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Jim Rickards: Money Velocity Is Dead — Lost Decade for Stocks, Golden Decade for Gold?

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Overview

Jim Rickards argues that the U.S. economy and financial markets are operating within a long, depression-like regime rather than a normal growth cycle. He links this to declining money velocity (how quickly money moves through the economy) and to the mechanics of how money actually enters financial markets—leading to implications for stocks and precious metals, especially gold.

Stock market: bubble conditions, but timing is unclear

  • Rickards says the stock market is “crystal clear” in a bubble state, pointing to historical parallels such as:
    • Nikkei (1989)
    • Nasdaq (1999)
    • Current U.S. conditions
  • He emphasizes that recognizing a bubble is easier than predicting when it bursts. Even after a bubble forms, prices can keep rising, so he does not recommend outright shorting.
  • His practical portfolio guidance centers on:
    • Reducing equity concentration
    • Diversifying across real assets and lower-risk instruments
    • Avoiding a single “crash trade”

Suggested equity positioning and diversification

  • He suggests trimming equity exposure from something like 70–90% down to roughly 30% or so.
  • Diversification he highlights includes:
    • Gold (~10%)
    • Treasury notes
    • A substantial cash allocation, framed as “embedded optionality” during market stress
    • Real estate, preferring residential/quality and avoiding commercial real estate at this stage
  • Sector preferences among equities:
    • Defense
    • Health care (demographics)
    • Natural resources / oil / agriculture

AI stocks: technology may survive, but valuations and survivability may not

Rickards distinguishes between AI as a durable technology trend and the equity valuations of specific hyperscalers and related semiconductor players.

  • He argues some AI-linked firms are likely over-levered and could face large drawdowns—potentially 30–50% or worse.
  • His comparison is to the railroad era: the sector can be real while many individual companies still fail.

Why Fed “printing money” won’t rescue markets the way the narrative claims

Rickards challenges the common story that:

“The Fed will print money, it will flow to wealthy investors, and markets will soar.”

Global dollar shortage (and why it may still coexist with Fed expansion)

  • He claims there is a global dollar shortage, and argues this is not inconsistent with Fed expansion due to the accounting mechanics of how Fed money creation works.

Base money vs. spending money

  • He describes the Fed’s role as operating largely through securities purchases/sales with primary dealers, creating base money (M0) that becomes excess reserves at the Fed.
  • In his view, this “doesn’t get lent, doesn’t get spent,” so it doesn’t directly drive real-economy spending.
  • The money that moves the economy is created by commercial banks through lending, producing M1-type money with real spending impact.

Inflation and stimulus: more fiscal and behavioral than purely monetary

  • He frames boom/inflation dynamics as being more tied to:
    • Deficit spending (fiscal stimulus)
    • Psychology and behavior
  • Rather than Fed balance-sheet moves alone.

Money velocity is the key: it’s been falling for decades

Rickards emphasizes money velocity—how often money turns over in transactions.

  • He asserts velocity has declined for about 26 years, from roughly 10–11 around 2000 to barely above 1 today (around ~2 in his narrative).
  • Interpretation:
    • If money printing occurs but velocity stays weak (money sits instead of circulating), the hoped-for stimulation, inflation, or market lift may not materialize.
  • He uses a quantity-theory framing (MV = PQ) but argues velocity is not constant—contrary to earlier “thermostat-style” assumptions.
  • He also claims velocity behavior is largely psychological/behavioral, meaning inflation risk can shift even if money supply growth looks controlled.

“Lost decades” and a depression framework (U.S. already in it)

Rickards compares Japan’s stagnation to a risk of long-duration outcomes for the U.S.

  • He argues:
    • Japan is in its fourth lost decade, effectively a long depression with frequent recessions.
    • The U.S. entered a depression-like period starting around 2007–2008.
  • He defines a depression (Keynes) as:
    • Sustained below-trend growth
    • Without a complete collapse
  • By his calculation:
    • Average U.S. real growth over 2009–2019 (~2.2%) was below potential (~3.5%), supporting his thesis.
  • He also argues the slowdown resembles a broader global long-depression dynamic.

Entropy/energy-collapse analogy applied to economics

Rickards endorses themes from Mickey Fain’s The Entropy Trap (which he helped forward).

  • Core idea:
    • Complex systems require energy that must scale faster than system growth.
    • If energy demands outstrip available energy, systems collapse.
  • He links “energy” to money as a functional energy store/battery for economic activity.
  • He uses this to justify why monetary dynamics and market cycles can unravel without easy “fixes” once velocity/behavior deteriorate.
  • He contrasts this with typical Wall Street approaches (bell curves, mean regression), arguing real outcomes may follow power-law/heavy-tail behavior.

Gold outlook: decline was likely technical/liquidity-driven, not broken fundamentals

Rickards frames gold’s weakness as a bear-market drawdown that may represent a bottoming process, not the end of the bull case.

Timing and drawdown (as he describes it)

  • He cites gold peaking around early 2026 (~$5,355–$5,400/oz).
  • Then falling to around $4,000/oz within about six months (a “full bear market” in his terms).

Why he says fundamentals haven’t changed

  • Central banks remain net buyers
  • Uncertainty remains high, including geopolitical risks (he mentions Iran and Ukraine)
  • Mining output has been flat for years

Proposed trigger: war-related oil shock and dollar liquidity

  • In his view, oil became the initial stressor:
    • Oil prices surged after escalation involving Iran
    • Physical oil became much more expensive than futures implied
  • Since oil is priced in dollars and the Persian Gulf supplies a large share of global inputs, dollar liquidity needs rose.
  • He argues participants sold gold to obtain dollars to buy oil:
    • Oil up → need more dollars → sell gold

Feedback loop that intensified the selloff

  • Leverage traders hit stop losses
  • Trend-following commodity advisors sold because prices were falling
  • Stop-outs compounded pressure

Timing and forecast

  • He invokes Jim Rogers’ guideline that commodities often don’t “go to the moon” without about a 50% drawdown, and applies a fractal/scale-invariance approach to argue gold is near the bottom.
  • He repeats a view that gold could reach around $10,000 sometime in late this year/2027 (timing flexible), consistent with drawdown followed by a major rebound.

Silver and miners: silver should follow gold; miners are leveraged bets

Rickards expects silver to track gold with a lag, focusing more on percentage gains than the gold-to-silver ratio.

  • He suggests silver could reach levels such as $150–$200/oz (potential outcomes).

Miners

  • He describes mining stocks as leverage bets on gold/silver prices.
  • He argues margins can expand because:
    • Many input costs (electricity, transportation, drilling, royalties/streaming terms) were set/assumed when gold was much lower
    • If output prices stay high, margins improve
  • Higher margins and operating leverage can lead to valuation multiple expansion (he mentions multiples possibly “10 or 20 or sometimes more”).
  • Key risks:
    • Management quality
    • Geopolitical risk (including expropriation), depending on mine locations

Investment aside: CallProtect app (spam-call blocking)

Rickards promotes Call Protect (spelled “callfort”), which blocks spam calls using AI.

  • He describes features such as:
    • White-listing contacts
    • AI cross-user learning to identify spam
    • Network-level penetration of spam systems
    • Logging and an additional challenge that humans can pass but robots can’t
  • He claims it improves his quality of life and recommends trying it.

Geopolitics: Iran conflict likely to persist despite U.S. political wishes

Rickards discusses the situation involving Iran and the Strait of Hormuz.

  • He argues Trump “boxed himself in” with choices he describes as all bad:
    • Surrender
    • Stalemate
    • Escalation
  • He says:
    • A long-term stalemate/ceasefire is unstable
    • Escalation is unlikely to work (he cites the Vietnam analogy)
  • Investor-relevant warning:
    • Even if oil prices fall and some shipping reroutes, the conflict is not over because “Iran is winning” and likely won’t allow an easy exit.

Presenters / contributors

  • Jim Rickards (economist; former Pentagon advisor; Strategic Intelligence newsletter editor/author)
  • Vasili (host/moderator)
  • Mickey Fain (author of The Entropy Trap, referenced; Rickards mentions writing a forward for it)
  • Jim Rogers (referenced; commodities trader; co-founder of the Quantum Fund)
  • Alan Greenspan, Ben Bernanke, Janet Yellen (referenced)
  • Anthony Fauci / J.D. Vance / Susie Wiles (referenced)

Original video