Jay:  Today’s show guest is Willem Middelkoop. Willem is the founder of The Commodity Discovery Fund and is a best-selling author. He became a well-known personality through his work as a stock market commentator for the Dutch Business Television channel RTLZ. Middelkoop predicted the onset of the credit crisis in his book, If the Dollar Fails, in 2007. Subsequent publications were The Permanent Oil Crisis in 2008, Surviving the Credit Crisis in 2009, Gold and the Secret of Money in 2012, and perhaps his best-known book, The Big Reset in 2013. Please enjoy my conversation with Willem.

Hi, Willem. Thank you for your time, and we’re extremely happy to have you on board.

Willem:  Well, thank you for the invitation, and it’s great to be here.

Jay:  So for the audience that’s tuning in, maybe you could give us a little quick introduction of who you are and what you do for a living.

Willem:  Yeah. I’m the founder of The Commodity Discovery Fund, which is a resource fund based in The Netherlands, and we are specialized in investing in the smaller resource companies working on new discoveries. I started the fund in 2008. And besides that, I’m also an author of books. I just published The TESLA Revolution, which also is out in Chinese. But I’m most well-known abroad about my previous book, which is called The Big Reset on the change in the monetary system and war on gold. I’ve been a journalist for the best part of my life, but I quit journalism in 2008. So I’m a full time investor, fund manager, and author now.

Jay:  I’ve been following you for a while now, and I read your book a number of years ago, and at the time, it was — well, it still is very prolific, but at the time it was quite revolutionary because I think not a lot of people had heard of this notion of even a potential reset. And mainstream media never really talks about things like the SDR and that sort of thing.

But The Big Reset was your book… I don’t know how concisely you can be, but if you could give a background for the audience because I think that it’s very important that people understand exactly what’s going on.

Willem:  Yeah. That’s a needed and most important point to make. I’ve been investing for the most part of my life. I was in real estate in Amsterdam in the ’90s. I studied the internet bubble in the last ’90s. I started to study economic cycles around 2000 and started to work on my first book, which was only published in Holland. It was published in 2007.

I was working for Dutch National TV at that time as a market commentator. I’ve been warning since the publication of my first book that the current monetary system with US dollars anchor is on the verge of collapse. So we are nearing the endgame of the current financial system. This was my warning in 2007, and everybody was laughing about my thesis, but then after the collapse of Lehman Brothers within 12 months, I became known in Holland as the guy who predicted the credit crisis.

Then I started to do some more research and some more writing. I wrote a few other books in Dutch explaining that the current crisis within the international monetary system would lead towards the end phase, the endgame for the current dollar system, and that China was a major factor in this development.

People always asked me, because I’ve done quite a bit of presentation on this topic, and people always ask me, what will be the solution? I always told audience — this was around 2009, 2010, 2011 — “Well, I’m glad I know what the problem is. I don’t have a solution.”

But the more I studied this topic, the more I learned about work being done by central bankers coordinated by the IMF to study how we could use the SDR, the Special Drawing Rights, which could be called IMF money. The SDRs were developed in the 1960s because the IMF was afraid about a dollar crisis which also occurred in the early ’70s after Nixon closed the gold window and took the dollar off the gold standard. So IMF has always been working on a Plan B so the dollar could be dropped as the anchor of the financial system and the SDR could be used.

Well, this old idea from the late ’60s was brought on the table again after the collapse of Lehman Brothers and the large financial crisis we had.

In The Big Reset, which was published in 2013, I explain, I lay out the thesis that central bankers are planning to upgrade the SDR, which is currency basket held by the IMF and to be able to use the SDR as the next world’s currency, as the new anchor for the world’s financial system. But first the Chinese renminbi had to be added to this currency basket.

It’s a little technical, but the SDR and its currency basket always contains four currencies: the dollar, the pound, the yen, and the euro. Two years ago, the renminbi was added as a fifth currency. This makes the SDR a wonderful world currency, which we could use for the next phase of the international monetary system.

In The Big Reset, I also explain that we’ve seen monetary resets in the past. This is not a new concept. In 1944, we had the Bretton Woods Conference in which the dollar started to be the real anchor for the international monetary system, because in the early 20th Century, of course, we had the pound sterling, which was the world reserve currency. This is, in short, the thesis of The Big Reset.

Jay:  Right. I think it’s important that the people listening in know that, like you said, this is not a new concept. In 1944, I believe, it was Bretton Woods at the end of the 2nd World War. Right?

Willem:  Yes.

Jay:  And at that time, I believe one of the options was another form of global monetary currency, but they ended up using the dollar. Then for the last 70 years, like you said, it’s been dollar dominance. And, of course, because Western mainstream media is tightly controlled by the U.S., of course, they’re not going to be talking much about losing their dollar dominance. It all makes sense.

Willem:  Yeah. That’s a perfect way to describe the current situation, but since China became much more important within the world economy, especially after the start of the financial crisis in 2008, China has been very vocal about their demand that the world international system has to be changed. China has put enormous pressure on the U.S. and the IMF to have the renminbi added to the SDR and to have a larger seat at the table where the decisions are being made about the next phase for the world’s monetary system.

Jay:  Right. So this is very pertinent, and everyone is interested in what’s going on in Asia, and that’s obviously driven by China, the world’s second-largest economy, soon to be first, I believe.

You cannot ignore what’s going on in China, and I think people are slowly starting to realize that, look, we have to recognize that China is on the rise. Now, despite China having its own set of growing pains, if you will, China has been around for a lot longer than the U.S. has. And they’re certainly not going anywhere.  So the fact that when the renminbi was added to the SDR basket, that was also symbolic of the fact that, look, China is here to stay, and you’re going to have to learn how to play nice with China.

That all said, what do you think about the current situation in China? I know that you do a lot of work in China. You’ve traveled there, I imagine, quite frequently, and you’ve studied China for a long time. What’s your outlook right now? There’s a lot of… Again, mainstream media are the ones that are out there saying, “China has a huge debt crisis. China’s on the verge of collapse. Their renminbi is… They’re currency manipulators,” this, that, and the other. So what’s really going on, Willem?

Willem:  I think the Chinese leadership understands quite well how the international economic system and the international financial system are organized. So the Chinese have studied the dollar system well. And every time I come to China to visit and to talk about these subjects, I always meet a great number of people who understand these topics very well, while, if I travel to London or New York or Canada, it’s always very hard for me to find people who really understand this situation. The Chinese are really on top of this, and you can also see it in the mainstream press.

You are right, the North American mainstream press is not openly talking about these subjects because they don’t want to highlight the problems of the current dollar system, while the Chinese mainstream press is all over the SDR concept and all over the current dollar crisis.

As always, there’s a great example I always use. Here in the Netherlands, I’m almost boycotted by the Financieele Dagblad, which the main financial newspaper. The Financial Times in Hong Kong, they asked me to write a piece of 2,000 words on this topic. So there’s a huge change in the way this topic is being discussed. It is being openly discussed in the East, and it’s not openly being discussed in the West.

Part of my book is also on the war on gold. It’s a small but it’s still a vital role, and if we study the financial reserves by central banks, one could clearly see that gold is still a main part of the financial reserves. This is also not talked about in the West, but in the East, it’s quite a hot topic. I think every investor in the East understands why Russia and China are building their gold reserves. So I invest a lot into precious metals and precious metal-related companies. This has been a topic of my studies since the ’90s.

Jay:  For the listeners or audience listening in, I know we’re getting a little bit technical with the SDR if you’re not familiar with it. Me being in Hong Kong… The end of last September, I believe, was when the IMF announced the renminbi’s inclusion, so I got a little bit more of the news flow, fortunately.

I know that in the West, there was hardly anything. They didn’t mention it at all. But there are some theories out there floating around that say that gold might also be potentially added to the SDR basket. What are your views on that?

Willem:  In my book, I published parts of some studies being done by the IMF and some other groups from a London-based think tank, in which they talk about the possibility to add gold as a sixth currency to the SDR currency basket. So gold could be added quite easily.

I know that one of those studies, which was done by a London-bank think tank was done on request of China, because China wanted to study the facts of adding gold to the SDR currency basket. This clearly shows that China thinks that it might be a good idea to add gold to the next phase of the international monetary system, while gold is still seen as an anti-dollar currency in the West.

The US and the IMF are not in favor to add gold, but China is clearly in favor to add gold to the system. I think this also explains why the West is fighting gold and selling gold and suppressing gold while the central banks in the East are buying gold hand-over-fist.

Jay:  It’s very interesting what is playing in the back scenes. I think that for the audience listening, it is worth doing a bit of research. It’s worth picking up Willem’s book, The Big Rest, and reading it because it is very articulate. It was very eye-opening for me because I’d never heard of any of these concepts before that were all out there if you just know where to look for it, like the IMF website and this sort of thing.

Willem:  I would like to add that if people are looking for a copy of The Big Reset, you can find it on Amazon, but be careful you buy the latest edition because I published a revised edition in 2015. This has an extra chapter, so when people are looking, buy the revised edition.

Jay:  Excellent. I will buy that myself.

Willem:  I’ll send you one.

Jay:  So the renminbi — one of the IMF stipulations was that — and I know that because it came up once before, or maybe it was in contention that it wasn’t fully convertible. So at some point, I imagine that it will become fully convertible. Then I could also see that the actual waiting in the SDR basket was going up.

This is not backed by research, but just intuitively to me it feels like if that were to happen, then wouldn’t that naturally cause a somewhat appreciation on the renminbi because if it’s added to this global basket, then there must be buying going on across the globe. No?

Willem:  One should understand that the total amounts of SDR being in circulation, I think it’s just over 500 billion. The SDR is not used like we use other currencies. It’s very important to understand that the SDR can be upgraded now to play a much more major role within the international monetary system. But then first, the IMF and countries like China should start to price bonds in SDRs, and by selling a huge amount of bonds denominated in SDRs, the SDR will become a real currency.

There’s one other expert in this field who has been writing quite a lot about it, Jim Rickards. You might know him, the American author.

Jay:  Yes, of course.

Willem:  James Rickards always explains that in the next financial crisis, which could be around the corner, the balance sheets of central banks will not be used for future QE operations, but governments will look to the IMF. And since the IMF has a clean balance sheet, the IMF could start a worldwide QE operation of their own by selling a huge amount of SDR bonds or giving them to all central banks who are part of the IMF system.

So a new crisis would lead to the creation of trillions of new SDRs. That would be the start of using the SDR as a real currency. One could envision that the SDR could become a real world reserve currency and could even replace the dollar when needed because the next financial crisis could also lead to a dollar crisis.

Jay:  Right. So let’s use that to shift gears here. You are also running a commodity fund which has, at least last year, performed extremely well. I want to talk about your outlook on commodities. I know commodities have somewhat been on a super-cycle run here, and for investors that are listening in and trying to figure out what’s the best way to position themselves should another crisis be around the corner, what’s a good asset allocation strategy for an investor?

Willem:  I have a quite simple model, which I’ve used for the last ten years. Since the financial crisis started ten years ago, it’s quite obvious that central banker have been printing and creating money like crazy. So if you want to be sure that you won’t lose any purchasing power on your savings, you have to position yourself into assets which can’t be printed, like fiat money can be or government bonds.

So I always advise people to have at least 25% of their net worth in physical gold and silver because this portion will even survive the worst crisis. I also advise them to put 25% in real estate because real estate, you can put huge amounts of money in real estate, and money put in real estate is money which you took out of the financial system which is not circulating among banks anymore. You put it into something tangible. You can have the rents from real estate as a nice way to have cash flow.

Then the third part, I always advise people to put 25% in equities. I prefer to invest dollars into commodity-related companies because I like it when companies have a high intrinsic value. So one could invest into Google or into Apple, but what are the assets of Apple besides a huge amount of cash? The only asset of Apple is engineers working there. They don’t own any factories. They don’t own anything tangible.

So I prefer to invest in commodity-related companies, especially because many metals are getting scarcer year after year. If we study supply and demands for zinc, nickel, platinum, palladium, and silver, it’s not difficult to envision much higher prices in the future. Then the fourth part of my model is to keep 25% in cash, because once there’s a crisis, it’s always good to have cash because, with cash, you can go bargain hunting.

Jay:  That’s right. That’s a very straightforward model, and cash is obviously the best hedge. Just quickly, what are your views on this whole blockchain cryptocurrency outrage right now?

Willem:  Yeah. It’s an interesting topic. I just wanted to add that in the last few years, I have been adding 5% — one could add 5% of the savings into the cryptocurrencies, because I think the cryptocurrencies have really shown their initial success, and I think the cryptocurrencies are here to stay. They will be a very volatile ride. Don’t be surprised. We’ll have another shakeout of 80% or 90%.

The main cryptocurrencies like Bitcoin, like Ethereum, they are here to stay, because so many people think they are the solution to problems they have experienced in the past.

Jay:  Interesting. Thanks for sharing those views. Now, as we look to the last part of the interview, and again, we thank you for your time, I just want to touch quickly on the outlook on China. Obviously, China has pretty bright prospects right now. Are there any themes, thematics, particularly in China, that excite you right now?

Willem:  Yeah. I think China is highly fascinating. Not only is China and the Chinese culture and China as a country and China as a system have been around for over 10,000 years, China is the country with the largest amount of people. There are over 1 billion. It’s becoming the large economy, so China is so important.

And China is in a development phase in which they are about to take over the position of the US and the American dollar as the main force within the international financial markets. But China has also experienced a bubble if its own, if we look at the real estate, if we look at the number of the debts, if we look at the bad debts, which clearly can be found within several regions.

One should expect a more serious crisis within China’s financial system in the next few decades. But there are many economists who have been warning about an impending Chinese crisis for the last 30 years. But because China is not a free market, and it’s a centrally controlled country with a strongly controlled financial market, the Chinese have been able to avoid a major crisis until now.

I’m very curious how this will play out in the future. One should also understand that the US might prefer to see a crisis developing in China to weaken China from a geopolitical point of view. We also have seen the first clashes, at least verbally, about the South China Sea.

For me, one of the most important questions is how will the cooperation or the clash between the US and China work out within the next decade?

Jay:  Fascinating, and we’re sitting right here in the front seats. Thank you, again, Willem, for your insights. I think it’s fascinating, and I think that everyone listening in should definitely go read the book The Big Reset.

I want to give you an opportunity to tell us what you’re working on these days — anything exciting that you’re working on, whether it’s personal or for your fund?

Willem:  Yeah. I would like to share that I just published a new book, also translated into Mandarin. It’s called The Tesla Revolution, and it tells the story about the world of energy and the revolution, which we can see in the world of energy. This is a major topic which I have been studying for the last ten years.

I do expect that our fund will do well in the next few years because we see a recovery of commodity markets. And since we are specialized in new discoveries, there’s a very interesting developing situation in Australia. Maybe some of your listeners might want to look into it.

There are two companies. One is a Canadian-listed company called Novo Resources, NVO. And the other is Artemis Resources. It’s an Australian-listed company. They are both working within a JV on a new discovery in the Northwestern Australian Karratha District where a new kind of mineralization has been found in one of the eldest rocks which are known on the planet earth.

It’s a very early situation, and we’ve seen a very rapid rise of the share price of both companies that this is clearly something that is big on our radar, and we’re heavily involved in this plan.

Jay:  Fascinating. Thank you for sharing that, and we’ll definitely check out The Tesla Revolution as well. Willem, thanks so much for your time. We really appreciate it and the insights that you gave. It sounds like we are going to be in for a lot of action here in the next few years. Where is the best place that the audience can find you, follow you, connect with you, and maybe learn a more about your work?

Willem:  The best place to follow me is on Twitter. If you do a search for my name, my Twitter address is @wmiddelkoop. We have a website, the Commodity Discovery Fund — our fund has a website at cdfund.com. It’s easy to find, as well. On Amazon, you can find my book.

Jay:  Fantastic. Thank you so much, again, and we look forward to talking to you again in the future.