PRAISE FOR JAMES RICKARDS “A fast-paced and apocalyptic look at the financial future, taking in finan- ciers’ greed, central banks’ incompetence and impending Armageddon for the dollar… Rickards may be right that ‘the system is going wobbly.’” — THE FINANCIAL TIMES “A terrifically interesting and useful book… fascinating.” HOW TO GROW YOUR — KENNETH W. DAM former deputy secretary of the Treasury and adviser WEALTH DURING THE COMING COLLAPSE to three presidents “One of the scariest books I’ve read this year. The picture that emerges is dark yet comprehensive and satisfying.” — BLOOMBERG BUSINESSWEEK “Jim’s on a mission Agora Financial supports with all of our might. One to help everyday Americans cut through the deception they’re being fed by political figures… to avoid the next collapse that’s coming… and to never suffer through the kind of hardship he personally experienced. Until now, he has only provided ongoing intelligence service to his high net worth clients and members of the U.S. intelligence community. But now, he reveals all. Jim’s right when he writes, ‘there are survival strategies you can use. You are not helpless. You can protect yourself. You can definitely see the crisis coming using the warning signs present today.’” — ADDISON WIGGIN, Executive Publisher at Agora Financial, bestselling author of Empire of Debt and producer of I.O.U.S.A. BESTSELLING AUTHOR OF THE DEATH OF MONEY AND CURRENCY WARS FOREWORD BY TIM DOHRMANN FOREWORD BY TIM DOHRMANN Copyright © Port Phillip Publishing, 2015 All rights reserved. ISBN: 978-1-6212915-3-4 19 18 17 16 15 1 2 3 4 5 6 7 Published by Port Phillip Publishing PO Box 713 South Melbourne VIC 3205 Cover and Layout Design: Mena Fusco For Ann CONTENTS FOREWORD I INTRODUCTION 001 CHAPTER 1: The Financial Warning You Were Never 009 Supposed to Hear CHAPTER 2: 031 Five Crisis Scenarios CHAPTER 3: The Threat of Inflation 041 CHAPTER 4: The Threat of Deflation 063 CHAPTER 5: 073 The Greatest Unwind in Economic History CHAPTER 6: 079 The Perfect Storm CHAPTER 7: 103 Inside the Federal Reserve CHAPTER 8: 119 Today’s Currency and Financial Wars CHAPTER 9: 143 Gold’s Bull Market Isn’t Over CHAPTER 10: The Best Way to Understand the Global 163 Financial System CHAPTER 11: 189 The Beginning of the End for the Dollar CHAPTER 12: 197 Protection and Wealth Building Strategies CHAPTER 13: Thirty-five Frequently Asked Questions 245 Answered 267 CONCLUSION 273 INDEX Foreword ‘The Big Drop: How to Grow Your Wealth During the Coming Collapse’ might strike you as a trite title for a worn-out topic. In the seven years since the 2008 crisis, we’ve seen forecasters publish countless tomes that predict financial calamity. This book is different. Its author’s experiences, connections and scientific knowhow rescue it. You may think the warnings contained in this book do not apply to you here in Australia. That the looming collapse of the American dollar as the world’s reserve currency is a uniquely American problem. This kind of thinking is a terrible mistake. During the last global financial crisis, we in Australia dodged a massive bullet. Our ‘get out of jail free card’ was an abundance of natural resources…and a booming China. But the price of iron ore — our chief export — has roughly halved in just the last year. Investment in mining, energy and public-backed infra- structure is expected to drop by more than 60% between now and 2018, according to ANZ. Australia no longer enjoys the protections and advantag- es necessary to survive a global financial crisis of 2007/2008 magnitude. And, as this book demonstrates, the next crisis is going to be orders of magnitude larger… ii THE BIG DROP What will this crisis look like? When will it arrive? How will it affect Australia in ways the last financial cri- sis didn’t? And what can you do to protect yourself? In this book, the world’s leading ‘financial warfare’ expert gives you some answers. I first met Jim Rickards face-to-face last year. We managed to convince him to get on a plane and present at our World War D conference in Melbourne. He stole the show with a pre- sentation called ‘Mutually Assured Financial Destruction — the Future of Warfare is Financial War’. While most people know Jim Rickards as a two-time New York Times best-selling author (or have seen him on TV), his experience actually spans 35 years on Wall Street. Even less well known is Jim’s extensive work within the government, where he has been an advisor to the Office of the Director of National Intelligence, which oversees the NSA, the CIA, and 14 other US intelligence agencies. In fact, after September 11, he was recruited by the CIA to develop a program to investigate stock market signals that could identify terrorist activities before they occurred (like the bets against airline stocks before 9/11). Jim Rickards’ personal history — plus his constant expert encounters in intelligence work, non-profit endeavours, fi- nance and academia — are responsible for the book you hold in your hands…and for our monthly financial newsletter, Jim Rickards’ Strategic Intelligence. The fact that you’re reading this foreword means one thing: you’ve joined our ranks. There is no better time for forward- looking Australian investors to receive such intelligence. As you will soon see, a storm is coming. And, unlike 2007/2008, unprepared Australians will feel its FULL magnitude. According to Jim, we are heading towards a devastating FOREWORD iii crash in stock markets pretty much everywhere around the globe. Some markets will lose less than others. But Rickards believes America’s could fall up to 70% — practically overnight — and that Australia’s could suffer a fall almost as catastrophic. What would you do if your superannuation savings and your assets HALVED in a 12 month period? To what extent would that hurl a grenade at your retirement plans…and explode them into complete disarray? The purpose of this book — and of Jim Rickards’ Strategic Intelligence — is to make sure that doesn’t happen. And you couldn’t have asked for a better guide for your investments. ‘I want to help everyday Australians,’ Jim told me candidly after he partnered with us at Port Phillip Publishing to launch his advisory service. ‘There are people in positions of real power who see what I see, but won’t be honest with people about it. They’re perfectly prepared for other people to lose all their money. ‘The next collapse — the big drop — is coming. You can see it coming because of the dynamics.’ The dynamics Jim points out could spell disaster for Aussie investors. Not everyone will be prepared. But those who are will be happy that they were in the aftermath. This book is a means to that end. As you read on, you’ll note Jim’s primary focus is the econo- my and financial market of the US. Some people might think that US focus makes The Big Drop less useful to the Aussie investor. As I said, this is wrong. We no longer have the China-driven mining boom as a bulletproof vest. More than that, what happens in the US and around the world has a profound impact on the Aussie economy. The Reserve Bank of Australia has gone so far as to pin its