by the US Treasury, which could inject $1 trillion into the economy, is legally permissible and has historical precedent, yet does not inherently alter the global market price of gold.

Short Highlights

A global monetary crisis is considered more likely and potentially sooner than an AI-triggered meltdown, though they could exacerbate each other.
Gold's price is projected to reach $10,000 per ounce by the end of 2026 due to fundamental factors like central bank buying and flat mining output, coupled with behavioral psychology driving faster percentage gains.
A US Treasury gold revaluation, while legally feasible and potentially injecting $1 trillion, would be an accounting entry and not directly impact the global market price of gold.
China's accumulation of gold is a strategic move, but the yuan is unlikely to become a leading reserve currency due to its lack of a developed bond market and capital controls.
AI poses systemic risks to financial markets through automation, deepfakes, and amplified reactions via social media, potentially triggering crashes faster than circuit breakers can respond.

Key Details

Global Monetary Reset vs. AI Meltdown [0:06]

A global monetary crisis is deemed more likely and potentially imminent than an AI-triggered meltdown.
These crises could mutually exacerbate each other, with a monetary crisis potentially leading to bank failures that AI could then amplify.
AI's ability to create convincing deepfakes of central bankers making speeches they never gave could directly impact markets within minutes.

A global monetary crisis is perhaps more likely and perhaps coming sooner. That's sneaking up on us and people really don't understand it.

The Strategic Role of Gold and a $10,000 Price Target [03:39]

Jim Rickards predicts gold could reach $10,000 per ounce by the end of 2026, a doubling from current levels.
This projection is supported by fundamentals: central banks have been net buyers of gold since 2010, reversing a previous trend of net selling.
Global mining output has been flat for six years, while demand is increasing from central banks and institutional investors.
Gold is considered an "everything hedge" due to its performance in inflationary, deflationary, and uncertain geopolitical environments, having risen 75% during the Great Depression.
The acceleration to higher gold prices is attributed to behavioral psychology, specifically the "anchoring" bias, where successive $1,000 increments become easier percentage-wise as the base price increases.

I can easily see gold going to 10k. Candidly, it would not surprise me, not even a little bit before the end of 2026.

US Treasury Gold Revaluation and Its Implications [15:05]

The US Treasury currently values its 261 million ounces of gold at $42.22 per ounce, a price set in 1973.
There is speculation, particularly surrounding a potential Trump administration, that the US could revalue its gold reserves to current market prices.
This revaluation would be an accounting entry, potentially creating $1 trillion in new assets on the Federal Reserve's balance sheet and crediting the Treasury's general account.
This process has historical precedent in the Eisenhower administration and could be used to circumvent debt ceiling limitations.
Crucially, this accounting change would not directly affect the world market price of gold, which is determined by global supply and demand.

The Gold Reserve Act gives the Treasury the authority to revalue America's gold reserves on the national balance sheet from their outdated book value of $42 to current market prices.

China's Gold Accumulation and Reserve Currency Ambitions [31:30]

President Xi Jinping has publicly called for the yuan to become a global reserve currency, a significant shift from previous quiet pursuit.
China has been aggressively stockpiling gold, with official holdings around 2,300 tons, though many analysts believe the true number is significantly higher (potentially 5,000-10,000+ tons).
This gold accumulation implicitly backs the yuan with a hard asset, providing a neutral reserve asset.
However, the yuan is unlikely to replace the dollar as a leading reserve currency due to China's lack of a liquid government bond market, capital controls, and non-convertibility.
Gold serves as a neutral reserve asset and settlement layer for trade among BRICS nations, rather than a new BRICS currency.

China must build what he calls a powerful currency, one that is widely used in global trade, investment, and foreign exchange and ultimately held by central banks.

AI's Systemic Risk in Financial Markets [40:40]

AI is designed to function as intended, but this exact functionality creates systemic fragility in financial markets.
Strategies beneficial to individuals (e.g., selling during a panic) become catastrophic at scale when amplified by AI and replicated across many market participants.
The combination of AI trading systems, deepfakes, and social media amplification can lead to rapid market crashes and bank runs with little time for verification or intervention.
Deepfakes are becoming sophisticated enough to fool even close relatives, making it difficult to discern real information from fabricated content.
Existing circuit breakers are ineffective against AI-driven market meltdowns, as automated systems react too quickly for human intervention.
A proposed solution involves "tapping the brakes" by executing only a portion of trades to slow down momentum rather than shutting down markets entirely.
Diversification across uncorrelated asset classes (stocks, cash, Treasuries, gold, real estate) is recommended for investors to preserve wealth during a crisis.
While AI itself is unlikely to achieve superintelligence, its current capabilities pose a significant and immediate danger to financial stability.

The AI threat to market is already here and will not be solved easily. Investors who fail to take this reality into account will suffer correspondingly when the meltdown comes as it certainly will.